今天是：
CFA一级官方样题及答案（AM）
CFA Level 1
MOCK EXAM 1
Morning Session
Time Limit: 3 Hours
1. Tenence recently passed the CFA examination. When he seek for potential employers, he writes in the cover letter: "I have passed all three levels of the CFA Program and may be eligible for the CFA charter after I get the required work experience." According to AIMR Standards of Professional Conduct, Terence:
A. violated Standard IV (B.3) Fair Dealing.
B. violated Standard II (B) Professional Misconduct.
C. violated Standard II (A) Use of Professional Designation.
D. acted in a proper manner.
2. Amy, a CFA candidate, recently joined A&F Asset Management, and reports directly to Tammy. Shortly after joining the firm, Amy learned that A&F Asset Management does not have a copy of the Code and Standards. Which of the following statements best complies with AIMR Standards of Professional Conduct?
A. Amy must deliver a copy of the Code and Standards to Tammy.
B. Amy must notify Tammy, in writing, of her obligation to comply with the Code and Standards.
C. Statement A and B.
D. None of the above.
3. The following are not the AIMR members with supervisory responsibility EXCEPT:
A. not expected to prevent violations of laws, rules and regulations by non-AIMR member employees.
B. in compliance with AIMR Standards after warning an offending employee to stop violating the applicable statutes, regulations, and provisions of the AIMR Code and Standards.
C. expected to evaluate personally the conduct of their employees concerning applicable statutes, regulations, and provisions of the AIMR Code and Standards on a continuing basis regardless of how many employees they supervise.
D. expected to establish and implement written compliance procedures about applicable statutes, regulations, and provisions of the AIMR Code and Standards.
4. According to Standard II (B) Duty to Employer, which of the followings is TRUE?
A. Members are prohibited from undertaking independent practice in competition with their employer.
B. Members are prohibited from making arrangements or preparations to go into a competitive business before terminating their employment.
C. Members must obtain their employer s written consent to engage in an independent competitive consulting work.
D. Members are not obligated to obtain their client s written recognition that they are engaging in an independent competitive consulting arrangement not related to member s firm.
5. Keith, CFA, has been invited to join a group of analysts in touring the riverboats of A & K Limited. Since commercial flight schedules are inconvenient and not practical for the group s time schedule, A & K Limited has arranged chartered flights from casino to casino. A & K Limited has also arranged to pay the hotel bill for the three nights of the tour. The trip is purely business. According to AIMR Standards of Professional Conduct, Keith should:
A. As the arrangements are inappropriate, decline to accept the trip.
B. offer to pay for his share of the airfare and his own hotel bill.
C. accept the flight, but pay his own hotel bill.
D. accept the arrangements as they are.
6. Karen, CFA, is the investment manager of a corporate pension plan. Under ERISA, she owes her fiduciary duty to:
A. the plan sponsor.
B. the firm s shareholders.
C. the plan participants and beneficiaries.
D. none of the above.
7. Daniel, CFA, is a portfolio manager with the trust department of Citi Nation Bank. One of his accounts is his children s trust fund. Daniel allocated IPO shares to his children s trust fund before he has completely satisfied all the needs of his other accounts. According to AIMR Standards of Professional Conduct, which of the following standards did Daniel violate?
A. Standard (A.3) Independence and Objective.
B. Standard IV (B.4) Priority of Transactions.
C. Standard IV (B.7) Disclosure of Conflicts to Clients and Prospects.
D. Standard IV (A.1) Reasonable Basis and Representations.
8. Which of the following about the breach of Standard IV (B.4) Priority of Transactions is correct:
A. Members wait to trade until after their firm s clients have been informed, but before they have had time to act.
B. Members for their client s account before the release of material nonpublic information.
C. Members trade on their family accounts after the member s clients and employer have had an adequate opportunity to act.
D. Members buy stock for a client s account after the stock is put on the firm s recommenced buy list but before this information is made public.
9. As part of an AIMR investigation into the conduct of Helen, CFA, AIMR requests records from Helen about her investment accounts. Helen writes AIMR a letter stating that under Standard IV (B.5), Preservation of Confidentiality, that she is unable to comply with their request. Which of the following statement is TRUE?
A. is correct in her interpretation of Standard IV (B.5).
B. should not turn over the information because it will violate federal material nonpublic information statutes and AIMR s Standard V (A) Prohibit against Use of Material Nonpublic information.
C. will no be in violation of Standard IV (B.5) by turning over the requested information because under the Professional Conduct Program, the Disciplinary Review Subcommittee is considered an extension of Helen.
D. All of the above.
10. Vivian, CFA, a research analyst assigned to Double Limited, has been recommending the stock s purchase in her quarterly report. Vivian has recently married and just discovered her husband s trust account owns several million dollars worth of Double Limited. The stock makes up more than 50 percent of the trust s value but less than 5 percent of Double Limited s outstanding shares. According to AIMR Standards of Professional Conduct, Vivian should:
A. take no action because the stock is not in her name.
B. disclose her interest in the stock at the time of her next report.
C. cease including Double Limited stock in her report.
D. take no action because the holding is less than 5 percent of the outstanding shares.
11. Which of the following statements concerning the AIMR Performance Presentation Standards about the calculation of composite returns is True?
A. Asset weighting within composites is not required using beginning of period weights.
B. Portfolios no longer under management should be included in historical composites.
C. Model results may be presented if they conform to the portfolio s investment strategy and objectives.
D. All of the above.
12. According to AIMR Performance Presentation Standards, which of the following statements about composite return calculations is FALSE?
A. Returns must be total returns.
B. Cost accounting is required.
C. Returns must be time-weighted rates of return calculated using geometric linking.
D. Returns from cash and cash equivalents held in portfolios must be included in return calculations.
13. Kenneth, CFA, is a portfolio manager at A&B limited, if he suspects a colleague at his company of engaging in ongoing illegal activities, as according to the AIMR Standards of Professional Conduct, he is required to take all of the following actions EXCEPT:
A. determine whether the conduct is, in fact, illegal.
B. disassociate himself from any illegal activity.
C. report the illegal violations to the appropriate governmental or regulatory organizations.
D. none of the above.
14. Gloria, CFA, has been assigned by her employer to analyze Well Limited. Which of the following actions would most likely violate AIMR s Standard III(C), Disclosure of Conflicts to Employer? Gloria does NOT report to her employer that:
A. she owns three shares of Well Limited
B. her mother owns 10 shares of Well Limited.
C. she is trustee of the Well Limited Foundation for Heart Research.
D. her brother in-law works on the assembly line at Well Limited.
15. Paul, CFA, heads the research department of a large brokerage firm. Paul has supervisory responsibility over 25 analysts. If Paul delegates some supervisory duties, which statement best describes his responsibilities based on the AIMR Standards of Professional Conduct?
