[Jan 15, 2022] CFA CFA-Level-I Real Exam Questions and Answers FREE
Pass CFA CFA-Level-I Exam Info and Free Practice Test
How to study the CFA CFA-Level-I: CFA Institute CFA Level I Chartered Financial Analyst Exam
There are two main types of tools for preparing for CFA Level 1 qualification exams. First, there are study guides and books that are detailed and suitable for building information from the ground up. Then there are video tutorials and lectures that can somehow ease the pain of training and are comparatively less tiring for some applicants, but they take time and concentration from learning. Smart candidates who want to build a strong base on all exam topics and relevant technology normally combine video lectures with study guides to reap the benefits of both, but, as often ignored by most candidates the CFA Level 1 practice exams, there is one vital training method. As an aspiring or active investor, you need the expertise and experience to succeed in a highly competitive industry. The CFA programme is built to provide you with the kind of experience and real world know-how to carry out your job analysis. If you are an intern, a worker, a transitional occupation or an investment professional, the CFA programme gives you a path to advance and accomplish your professional objectives. The CFA Program is a three-part review that examines the basics of investing tools, asset assessment, portfolio management and wealth planning. The CFA Program is mostly completed for people of administrative, accounting, economic or commercial backgrounds. Holders of the CFA charter shall be entitled to use the CFA classification until completion, application and approval of the curriculum by the CFA Institute. CFA charter members are eligible to work in wealth management, risk management, wealth control, and more in senior and executive roles. CFA Level 1 practice test is the best start towards understanding the concepts of examination.
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NEW QUESTION 878
Which of the following is not true?
- A. Un-weighted, or equally-weighted, indexes must be rebalanced after every stock split.
- B. Un-weighted, or equally-weighted, indexes assign equal weight to all stocks.
- C. Value-weighted indexes are more sensitive to large market capitalization stocks.
Answer: A
Explanation:
Un-weighted indexes are not rebalanced. They are typically used to compute returns, in which case equal weight is given to the return (properly measured) of each stock. There is no balancing because there are no weights.
NEW QUESTION 879
After 8 years of claiming compliance, the firm has to present a ____-year performance record at a minimum.
- A. 10.
- B. 8.
- C. 5.
Answer: A
Explanation:
A firm must present additional annual performance up to 10 years (ata minimum) after the firm presents 5 years of compliant history.
NEW QUESTION 880
Assume a small country imposes tariff.
After the tariff, the consumer surplus will decrease by: AF
- A. B + E + F + G
- B. E + F + G
- C. F
Answer: A
Explanation:
Consumer surplus will decrease if the price rises.
NEW QUESTION 881
Which one of the following best explains why the crowding out effect, brought on by an increase in government spending financed by the sale of government bonds to the public, is likely to reduce aggregate demand?
- A. The sale of government bonds to the public reduces the money supply and will offset the expansionary impact of the increased government spending.
- B. The sale of government bonds to the public will drive up interest rates, thereby retarding private investment and aggregate demand.
- C. The question is based on a false premise. The crowding-out effect suggests that the government's selling of bonds to the public is a very effective tool with which to stimulate demand.
Answer: B
NEW QUESTION 882
Automatic stabilizers will tend automatically to promote a
- A. budget surplus during a recession.
- B. budget deficit during a recession.
- C. budget deficit during an economic boom.
Answer: B
Explanation:
They institute counter-cyclical fiscal policy automatically, that is a budget deficit during a recession and a budget surplus during an economic boom.
NEW QUESTION 883
A mutual fund has securities in its portfolio that are worth $196 million. The fund has borrowed $12.1 million to purchase securities on margin and has 28.5 million fund shares outstanding. What is the fund's net asset value (NAV) per share?
- A. 9.76
- B. 6.20
- C. 6.45
Answer: C
Explanation:
The net asset value of a mutual fund is calculated as:(Market Value of Assets - Market Value of Liabilities) / Number of Shares Outstanding = ($196 m - $12.1 m) / 28.5 m = $6.45.
NEW QUESTION 884
Which of the following statements regarding the weighted average cost of capital formula is false?
