Actual CFA-Level-I Exam Recently Updated Questions with Free Demo
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NEW QUESTION # 831
If the alternative hypothesis states that u > 6,700, what is the rejection region for the hypothesis test?
- A. Lower tails
- B. Both tails
- C. Upper tail
Answer: C
Explanation:
Since the alternative is that u is bigger than the mean, then it will be located at the upper tail.
NEW QUESTION # 832
Worldwide Enterprises (a U.S. company) wishes, over the next five years, to establish operations in
Great Britain. Worldwide has signed a contract with a British construction company. The contract requires annual payments of 250,000 pounds for each of the next 5 years. Worldwide will use U.S. revenues to make the contract payments. As the exchange rate between U.S. dollars and British pounds fluctuates:
I). the number of dollars necessary to purchase 250,000 pounds may increase
II). the number of dollars necessary to purchase 250,000 pounds may decrease
III). the number of dollars necessary to purchase 250,000 pounds may remain unchanged
- A. I, II and III.
- B. I and III.
- C. I and II.
Answer: A
Explanation:
Changes in the exchange rate between U.S. dollars and British pounds will determine the number of dollars necessary to purchase 250,000 pounds.
NEW QUESTION # 833
Clifton Company leased a computer from Jan Corporation on January 1, 2000, for a 10-year period, the useful life of the asset. Equal rental payments of $5,000 are due on January 1 of each year. The first payment was made on January 1, 2000. The present value of the minimum lease payments over the lease term discounted at 10% was $33,795. The balance in Clifton's liability account (including accrued interest) at December 31, 2000, should be:
- A. $27,256
- B. $31,675
- C. $30,392
Answer: B
Explanation:
Lease liability (December 31, 2000): = Acquisition cost - First lease payment interest for
2 000 = $33,795 - $5,000 + ([$33,795 - $5,000] x 10%) = $28,795 + $2,880 = $31,675
NEW QUESTION # 834
Two bonds differ in their provisions for early retirement. Bond A is a 5-year serial bond. Bond B contains a sinking fund provision requiring the issuer to provide the trustee with sufficient funds to retire
2 0% of the original principal each year for 5 years. The sinking fund provision calls for the trustee to select the serial numbers of bonds to be retired by random assignment. Neither bond is callable.
I). The timing and size of bond A's promised payments are known with certainty.
II). There is a 20% chance that an investment position in bond B will be reversed after the first year.
III). The probability that an investment position in bond B will be reversed before maturity increases as time to maturity decreases.
- A. II and III.
- B. I, II and III.
- C. I and II.
Answer: B
Explanation:
The indenture of a serial bond specifies the size and timing of promised payments. The sinking fund provision of the bond described in this problem adds uncertainty as to the number of cash flows to be received by the bond owner.
NEW QUESTION # 835
Which element is "defined" in a defined benefit pension plan?
- A. Pay-out amount.
- B. Pay-out formula.
- C. Pay-in formula.
Answer: B
Explanation:
Accounting for defined benefit plans is complicated is because only the pay-out formula, and not the pay-out amount, is known. The pay-in formula is specified in a defined contribution plan.
NEW QUESTION # 836
Which of the following statements about unweighted indexes is incorrect?
- A. The Value Line Composite Index is an unweighted index.
- B. Index movements are typically based on the geometric average of the percentage price changes for the stocks in the index.
- C. These indexes are useful in measuring situations where equal dollar amounts of each stock are held.
Answer: B
Explanation:
Index movements are typically based on the arithmetic average of the percentage price changes for the stocks in the index.
NEW QUESTION # 837
Which of the following is correct about a probability distribution?
I). Sum of the probabilities of all possible outcomes must equal 1
II). Probability of each outcome must be between 0 and 1 inclusive
III). Outcomes must be mutually exclusive
- A. I, II and III.
- B. I and III.
- C. I and II.
Answer: A
Explanation:
All describes properties of a probability distribution.