A. Paul is not responsible for those duties he has delegated to his subordinates.
B. Paul s supervisory responsibilities only apply to analysts with the CFA designation.
C. Paul retains supervisory responsibility for all subordinates despite his delegation of some duties.
D. The AIMR standards prevent Paul from delegating supervisory duties to subordinates.
16. Before disseminating changes in his firm s buy/sell list. Johnson, a CFA candidate, calls his best clients to apprise them of the pending change. Based on the AIMR Standards of Professional Conduct, what standard, if any, did Johnson violate?
A. Standard IV(B.3), Fair Dealing.
B. Standard IV(B.4), Priority of Transactions.
C. Standard V(A), Prohibition Against Use of Material Nonpublic Information.
D. None of the above.
17. According to the AIMR Standards of Professional Conduct, which of the following about Standard IV (B.5), Preservation of Confidentiality, is TRUE?
A. If a member receives information due to his or her special relationship with the client indicating illegal behavior on the part of the client, the member may not have an obligation to inform the appropriate authorities.
B. Confidentiality clauses in settlement agreements protect members from divulging information during investigations.
C. Members having a special relationship with a client may withhold that information from an AIMR Professional Conduct Program investigation of that client.
D. A member may disclose information received from a client, even to authorized fellow employees who are also working for the client.
18. Based on the AIMR Standards of Professional Conduct, which of the following statements is least likely to be a violation of Standard IV (B.6), Prohibition against Misrepresentation?
A. An analyst tells a prospective client that investment grade bonds involve less default risk than junk bonds.
B. A bond trader tells a client that he can assist the client in all the client s investment needs: equity, fixed income, and derivatives.
C. An investment manager recommends to a prospective client an investment in mortgage IO strips because they are guaranteed by an agency of the federal government.
D. A broker guarantees that a specific common stock will double in value over the next six months.
19. John receive $1,000 at the beginning of each for the next 10 years. Assume that the interest rate is 12%, calculate the value of this annuity at the end of the ten-year period.
A. $13,578.24
B. $17,548.74.
C. $19,654.58.
D. None of the above.
20. There is a perpetuity of $500 and the interest rate is 10%. Calculate the present value of this perpetuity.
A. $500.
B. $5,000.
C. $5,500.
D. None of the above.
21. John buy the computer through creating a loan of $40,000. It is to be paid off using 6 percent over ten years. Calculate the monthly payment.
A. $421.72.
B. $444.08.
C. $478.59.
D. None of the above.
22. Which of the following statements about probability concepts is TRUE?
A. The multiplication rule for independent events is P(AB) = P(A)(B).
B. A conditional probability is the probability of a particular event occurring given that another event has not occurred.
C. The addition rule of probabilities is P(A or B) = P(A)+P(B).
D. All of the above.
23. For a binomial random variable B(n=12,p=0.5), Find out the mean and variance.
Mean Variance
A. 6 3
B. 7 3.5
C. 8 4
D. None of the above.
24. Which of the following statements best describes the binomial distribution?
A. has a variance equal to -1.
B. is skewed to right.
C. is defined in terms of the mean and variance of its associated normal distribution.
D. is a discrete probability distribution that is used to make probability statements about quantities with binary outcomes.
25. Peter buys a stock for $25 per share. At the end of the one-year holding period the price of the stock is $40 per share. Assume that it pays no dividends, calculate the continuously compounded return.
A. 35%.
B. 47%.
C. 56%.
D. None of the above.
26. Which of the following statements about time-series data is TRUE?
A. Consists of a range of values that bracket the parameter with a specified level of probability 1-β is a confidence internal estimate.
B. Cross-sectional data are a set of values of a particular variable in sequential time periods.
C. A point estimate is a single estimate of an unknown population.
D. None of the above.
27. Which of the following statements about correlation and linear regression is TRUE?
A. A limitation of regression analysis is that regression relations can change over time.
B. Outlines are small numbers of observations at either extreme (small or large) of a sample.
C. Spurious correlation arises in data solely because each of two variables is related to some third variable.
D. The dependent variable Y, is equal to the intercept b0 , plus a slope coefficient, b1 , times the independent X, plus an error term,ε.
28. Based on the following table, if the discount rate is 10%, calculate the present value of the cash flow.
|
Year-End Cash Flows
|
|||
|
1
|
2
|
3
|
4
|
|
$100
|
$150
|
$200
|
$250
|
If the discount rate is 12 percent, the present value of this stream of cash flows is closest to:
A. $636.36
B. $579.87
C. $535.89
D. None of the above.
29. There is 5-year annuity of $3,000 per year. However, the first payment will not pay until year 3. Assuming the interest rate is 10%, calculate the present value of this annuity.
A. $8397.
B. $9,399.
C. $10,258.
D. None of the above.
30. Which of the following is the weakest and strongest measurement scale?
|
|
Weakest |
Strongest |
|
A
|
ordinal
|
interval
|
|
B
|
ordinal
|
ratio
|
|
C
|
nominal
|
interval
|
|
D
|
nominal
|
ratio
|
31. Which of the following statements about statistical concepts is FALSE?
A. A frequency is a tabular display of data summarized into a relatively small number of intervals.
B. An interval is a set of return values within which an observation not falls.
C. A parameter is any descriptive measure of a population characteristic.
D. None of the above.
32. The following shows the yearly returns of aggressive equity funds for four years:
1999 = +5%
2000 = +2%
2001 = +1%
2002 = -4%
2002 = -4%
Assume that this distribution can represent either the population or a sample of aggressive equity funds. Calculate the population and sample standard deviation.
|
|
Population
Standard Deviation
|
Sample
Standard Deviation |
|
A.
|
2.73%
|
3.99%
|
|
B.
|
3.09%
|
4.55%
|
|
C.
|
3.24%
|
3.74%
|
|
D.
|
None of the above.
|
|
33. The minimum proportion of observations falling within 2 standard deviations of the mean is closest to:
A. 95%.
B. 75%.
C. 68%.
D. None of the above.
Use the following data to answer Questions 34 and 35.