- A. It can be used to take account of issue costs and other such financing side effects
- B. It assumes the project is a carbon copy of the firm
- C. It requires knowledge of the required return on the firm if it is all-equity financed
Answer: B
NEW QUESTION 885
Consider a stock call option with the following characteristics:
Type of option: call option on stock Underlying asset: 100 shares of Coca Cola stock Exercise price: $60 per share Premium: $1.25 per share Expiration date: November
Let the current market price of Coca Cola stock be $62.75 per share. In this case, the call option:
- A. is "out of the money" with an intrinsic value of zero
- B. is "out of the money" with an intrinsic value of $2.75
- C. is "in the money" with an intrinsic value of $2.75
Answer: C
Explanation:
CT = MAX(0, ST - X) = MAX(0, 62.75 - 60) = MAX (0. 2.75) = 2.75
NEW QUESTION 886
If the government wants to increase tax revenues, it should tax goods and services that have a(n)
- A. high elasticity of demand.
- B. unitary elasticity of demand.
- C. low elasticity of demand.
Answer: C
NEW QUESTION 887
According to the Marshall-Lerner condition, a currency depreciation is least likely to lead to an improvement in the home country's trade balance when:
- A. Home demand for imports is inelastic and foreign export demand is elastic.
- B. Home demand for imports is elastic and foreign export demand is inelastic.
- C. Home demand for imports is inelastic and foreign export demand is inelastic.
Answer: C
Explanation:
When both demand are inelastic a currency depreciation will actually make the trade balance worse.
NEW QUESTION 888
In terms of CFA Institute's Standards of Professional Conduct when dealing with the procedures for compliance per Standard III(A): Loyalty, Prudence, and Care, which of the following are factors that would aid in complying with this Standard?
I). Follow all the applicable laws and rules.
II). Diversification: all portfolios should be adequately diversified unless the plan guidelines state otherwise.
III). Deal fairly with all clients.
IV). Conflicts of interest: all conflicts must be disclosed.
- A. I, II and IV.
- B. I, II and III.
- C. All of the above.
Answer: C
Explanation:
Standard III (A): Loyalty, Prudence, and Care
Follow all the applicable laws and rules
*
Establish the investment objectives of the client, taking into account the client's needs and
*
circumstances and the investment's basic characteristics.
Diversification: all portfolios should be adequately diversified unless the plan guidelines state
*
otherwise.
Deal fairly with all clients.
*
Conflicts of interest, all conflicts must be disclosed.
*
NEW QUESTION 889
What is the future value of the following regular (ordinary, deferred) annuity?
Payment amount = $100 Payment frequency = annual, at the end of each year Number of payments = 20
Interest rate = 8% per year.
- A. $2,160.00
- B. $4,576.20
- C. $4,750.00
Answer: B
Explanation:
19 18 17 1 0
FV = 100(1.08) + 100(1.08) + 100(1.08) + ... + 100(1.08) + 100(1.08) = $4,576.20
NEW QUESTION 890
When the price of a good changes, the substitution effect can be found by comparing the equilibrium quantities purchased
- A. on the old budget line and the new budget line.
- B. on the new budget line and a hypothetical budget line that is a parallel shift back to the original indifference curve.
- C. on the original indifference curve when faced with the original prices and when faced with the new prices.
Answer: C
NEW QUESTION 891
Which type of demand for money will tend to fall as the perceived risk in other financial assets falls?
- A. transactions-related.
- B. precautionary.
- C. speculative.
Answer: C
Explanation:
Speculative balances will tend to be directly related to the perceived risk of other financial assets.
NEW QUESTION 892
Which statement is FALSE?
- A. A VER has the same impact on the importing country as an import quota.
- B. The welfare loss suffered by the importing country is generally greater with a quota than with an import tariff.
- C. The welfare loss caused by an export subsidy is greater for a small country than for a large country.
Answer: C
Explanation:
A is true - The tax revenue that would be raised by the equivalent tariff is instead captured by foreign producers as quota rents.
B is also true - In both cases foreign producers capture all of the quota rents.
C is false - In the large country case, the world price declines as the large country increases exports. The decline in world prices implies that a part of the subsidy is transferred from large country to the foreign country.
NEW QUESTION 893
Which of the following statements is (are) true with respect to the usage of the various forms of duration and convexity measures?
I). Holding everything constant, Modified duration will always be higher than Macaulay duration.
II). Both modified duration and Macaulay duration assume that the cash flows from a bond will not be affected by changes in interest rates.