NEW QUESTION # 838
The convexity adjustment for a callable bond with a duration of 5.5 and convexity of -38, when the interest shock is 250 basis points, is:
- A. -2.375
- B. -16.125
- C. -11.375
Answer: A
Explanation:
Convexity adjustment = -38(.025)(.025) 100 = -2.375
NEW QUESTION # 839
All of the following statements typically characterize the structure of an investment company EXCEPT:
- A. An investment company adopts a corporate form of organization. The board of directors of an investment company hires a separate investment management company to manage the portfolio of securities and to handle other administrative duties.
- B. An investment company receives an annual management fee ranging from 3 to 5% of the total value of the fund.
- C. An investment company invests a pool of funds belonging to many investors in a portfolio of individual investments.
Answer: B
NEW QUESTION # 840
eRetailer.com is borrowing $1 million at 10% for a year on a discount basis with a bank. How much in funds are available for use? What is the effective cost of interest?
- A. $1,000,000; 10.0%
- B. $900,000; 10.0%
- C. $900,000; 11.1%
Answer: C
Explanation:
On a discount basis, the interest is subtracted from the amount borrowed ($1 million -
$ 100,000 interest) and the effective cost is $100,000 / $900,000 = 11.1%.
NEW QUESTION # 841
Which of the following is not an example of an affirmative (positive) covenant?
- A. Requirement to limit dividends to net income
- B. Requirement to maintain a minimum level of working capital and net worth
- C. Requirement to furnish bondholders with a copy of the firm's annual accounts
Answer: A
NEW QUESTION # 842
What part of the annual report contains forward looking information?
- A. balance sheet and income statement
- B. management discussion and analysis
- C. auditor's report
Answer: B
Explanation:
The management discussion and analysis presents management's detailed analysis of the company's liquidity, capital resources, and operations. It includes forward looking information such as projections of capital expenditures and how the company plans to finance such expenditures.
NEW QUESTION # 843
Which is true of positively skewed distributions?
I). They have a limited, but frequent, upside.
II). Their downside is less frequent but more unlimited.
III). They are attractive to investors because their mean is larger than their median.
- A. III
- B. II
- C. I and III
Answer: A
Explanation:
I and II are false. The correct statements for them would be: 1) positively skewed distributions have a limited, but frequent, downside, and 2) they have a less frequent, but more unlimited, upside. III is true.
NEW QUESTION # 844
A bond is trading at the ex-coupon transaction price which is 99-7/32 for a semi-annual pay, 9-5/8% coupon bond. 4.0 months have elapsed since the last coupon. What is the accrued interest for the buyer for $2,750,000 par value of this bond?
- A. $0
- B. $88,229
- C. $110,286
Answer: A
Explanation:
The designation "ex-coupon" indicates that the bond buyer does not receive the next coupon payment. The bond seller is entitled to the entire coupon payment. Consequently, there is no accrued interest for the buyer for this transaction.
NEW QUESTION # 845
If a major magazine contained a review of your restaurant saying it was the best in the Midwest, which of the following would most likely happen?
- A. demand would increase.
- B. quantity demanded would drop.
- C. quantity demanded would increase.
Answer: A
Explanation:
Anything that affects demand other than price will result in a shift in demand. In this case price has not changed. At each price, more of your restaurant services would be demanded; demand would increase.
NEW QUESTION # 846
Using greater amounts of debt in the capital structure
- A. increases the cost of debt because increasing numbers of bondholders are competing for the same earnings stream.
- B. increases the cost of debt because bondholders must compete with equity holders for the earnings stream.
- C. decreases the cost of debt because it reduces the amount of the equity holders' claims on the earnings stream.
Answer: A
Explanation:
Using greater amounts of debt in the capital structure increases the cost of debt because increasing numbers of bondholders are competing for the same earnings stream.
NEW QUESTION # 847
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CFA Level I exam is known for its rigor and difficulty. The pass rate for the exam is typically around 40%, and candidates are advised to spend at least 300 hours preparing for the exam. CFA-Level-I exam covers topics such as financial reporting and analysis, corporate finance, equity investments, fixed income, derivatives, alternative investments, and portfolio management.
CFA-Level-I Free Sample Questions to Practice One Year Update: https://2cram.actualtestsit.com/CFA/CFA-Level-I-exam-prep-dumps.html