The following table summarizes the results of a poll taken of CEOs and analysts about the economic impact of a pending piece of legislation:
|
Group
|
Think the legislation will have a positive impact.
|
Think the legislation will have a negative impact.
|
Total
|
|
Others
|
40
|
30
|
70
|
|
Analysts
|
100
|
30
|
130
|
|
Total
|
140
|
60
|
200
|
34. What is the probability of selecting an analyst who thinks that the legislation will have a negative impact on the economy?
A. 0.15.
B. 0.3.
C. 0.5.
D. None of the above.
35. What is the probability that a randomly selected individual from this group will be either an analyst or someone who thinks this legislation will have a positive impact on the economy?
A. 0.35.
B. 0.58.
C. 0.64.
D. None of the above.
36. Accounting to a new classical view, what is the effect of increasing government expenditures financed by a budget deficit.
A. stimulate output if the marginal propensity to save is negative.
B. exert little impact on aggregate demand.
C. Increase aggregate demand and employment.
D. None of the above.
37. Which of the following statement is FALSE?
A. The crowding-out model implies that deficits will have a upward pressure on the real rate of interest.
B. The new classical model contends that deficits exert little impact on interest rates.
C. Empirical studies consistently show a statistically significant relationship between budget deficits and interest rates.
D. All of the above.
38. Based on the following information, if the Federal Reserve buys $150 million of Treasury Bills from public, what is the effect on money supply?
‧ Reserve requirement: 25%
‧ Bank keeps no excess reserve
A. increase by $112.5 million.
B. increase by $150 million.
C. increase by $600 million.
D. decrease by $800 million.
39. If there is an unanticipated increase in the money supply, what will be the effect?
A. Decrease in price level.
B. Increase in interest rate.
C. Decrease in GDP.
D. increase output as demand increases as people try to reduce their holdings of money.
40. Which of the following about a purely competitive market is FALSE?
A. All firms in the market produce homogeneous products.
B. Each seller is small relative to the total market.
C. There are a large number of dependent firms.
D. There are no barriers to entry or exit.
41. Which of the following statements about supply curves is TRUE?
A. For decreasing cost industries, the supply cuve slopes downward to the right.
B. For increasing cost industries, the supply curve sweeps upward to the right.
C. For constant cost industries, the supply curve is horizontal.
D. All of the above.
42. Which of the following statements about a monopolist is TRUE?
A. There is no restriction for entrance.
B. Many competitors are found in the market.
C. is the sole producer of a product for which there are several substitutes.
D. sells a product for which consumers believe no adequate substitutes exist.
43. Which of the following is the reason for the Oligopolists to collude and to cheat on collusive agreements?
A. restrict output.
B. restrain trade.
C. increase its share of the joint profit.
D. all of the above.
44. Under a system of flexible exchange rates, if there is a decrease in demand for the U.S. dollar in the foreign exchange market will cause:
A. the U.S. trade surplus to increase.
B. the U.S. unemployment rate decrease.
C. the U.S. dollar to depreciate in value.
D. the U.S. dollar to appreciate in value.
45. Which of the following are the two specific conditions that must be met for revenue recognition to take place under the accrual concept of income?
A. Cash is received.
B. Delivery of goods and services and the absence of significant contingent obligation on the part of the seller.
C. passage of risk of ownership from seller to buyers.
D. Completion of the earnings process and assurance of payment.
46. In a flexible or floating change rate system, which of the following types of changes is least likely to affect the exchange-rate?
A. Changes in supply of currency.
B. Changes in demand of currency.
C. Changes in. interest rates.
D. Changes in unemployment.
47. If the real interest rates in the U.S. are lower than its trading partners, what is the effect on the foreign exchange value of the dollar?
A. depreciate.
B. appreciate,
C. remain steady.
D. uncertain.
48. Which of the following statements about the foreign exchange market is TRUE?
A. A foreign currency is at a forward discount if the forward rate expressed in dollars is below the spot rate, whereas a forward premium exists if the forward rate is above the spot rate.
B. In the spot market, currencies are traded for immediate delivery but in the forward market, contracts are made to buy and sell currencies for future delivery.
C. According to interest parity theory, when the forward discount (or premium) exactly offsets the interest rate differential, then the forward rate is said to be interest parity.
D. All of the above.
49. Based on the following information, find out the forward rate.
‧ Domestic nominal rate of return: 30%
‧ Foreign nominal rate of return: 25%
‧ Current exchange rate: 0.4 (D/F)
A. 0.273.
B. 0.398.
C. 0.436.
D. None of the above.
Use the following data to answer Question 50 to 52
.
Net Income $1,000
Depreciation expense 70
Purchase of equipment 200
Goodwill amortization 30
Sale of motor car 25
Sale of common stock 100
Decrease in accounts receivable 40
Increase in inventory 35
Issuance of bonds 20
Increase in accounts payable 30
Increase in wages payable 15
Capital stock exchanged for equipment 10
50. Cash flow from operating activities is:
A. $1,065.
B. $1,090.
C. $1,135.
D. none of the above.
51. Cash flow from investing activities is:
A. -$200.
B. -$175.
C. +$175.
D. +$200.
52. Cash flow from financing activities is:
A. $20.
B. $100.
C. $120.
D. none of the above.
53. In a common-size financial statements, which of the following statement is TRUE?
A. A common size balance sheet expresses all balance sheet accounts as a percentage of total asset.
B. Common size ratios are useful in comparing companies of different sizes.
C. Common size ratios are useful to examine trends over time within a single company.
D. All of the above.
54. Based on the following information, calculate the:
n The company had 1,000,000 shares outstanding at the beginning of the year.
n On June 30th the company declared and issued a 20 percent stock dividend.
n On September 30th the company sold 200,000 shares of common stock at par.
A. 1,000,000.
B. 1,200,000.
C. 1,250,000.
D, 1,400,000.