III). If interest rates are low enough, effective duration and modified duration will yield the same results for a callable bond.
IV). When there is increasing likelihood that the issuer will call the bonds, effective convexity should be used as opposed to modified convexity.
- A. II and IV.
- B. I and II.
- C. III and IV.
Answer: A
Explanation:
I is incorrect because modified duration is simply Macaulay duration divided by one plus the periodic yield. Since Macaulay duration is being divided by a factor greater than one, the modified duration will be less than the Macaulay duration.
III is incorrect because if interest rates are low enough, the issuer may actually call the bonds. Thus, effective duration, which takes into account embedded options, will produce results that are very different from that of modified duration.
NEW QUESTION 894
A hedge fund charges a base fee of 1.5% and an incentive fee of 15% on returns in excess of the risk-free rate. If the fund's gross return is 8%, and the risk-free rate is 2.5%, the net return to the investor is:
- A. 4.65%
- B. 5.32%
- C. 5.68%
Answer: C
Explanation:
Total fees expressed as a percentage equal: Fees (%) = 1.5% + 0.15 (8% - 2.5%) = 2.325%
Net return = 8% - 2.325% = 5.675%, or 5.68%
NEW QUESTION 895
Two parties enter into a three-year interest rate swap, which involves the exchange of LIBOR+1% for a fixed rate of 12% on a $100 million notional amount. The LIBOR rate today is 11%, but is expected to increase to 15% in one year and fall back down to 8%. Which statement accurately depicts the flow of net cash flows between the two counter-parties?
- A. The fixed rate payer will have to pay $3 million at the end of the second year and $3 million at the end of the third year.
- B. The fixed rate payer would receive a payment of $4 million at the end of year two, while the variable rate payer would receive $3 million at the end of year three.
- C. The variable rate payer would receive a payment of $4 million at the end of year two, while the fixed rate payer would receive $3 million at the end of year three.
Answer: B
Explanation:
With a variable of LIBOR + 1%, the effective interest payment for the variable rate payer will be 12% in year one, 16 in year two, and 9% in year three.
End of yr 1: fixed pays ($100million * 12%): $12 million; Variable pays ($100million * 12%): $12 million.
net cash flow received by fixed payer: NIL.
End of yr 2: fixed pays ($100million * 12%): $12 million; Variable pays ($100million * 16%): $16 million.
net cash flow received by fixed payer: $4 million.
End of yr 3: fixed pays ($100million * 12%): $12 million; Variable pays ($100million * 9%): $9 million. net cash flow received by variable payer: $3 million.
NEW QUESTION 896
A firm should accept a project if _________, according to the NPV rule.
- A. the NPV is negative but the IRR is positive
- B. the estimated NPV exceeds the project's cost, indicating that the project has more than recaptured its initial cost in terms of net income
- C. the estimated NPV is positive
Answer: C
NEW QUESTION 897
Before Britain joined the EU, most lamb imports came from New Zealand, the cheapest lamb producer.
However, when Britain joined the EU the common external tariff made it more expensive to import lamb from New Zealand than from countries inside the union, thus France became the majority exporter of lamb to the UK. This is an example of:
- A. trade diversion.
- B. trade replacement.
- C. trade creation.
Answer: A
Explanation:
Trade was diverted from New Zealand and created between France and the UK.
NEW QUESTION 898
A box of candy contains tree types of candy: dark chocolate (DC), white chocolate (WC), and peanut butter (PB). There are 24 pieces of candy in the box, 8 of each kind. All pieces are wrapped in the same material and there is no way of finding out what kind of candy one has until one unwraps the candy. An experiment consists of selecting pieces of candy randomly and identifying each piece. Once a piece of candy has been removed from the box, it is not put back in the box. Consider the following events: A, observing a chocolate piece, A=(WC,DC), and B, selecting four pieces of candy such that B=(PB,DC).
Which of the following statements is correct?
- A. Events A and B are not mutually exclusive.
- B. Events A and B may or may not be in the same sample space.
- C. Events A and B are not exhaustive.
Answer: A
Explanation:
Events A and B are not mutually exclusive. The two events are not mutually exclusive nor disjoint because they share common outcomes. The events A and B are exhaustive because they cover all possible outcomes. A and B are a subset of the same sample space.
NEW QUESTION 899
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