CFA-Level-I Free Update With 100% Exam Passing Guarantee [2021]
[Aug-2021] Verified CFA Exam Dumps with CFA-Level-I Exam Study Guide
NEW QUESTION 745
Credit investors may use the financial information to make economic decisions, including:
I). Determining the creditworthiness of a company.
II). Assigning a debt rating to a bond issue.
III). Valuating a stock for making an investment recommendation to others.
IV). Examining compliance with debt covenants or other contractual arrangements.
- A. I, II, III and IV.
- B. I, II and IV.
- C. I, II and III.
Answer: B
Explanation:
III is mainly for equity investors (or their analysts).
NEW QUESTION 746
Which of the following statements is false with respect to the price volatility of a bond arising out of changes in the yield curve?
- A. For a one basis point change in yields, a bond will be less volatile at higher levels of yield than it would be at lower levels of yield.
- B. Higher coupon paying bonds will always be less volatile than low coupon paying bonds, holding everything else constant.
- C. Government bonds will always be less volatile than corporate bonds.
Answer: C
Explanation:
When it comes to interest rate risk, not even government bonds are immune. In fact, a long term government bond's price will be a lot more volatile than a short term corporate bond's price. This is despite the fact that corporate bonds have a credit risk.
NEW QUESTION 747
Consider the following statements:
I). Monte Carlo simulation is used to generate a large number of random samples from a probability distribution.
II). Monte Carlo simulation allows us to experiment with a proposed policy before actually implementing it.
III). Monte Carlo simulation is used to develop estimates of Value at Risk.Which of the following is/are
TRUE?
- A. All of the above.
- B. I and III.
- C. II and III.
Answer: A
NEW QUESTION 748
Which one of the following would provide evidence against the semi-strong form of the efficient market theory?
- A. Low P/E stocks tend to have positive abnormal returns over the long-run.
- B. About 50% of pension funds out perform the market in any year.
- C. All investors have learned to exploit signals about future performance.
Answer: A
NEW QUESTION 749
A firm does not want to increase it financial leverage. It may resort to all of the following actions
EXCEPT:
I). It may disguise a capital lease as an operating lease.
II). It may issue convertible bonds.
III). Sell its accounts receivables through a securitization.
IV). It may set up a subsidiary and guarantee its debt.
- A. All of them.
- B. II only.
- C. I and IV.
Answer: B
Explanation:
By issuing convertible bonds a firm must immediately recognize a long-term liability increasing its leverage. Only if and when bonds are converted does debt get reclassified as equity in the distant future.
NEW QUESTION 750
Which statement(s) is/are correct?
I). The accounts receivable period is always greater than or equal to the length of the cash cycle.
II). Reducing the inventory turnover will increase the cash cycle and lower the cash balance.
- A. I and II.
- B. II only.
- C. I only.
Answer: B
Explanation:
The accounts receivable period can be shorter than the cash cycle.
NEW QUESTION 751
A large number of competing investors is necessary for market efficiency because:
I). it creates independent and random price changes.
II). it results in faster price adjustment.
III). information is more fully examined and acted upon.
- A. I and II.
- B. I, II and III.
- C. II and III.
Answer: B
Explanation:
Markets become efficient due to a high degree of competition in the markets. Competition is higher with more participants, who examine and act on new information. Also, a higher level of competition will result in faster decisions and therefore faster price adjustment.
NEW QUESTION 752
When finding a confidence interval for the population mean, when is t-score used as the critical value
(assume the population is normally distributed)?
- A. The sample size is 30 or more or you know the population standard deviation.
- B. The sample size is less than 30 and you do not know the population standard deviation.
- C. The sample size is less than 30 or you do not know the population standard deviation.
Answer: B
NEW QUESTION 753
The risk of a preferred stock is based on the:
- A. uncertainty of its dividends.
- B. uncertainty of its total return.
- C. uncertainty of its price.
Answer: B
Explanation:
The total return includes its dividends and price change.
NEW QUESTION 754
The employer's pension expense is the amount that it is obligated to pay to the pension trust in
- A. a defined contribution plan.
- B. both defined benefit and defined contribution plans.
- C. a defined benefit plan.
Answer: A
Explanation:
In a defined contribution plan, employer's pension expense is equal to annual contribution needed. In a defined benefit plan, the pension obligation is the actuarial present value of forecasted benefits to be paid to retirees.
NEW QUESTION 755
SEC rule 12b-1 allows managers of certain funds to use a portion of the fund's average net assets every year for ___________expenses.
- A. administrative
- B. operating
- C. marketing and distribution
Answer: C
Explanation:
SEC rule 12b-1 allows funds to use a portion of assets under management for selling and promotional expenses associated with marketing and distributing fund shares.
NEW QUESTION 756
Which of the following is NOT one of the major areas where financial ratios are used?
- A. Systematic risk.
- B. Bankruptcy.
- C. Capital budgeting.
Answer: C
Explanation:
Ratios are used to determine systematic risk evaluate stocks forecast bankruptcy and create bond ratings
Ratios are used to determine systematic risk, evaluate stocks, forecast bankruptcy, and create bond ratings.
NEW QUESTION 757
You invest $100 in a risky asset with an expected rate of return of 12% and a standard deviation of
1 5% and a T-bill with a rate of return of 5%. A portfolio that has an expected outcome of $115 is formed by:
- A. investing $80 in the risky asset and $20 in the risk-free asset.
- B. investing $43 in the risky asset and $57 in the riskless asset.
- C. borrowing $43 at the risk-free rate and investing the total amount ($143) in the riskyasset.
Answer: C
Explanation:
143% x 12% - 43% x 5% = 15%.
NEW QUESTION 758
Standard deviation and beta both measure risk, but they are different in that beta measures:
- A. both systematic and unsystematic risk, while standard deviation measures only systematic risk.
- B. only systematic risk, while standard deviation is a measure of total risk.
- C. only unsystematic risk, while standard deviation is a measure of total risk.
Answer: B
NEW QUESTION 759
An investor wishes to liquidate their position in an investment company. They do so by selling their shares on the NYSE. They were most likely invested in:
- A. an open-end fund.
- B. a closed-end fund.
- C. a hedge fund.
Answer: B
Explanation:
Investors in closed-end funds liquidate their position by selling their shares in the secondary market.
NEW QUESTION 760
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