55. During deflation and decreasing inventory quantities, a company using last-in first-out (LIFO) rather than first-in first-out (FIFO). What is the effect on inventory turnover and net profit margin?
|
|
Inventory Turnover
|
Net Profit Margin
|
|
A.
|
higher
|
lower.
|
|
B.
|
higher
|
higher.
|
|
C.
|
lower
|
lower.
|
|
D.
|
lower
|
higher.
|
56. During deflation and decreasing inventory quantities, a company using LIFO rather than FIFO. What is the effect on cost of goods sold and cash flows?
|
|
Cost of Good Sold
|
Cash Flow
|
|
A.
|
lower
|
lower.
|
|
B.
|
higher
|
lower.
|
|
C.
|
lower
|
higher.
|
|
D.
|
higher
|
higher.
|
57. The following information is calculated by using LIFI method, calculate the cost of goods sold using FIFO.
2000 2001
Beginning Inventory $80,000 $70,000
Ending Inventory $70,000 $50,000
LIFO Reserve $5,000 $8,000
LIFO Cost of Goods Sold $300,000 $250,000
A. $219,000.
B. $238,000.
C. $247,000.
D. none of the above.
58. Two growing companies are identical except that Company X capitalizes whereas Company Y expenses costs for long, , , , -lived resources. Which of the following statements about financial statement effects is FALSE? Company X will show:
A. lower income variability.
B. lower profitability.
C. higher leverage ration.
D. higher cash flows from operations.
59. A company retires bond before the maturity date. Assume that the bond is initially sold at discount, the difference between the bond’s market value and the bond’s book value will:
A. treated as ordinary income or loss.
B. listed on the statement of retained earnings.
C. treated as an extraordinary gain or loss.
D. Posted to the reserve account.
60. Which of the following is NOT a criteria for classifying a capital lease?
A. The term of the lease is 75 percent or more of the estimated economic life.
B. It contains a bargain purchase option.
C. Transfer ownership.
D. The present value of the minimum lease payments equals or exceeds 80 percent of the fair value of the leased property.
61. Assume the present value discounted by 15% is $3,500,000 and it is used the straight-line depreciated method. Find out the reported lease related expense for the first year.
‧ The lease is a 10-year capital lease with annual payments of $500,000.
‧ There is a guaranteed residual value of $500,000 at the end of the lease.
A. $525,000.
B. $830,000.
C. $970,000.
D. none of the above.
62. What is the reason for an analyst should consider whether a company acquired assets through a capital lease or an operating lease?
A. It could affect the leverage ratio.
B. It could affect the liquidity.
C. It could affect the turnover.
D. none of the above.
63. Under off-balance-sheet financing, which of the following is FALSE?
A. Use of take-or-pay agreements to ensure the long-term availability of raw materials and other inputs necessary for operations.
B. Sale of receivables to unrelated parties.
C. Issuance of debt with warrants to finance expansion.
D. All of the above.
64. Which of the following factor that affect the cost of capital and it is not control by the company?
A. Interest rates and tax rates.
B. Wages policy.
C. Capital structure policy.
D. None of the above.
65. Which of the following statements about business risk and financial risk is TRUE?
A. Business risk is the riskiness of the company s assets if it uses debt.
B. Financial risk is the additional risk placed on the common stockholders when more debt is acquired.
C. Interest rate risk can be avoided.
D. None of the above.
66. Which of the following statement about market is FALSE?
A. The fourth market describes direct trading of securities using the Internet.
B. The primary market is where most of the trading takes place on major exchanges such as the New York Stock Exchange.
C. The secondary market describes block trades conducted by exchange members off the exchange floor.
D. All of the above.
67. Which of the following statement about market is FALSE?
A. Over-the-counter-market is called a continuous market.
B. Dealer-markets are price driven markets.
C. If trades occur at any time the market is open, it is called continuous market.
D. None of the above.
68. Which of the following statement about weighting schemes used in constructing stock market indexes is FALSE?
A. The Nikkei Dow is a price-weighted index.
B. The Standards and Poor s indexes are market value-weighted indexes.
C. A market-weighted index automatically adjusts for stock splits.
D. None of the above.
69. Which of the following about a well functioning market is FALSE?
A. numerous buyers and sellers are willing to trade at prices about and below the current price.
B. the current price of a security fully reflects all the information currently available about the security.
C. market participants can buy and sell quickly at a known price.
D. transaction costs are low.
70. Study the following information about a stock, calculate the price earning ratio:
‧ Required rate of return: 15%
‧ Constant growth rate: 8%
‧ A return on equity: 12%
‧ The earning retention ratio: 20%.
A. 3.8.
B. 4.7.
C. 5.6.
D. none of the above.
71. There is a stock selling for $25 and it has an expected annual dividend of $4. Assume it will have a sustainable growth rate of 9% perpetual and the capital markets are in equilibrium, calculate the market discount rate for this stock.
A. 20%.
B. 25%.
C. 30%.
D. none of the above.
72. Study the following information, calculate the expected rate of return.
‧ index is now selling at $490.
‧ market index multiplier is expected to be 5X.
‧ index earnings is expected to be $100.
‧ dividend payment is expected to be $40.
A. 10%.
B. 20%.
C. 30%.
D. 40%.
73. Which of the following statement about market value added, Economic Value Added and the franchise factor is TRUE?
A. The critical factors determining the franchise P/E are the risk premium.
B. Market Value added is used primarily for evaluating management.
C. Economic Value Added is a measure of external performance.
D. The franchise factor concept is similar to Economic Value Added because it recognizes that adding value requires investing in projects that provide excess net present value.
74. In accrual accounting, the matching principle states that:
A. related revenues and expenses are accounted for during the same time period.
B. an entity should match the cash payment and cash receipt.
C. an entity should match the income and expense monthly.
D. none of the above.
75. A change from an incorrect to an acceptable accounting method reported as:
A. an extraordinary item.
B. correction of error.
C. a prior period adjustment.
D. none of the above.
76. Which of the following statements about the percentage-of-completion and completed contract methods is FALSE? The completed contract method will produce:
A. the same cash flows as that using the percentage-of-completion method.
B. smaller net worth and retained earnings than using the percentage-of-completion method.
C. balance sheets with greater current assets (assuming cash receipts are at least as great as revenue
earned) and greater liabilities than using the percentage-of-completion method.
earned) and greater liabilities than using the percentage-of-completion method.
D. greater net income in the periods before construction is completed, but not at the end of the contract, than using the percentage-of-completion method.
77. The following information is extracted from a financial statement:
Net income $1000
Decrease in accounts receivable 120
Increase in inventory 40
Increase in accounts payable 20
Decrease in wages payable 10
Increase in deferred taxes 40
Depreciation 100
Profit from the sale of fixed assets 10
Dividends paid out 80
Cash flow from operations is:
A. $940.
B. $1020.
C. $860.
D. none of the above.
78. Which of the following statements about cash flow is TURE?
A. Cash flow from operations includes changes in current asset accounts.
B. Cash flow from investing includes the sales of motor car.
C. Cash flow from financing includes the payment of dividend.
D. All of the above.
79. A increase in inventory over a period of time would be considered:
A. use of cash.
B. adjusting entry.
C. non-cash flow item.
D. none of the above.
80. Study the following information, find out the cash conversation cycle.
l Receivables Turnover: 30
l Inventory Turnover: 15
l Payable Turnover: 20
A. 15 days.
B. 18.25 days.
C. 25.34 days.
D. none of the above.
81. Which of the following could increase the current ratio?
A. buys the equipment on credit.
B. Buy the stock on account.
C. sells marketable securities for cash.
D. all of the above.
82. Based on the following information, calculate the return on equity.
• Total asset turnover: 2.1
• After-tax profit margin: 30%
• Financial leverage multiplier is 0.5.
A. 25.9%.
B. 28.3%
C. 31.5%
D. none of the above.
83. Study the following information, calculate the return on equity.
l The asset turnover (S/A) is 2.5.
l A leverage multiplier (A/E) is 1.2.
l An interest expense ratio (I/A) of 0.08.
l A tax retention rate (1 -1) is 0.6.
l Pre-interest profit margin (EBIT/S) of 20 percent.
A. 30%.
B. 32%.
C. 34%.
D. none of the above.
84. Which of the following statements about dilative securities is TRUE?
A. Complex capital structure contains potentially dilutive securities.
B. Anti-dilutive security will cause earnings per share to increase if it is converted into common stock.
C. Dilutive security will cause earnings per share to decrease if it is converted into share capital.
D. None of the above.
85. Based on the following information, calculate the basic earnings per share.
l Income after tax: $180,000
l 50,000 common stock of $5 par: $250,000
l 10,000, 8% preference share of $5 par: $50,000
A. $3.23.
B. $3.52.
C. $4.97.
D. none of the above.
86. During deflation compared with FIFO companies, LIFO companies will have:
A. higher stock balances.
B. higher cost of goods sold.
C. higher net incomes.
D. Higher sales.
87. Compared with expensing companies, companies that capitalize costs:
A. have higher cash flow from operations and lower cash flow from investing.
B. have better debt/equity ratios.
C. have better debt/asset and debt/equity ratios.
D. All of the above.
88. Which of the following is not the result of using an straight line depreciation method instead of accelerated depreciation method in the early years of asset’s life?
A. lower depreciation expense.
B. higher assets.
C. lower net income.
D. All of the above.
89. Which of the following definitions used in accounting for income taxes is TURE?
A. A valuation allowance is a reserve against deferred tax assets.
B. A timing difference is the result of tax return treatment of a transaction that differs from its financial reporting treatment.
C. Statement A and B.
D. None of the above.
90. Which of the following statements about temporary and permanent differences is correct?
A. Permanent differences are differences between taxable and pretax income that are never reversed.
B. Temporary differences are differences between taxable and pretax incomes that will reverse in future years.
C. Both Statement A and B are correct.
D. None of the above.
91. What is the name for the collateralized borrowed arrangement used by institutional investors in the bond market?
A. futures.
B. options.
C. a repurchase agreement.
D. none of the above.
92. Which of the following described premium bond can be described?
A. Coupon rate = required market yield = par value.
B. Coupon rate < required market yield < par value.
C. Coupon rate > required market yield > par value.
D. Coupon rate > required market yield < par value.
Use the following information for Questions 93 to 95.
Peter is considering two bonds:
Bond A yield 10%
Bond B yield 7%
93. Using Bond B as the reference bond, calculate the absolute yield spread.
A. -3.0%.
B. 0%.
C. 2%.
D. 3%.
94. Using Bond B as the reference bond, calculate the relative yield spread.
A. 40%.
B. 43%.
C. 47%.
D. none of the above.
95. Using Bond B as the reference bond, calculate the yield ratio.
A. 0.89.
B. 1.43.
C. 1.77.
D. none of the above.
96. There is a $100 par value, 8% percent semiannual, 10 year debenture bond is currently selling for $130. Find the bond s current yield.
A. 5.77%.
B. 6.25%.
C. 8.34%.
D. none of the above.
97. There is a call option on a stock that is currently selling for $25 and it is in-the-money by $8. Find the call option s strike price:
A. $17.
B. $25.
C. $33.
D. None of the above.
98. Which of the following statement about American and European options is FALSE?
A. The total number of options in Europe exceeds the number of American options.
B. European options can only exercise at expiration.
C. American options can exercise on or before expiration.
D. None of the above.
99. Given that there is a put on a stock with a strike price of $60 is priced at $5 per share, while a call with a strike price of $60 is priced at $8. Find out the maximum per share loss and the maximum per share gain to the writer?
Maximum loss to put writer Maximum gain to the call writer
A. $55 $8
B. $52 $6
C. $52 $8
D. Cannot be determine.
100. Investors should NOT solely rely on the comparative sales approach to value real estate? Because:
A. every property is unique in some respect.
B. it relies on asking prices.
C. it relies on bid prices.
D. All of the above.
101. Which of the following statements about real estate limited partnerships (RELPs) is TRUE?
A. RELPs are sold as units of participation.
B. Investors have unlimited liability.
C. There is no active secondary market.
D. None of the above.
102. The nominal rate of return investors require to take investments varies over time and is a function of which of the following factors?
I. Risk Premium.
II. Expected inflation rate.
III. Real risk-free rate.
A. I only.
B. I and II only.
C. II and III only.
D. I, II and III.
103. Which of the following factor determine the real risk-free rate of interest?
A. Consumer preferences for current consumption (time preference) and the set of investment opportunities available in the economy (investment opportunities).
B. The set of investment opportunities available in the economy.
C. The uncertainty caused by the possibility of a major change in the political or economic environment of a country (country risk).
D. None of the above.
104. Which of the following statements about the security market line is TRUE?
I. The security market line interact the y-axis at the real risk-free rate of return.
II. The tradeoff between risk and return is shown by movement along the security market line.
III. The slope of the security market line reflects investor s investment risk premium.
A. II only.
B. III only.
C. I and III only.
D. II and III only.
105. Amy past the mid-point of their careers, identify the phase of lift cycle she is typically in?
A. Accumulation.
B. Consolidation.
C. Gifting.
D. None of the above.
106. Endowment funds are typically characterized as having a ____________ horizon and ____________ needs.
A. Short time, High Liquidity.
B. Long time, High Liquidity.
C. Short time, Low Liquidity.
D. Long time, Low Liquidity.
107. Which of the following is about the major constrains faced by mutual funds is CORRECT?
A. law to protect mutual fund investors, and those placed on the mutual fund s managers by investors.
B. capital markets, and those that represent choices made by the mutual fund s managers.
C. law to protect mutual fund investors, and those that represent choices made by the mutual fund s managers.
D. none of the above.
108. Which of the following statement described the security market line (SML) correctly?
A. Beta is the risk measure for the SML.
B. Risk-free rate determine how the SML interests the X-axis.
C. Securities fall above SML are over-valued.
D. All of the above.
109. A call option is in-the money if:
A. The stock price is greater than the strike price
B. The stock price is smaller than the strike price
C. The market rate is decreasing
D. None of the above.
110. Based on the following information, calculate the required return on stock.
Beta=1
Risk-free rate=5%
Expected return on market=10%
A. 10%.
B. 12%.
C. 14%.
D. 16%.
111. Which of the following is the primary reason for the slope of security market line changes over time?
A. risk characteristics.
B. attitudes-of investors toward risk.
C. expected rate of inflation.
D. market conditions.
112. In the investment policy statement, which of the following is included as an input?
A. Investor s return objectives.
B. Investment constraints.
C. Expected Return on Investment.
D. All of the above.
113. Which type of institutional investor must balance the need for current income and the need for long-term protection of capital?
A. bank.
B. pension fund.
C. endowment fund.
D. none of the above.
114. Which of the following about correlation of two assets is TURE?
A. The smaller correlation implies smaller risk reduction potential.
B. The smaller correlation implies greater risk reduction potential.
C. The larger correlation implies smaller risk reduction potential.
D. The larger correlation implies greater risk reduction potential.
115. Which of the following portfolios could NOT lie on the efficient frontier?
|
Portfolio
|
Expected Return
|
Standard Deviation
|
|
A
|
6
|
3
|
|
B
|
10
|
3
|
|
C
|
18
|
7
|
|
D
|
18
|
9
|
A. Portfolios A and B.
B. Portfolios A and D.
C. Portfolios B and C.
D. Cannot be determine.
116. Given that the covariance between two assets is 50 while their variances are 16 and 64, calculate the correlation coefficient between the two assets is closet to:
A. 1.27
B. 1.35
C. 1.56
D. none of the above
117. Which of the following statements about risk is TRUE?
A. Systematic risk = Total risk + unsystematic risk.
B. Unsystematic risk is an undiversifiable risk.
C. Systematic risk is a diversifiable risk.
D. The market portfolio consists only of systematic risk.
118. Which of the following statements about the security market line (SML) and capital market line (CML) is TRUE?
A. The SML is a curve but the CML is a straight-line.
B. The SML involves the concept of a risk-free asset but the CML does not.
C. For risk measurement, SML uses beta but the CML uses standard deviation.
D. Both statements B and C are correct.
119. Which of the following statements about the similarity between arbitrage pricing theory (APT) and the capital asset pricing model (CAPM) is TRUE?
A. Both of them assume that unique effects are independent and will be diversified away in a large portfolio
B. Both of them assume linear relationships between return and the factor(s) included in the models.
C. Both of them are asset pricing models.
D. All of the above.
120. Which of the following is the least likely to explain how investing internationally can benefit the investor s portfolio within a risk-return framework?
A. It provides substantial tax benefits.
B. It expands the efficient frontier above the domestic only frontier.
C. Portfolio diversification could be allowed through international investing.
D. All of the above.
ANSWERS FOR MOCK EXAM 1 (MORNING SESSION)
1. D. Although Terence has passed Level III, he has not yet received his charter and cannot use the CFA designation. The description provided in the cover letter properly describes his situation.
2. C. Amy must take both actions-notifying her immediate supervisor and delivering a copy of the Code and Standards.
3. D.
4. C. Members may undertake an independent practice that could result in compensation or other benefit in competition with their employer provided they obtain written consent from both their employer and the party for whom they undertake independent practice.
5. C. To maintain his objectivity, Keith should pay his own hotel bill. Because the itinerary required charter flights due to a lack of commercial transportation, A & K Limited can appropriately provide them.
6. C. Under ERISA, fiduciaries must act solely in the interest of, and for the exclusive purpose of benefiting, the plan participants and beneficiaries.
7. B. Daniel must give priority to transactions for clients and employers over transactions for his children.
8. A. To avoid violating the standards, members cannot trade until the member s clients and employers have had an adequate opportunity to act on the recommendation.
9. C. The requirements of Standard IV (B.5) are not intended to prevent Lambert from cooperating with an investigation by AIMR s Professional Conduct Program.
10. B. Vivian should disclose to her clients and prospects her husband s holdings in Double Limited because this matter could be expected to impair her ability to make unbiased and objective recommendations.
11. B.
12. B. Accruals accounting is required.
13. C. Standard I(B) Fundamental Responsibilities. Prohibition against participating or assisting in illegal and ethical violations. If Roberts suspects someone is planning or engaging in illegal activities, he should: (1) determine the legality of the activities, (2) disassociate himself from the illegal or unethical activity, and (3) urge his firm to attempt to persuade the perpetrator to stop. The AIMR Standards of Professional Conduct do not require that Roberts report such activities to the authorities, but the law might.
14. C. Standard III(C) Disclosure of Conflicts to Employer. Gloria should disclose to her employer all matters that could reasonably be expected to interfere with her ability to make unbiased and objective recommendations. Her service as a trustee of the Well Limited Foundation for Heart Research is most likely to be considered a conflict of interest with her responsibility to her employer.
15. C. Standard III (E) Responsibilities of Supervisors. Paul may delegate supervisory duties, but such delegation does not relieve him of his supervisory responsibility.
16. A. Standard IV (B.3) Fair Dealing. Johnson violated the standard on fair dealing because he did not deal fairly and objectively with all clients and prospects when disseminating investment recommendations. Instead, he showed favoritism to his best clients. In disseminating investment recommendations, Johnson should consider making the information available to clients based on their interest and suitability. A change of recommendation from buy to sell or sell to buy is generally material.
17. D. Standard IV(B.5) Preservation of Confidentiality. Choice B is false because this standard prohibits members from executing settlement agreements that prevent members from providing information in an investigation by AIMR s Professional Conduct Program (PCP). Choice C is false because a person cannot withhold information during PCP investigations. Choice A is false because if a member receives information due to his or her special relationship with the client indicating illegal behavior on the past of the client, the member may not have an obligation to inform the appropriate authorities.
18. A. Standard IV(B.6) Prohibition against Misrepresentation. Members are not permitted to make any assurances or guarantees about any investment, except to communicate accurate information. The statement that investment grade bonds have less default risk than junk bonds is an accurate statement.
19. C. Use BGN node: n = 10; i = 12 PMT = 1,000, compute FV = 19.654.58
20. B. The present valu, e , of, a, perpetuity is PV = A/r = 500/0.1 = $5,000.
21. B. i = 6/12 = 0.5; n = 10x12 = 120; PV = 40,000 Compute PMT
22. A.
23. A. A binomial random variable has an expected value or mean equal to np and variance equal to np(1-p).
Mean = 12(0.5) = 6; variance (12)(0.5)(1-0.5) = 3
24. D.
25. B. Rbt-1 = In St+1 /St = (1+RL1-1) = In (40/25) = 0.47. Thus, 47% is the continuously computed return for the one-year holding period.
26. B. Choice A describes cross-sectional data.
Choice B describes time-series data.
27. D. The dependent variable, Y, is equal to the intercept, b0, plus a slope coefficient, b1, times the independent, X, plus an error term, ε.
28. C.
|
I
|
N
|
FV
|
Compute PV
|
|
10
|
1
|
100
|
90.91
|
|
10
|
2
|
150
|
123.97
|
|
10
|
3
|
200
|
150.26
|
|
10
|
4
|
250
|
170.75
|
|
|
|
Total
|
535.89
|
29. B. Step 1: Solve for the PV of the 5 payments of 3,000 to be received in years 3 through 7.
n = 5; i = 10; PMT = 3,000; compute PV =11,372.36
11,372.36 falls one year before the first payment, or in year 2.
Step 2: Find the present value of 11,372.36 that is two years in the future.
n = 2; i = 10; FV =11,372.36; compute PV =9,398.64 or 9,399(rounded).
30. D. From weakest to strongest, the ordering of measurements scales is nominal, ordinal, interval, and ratio.
31. B. An interval is a set of return values within which an observation not falls.
32. C. Step 1. Calculate the mean monthly return = 2% + (- 4%) + 1% + 5% = 4%M = 1%
Step 2.Calculate the population standard deviation:(［(2% - 1%)2 + (-4% -1%)2 + (1% - 1%)2 + (5% -1%)2］N)¹/ 2=3.24%
Step 3. Calculate the sample standard deviation: (［(2% - 1%)2 + (-4% -1%)2 + (1% - 1%)2+ (5% - l%)2］)/n - 1) ¹/ 2 = 3. 74%
33. B. According to Chebyshev s inequality, the proportion of the observations within 2, which is k, standard deviations of the mean is at least 1 -(l/k) 2 = 1-(1/2 2) = 0.75 or 75%.
34. A. The probability is 30/200 = 0.15.
35. B. Using the addition rule for probabilities, P (analyst or positive) =P(analyst) + P(positive) - P(analyst and positive)
P (A or positive) = 130/200 + 140/200 - (100/130) = 0.58 or 58%
36. B. Savings increases to hold interest rates constant. This means aggregate demand changes little.
37. C. The empirical evidence on the relationship between budget deficits and interest rates is mixed.
Few studies show a significant positive short-term link between budget deficits and real interest rates.
38. B. Expansion = 1 / reserve requirement = 1/0.25 = 4
(4)(150) = 600
39. C. People realize this leads to inflation in the long run, so they reduce their money holdings. Output rises because the increase is unexpected.
40. C. In purely competitive markets, there are a large number of dependent firms.
41. D.
42. D.
43. C.
44. C.
45. D. Choice A: Accrual accounting does not require the receipt of cash for assurance of payment to exist.
Choice C and D: These relate only to the condition of completion of the earnings process.
46. D.
47. A Demand for currency decreases when real interest rates decrease because of decreased capital flows.
48. C Foreign exchange quotations can be expressed on a direct basis - the home currency price of another currency—or an indirect basis-- the foreign currency price of the home currency.
49. C F/S= (1 + rD)/(l + rF) where rates are listed as DC/FC
F = (1.3/1.25)(0.4) = 0.416
50. C. Direct method:
Net income 1000
Depreciation 70
Goodwill 30
Change in accounts receivable 25
Change in inventory (35)
Change in accounts payable 30
Change in wages payable 15
Operating cash flows 1135
51. B. Purchase equipment (200)
Sell truck 25
Investing cash flows (175)
52. D. Sale of common stock 100
Issuance of bonds 20
Financing cash flows 120
53. D. A common size balance sheet expresses all balance sheet accounts as a percentage of total assets.
54. C. Original shares of common stock = 1,000,000(12) = 12,000,000
Stock dividend = 200,000(12) = 2,400,000
New shares of common stock = 200,000(3) = 600,000
Total shares of common stock = 15,000,000/12
= 1,250,000
Stock dividends are assumed to have been outstanding since the beginning of the year.
55. D. Inventory turnover, defined as COGS/Average inventory, if often meaningless for LIFO companies due to the mismatching of costs. The numerator represents current costs, whereas the denominator reports outdated historical costs. Thus, the turnover ratio under LIFO will, when prices decrease, trend lower because of small COGS and larger inventory. Net profit margin, defined as EAT/Sales, is higher during periods of decreasing profits for LIFO companies. LIFO leads to a smaller COGS, which reduces EAT, without affecting sales.
56. A. In this situation, LIFO results in lower cost of goods sold because it uses the more recent and lower costs than LIFO. LIFO results in lower cash flows because the cash on income taxes is a percentage(the marginal tax rate) of the difference in inventory values. Thus, with LIFO:
Sales
-COGS (smaller)
EBT (larger)
-Taxes (larger) Because taxes paid out are a cash outflow.
EAT (larger) If taxes are larger, then cash flow ill be smaller.
57. D. COGSFIFO = COGSLIFO - (Ending LIFO Reserve - Beginning LIFO Reserve)
COGSFIFO = $250,000 - ($8,000-$5,000) = $247,000
58. D. Compared to expensing, capitalizing results in higher profitability in early years and lower profitability in later years.
59. C.
60. D. The present value of the minimum lease payments equals or exceeds 90 percent of the value of the fair value of the leased property.
61. B. Capital lease affects on the income statement:
Step1: Calculate the depreciation charge: ($3,500,000-$450,000)/10 = $305,000
Step2: Calculate the interest expense: $3,500,000(0.15) = $525,000
Total expense: $305,000+$525,000 = $830,000
62. A.
63. C.
64. A.
65. B.
66. D.
67. B. Dealer-markets are price-driven markets.
68. D.
69. C.
70. C. P/E = Dividend payout ratio/(k-g)
Dividend payout ratio = 1 - retention ratio = 1-0.2 = 0.8
P/E = 0.8(0.15-0.08) =5.6
71. B. k = D1/P0+g = $4/$25+0.09 = 0.25
72. A. Step1: Calculate the ending index value = ($100)(5) = $500
Step2: Calculate the expected return.
E(R1) = ［Dividends + (Ending value - Beginning value)］/(Beginning value)
= ［40+(500-490)］/$490 = 0.1 or 10%
73. D. The critical factors determining the franchise P/E are the difference between the expected return on the new opportunities (R) and the current cost of capital (k) and the size of these growth opportunities relative to the firm s current size.
74. A.
75. C.
76. D The completed contract method less net income in the periods before construction is completed, but not at the end of the contract, than using the percentage-of-completion method. This is because the completed contract method recognizes revenue and expense only when the contract has been completed.
77. A. Net income 1,000
Adjustment for non-cash and
non-operating items
Adjustment for non-cash and
non-operating items
Depreciation 100
Deferred taxes (increase) 40
Profit from sale of equipment (10)
Adjustment for working capital items:
Adjustment for working capital items:
Accounts receivable (decrease) (120)
Inventory (increase) (40)
Accounts payable (increase) (20)
Wages payable (decrease) (10)
Cash flow from operations 940
78. D
79. A When inventory and accounts receivable increase, this is a use of cash (cash outflow); when assets decrease, this is a source (cash inflow). When accounts payable increase, this is a source of cash (cash inflow); when liabilities decrease, this is a use (cash outflow).
80. B Cash conversion cycle = receivables days + inventory processing days - payables payment period.
Receivables days = 365/receivabies turnover = 365/30 = 12.17 days.
Inventory processing days = 365/inventory turnover = 365/15 = 24.33 days.
Payables payment period = 365/payabIes turnover = 365/20 = 18.25days.
Cash collection cycle = 12.17 + 24.33 – 18.25 = 18.25 days.
81. B Choice A: Buying fixed assets on credit does not affect current assets but increases current liabilities. Therefore, the current ratio falls.
Choice B: Buying inventory on account increases both inventory and accounts payable. Because the current ratio started off below I, the ratio will increase.
Choice C: Selling marketable securities for cash does not affect the amount of current assets and leaves the current ratio unaffected,
Choice D: Paying off accounts payable from cash lowers current assets and current liabilities by the same amount. Because the current ratio started off below 1, the ratio will fall.
82. D ROE = Profit margin x Total asset turnover x financial leverage
ROE = (0.3)(2.1)(0.5)= 0.315 or 31.5%
83. A ROE = ［(S/A)(EBIT/S) - (I/A)］(A/EQ)(I - t)
ROE = ［(2.5)(0.2) - (0.08)］(1.2)(0.6) = 0.30 or 30%
84. A
85. B EPS = ($180,000 - $4,000) / 50,000 = $3.52 per share
86. B
87. D
88. C These relationships are reversed in the latter years of the asset s life if the firm s capital expenditures decline.
89. D
90. C.
91. C.
92. D.
93. D. Absolute yield spread = Yield on Bond A - Yield on Bond B = 10%-7% = 3%
94. B. Relative yield spread = (Yield on Bond A - Yield on Bond B)/(Yield on Bond B)
= (10%-7%)/7% = 0.43 = 43%
95. B. Yield ratio = (Yield on Bond A)/(Yield on Bond B) = 6%/7% = 1.43
96. B. Current yield = (Annual dollar coupon interest)/(Price of the bond) = 8/130 = 0.0625 or 6.25%
97. A. When the stock s price (S) - the strike price (X) is positive, a call option is in-the-money. 25-X = 8 so X = 17.
98. A.
99. A. The writer of put loss = $60-premiun$5 = $55
The writer of call gets a maximum gain of $8
100. A.
101. C.
102. D.
103. A.
104. D.
105. B.
106. D.
107. C.
108. A. Securities that fall on the SML are properly valued.
109. A.
110. A. If a stock s beta were equal to 1, an investor would be expected to get the market rate of return from buying the stock. E(R) = 5%+1(10%-5%) = 10%
111. D
112. D
113. C
114. B Perfect positive correlation (r = + 1) of the returns of two assets offers no risk reduction, whereas perfect negative correlation (r = -1) offers the greatest risk reduction.
115. B Portfolio A does not lie on the efficient frontier because it has a lower return than Portfolio B but has greater risk. Portfolio D does not lie on the efficient frontier because it has higher risk than Portfolio C but has the same return.
116. C.
117. D Choice A: Unsystematic risk is diversifiable risk.
Choice B: Systematic risk is undiversifiable risk.
Choice C: Total risk= Systematic risk+ Unsystematic risk.
118. C
119. D CAPM specifies the factor (market risk) but APT does not.
120. A
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