CFA一级模考题
CFA一级模考
CFA一级模考题1 . If the price of World Cup Soccer tickets increases from $40 a ticket to $50 a ticket and the quantity demanded of tickets stays the same, demand for the tickets is:A)elastic, but not perfectly elastic.B)perfectly inelastic.C)inelastic, but not perfectly inelastic.The correct answer was: BSince the quantity of tickets demanded stayed the same after the price changed, the demand curve would have to be vertical which is a perfectly inelastic demand curve.2 . If the market demand for a product increases in a competitive market, then in the short run the quantity supplied by an individual firm will:A)decrease and the firm will generate economic profits.B)increase and the firm will generate economic profits.C)increase and the firm will generate economic losses.The correct answer was: BIf the market demand for a product increases in a competitive market, then both price and quantity supplied by an individual firm will increase and the firm will generate economic profits in the short run because price will be greater than average total costs.3 . A technology that all of the firms in a perfectly competitive industry are using in their production process has been banned by new legislation. What will most likely be the effect if these firms stop using this technology?A)Firms will adopt a different technology that reduces their costs of production.B)Profit will no longer be maximized at the level of output where marginal cost is equal to the market price.C)The quantity that the industry will supply at a given price will be reduced.The correct answer was CIf all the firms in a competitive industry have adopted a technology for production, it is presumably the technology that minimizes their production costs . If that technology is outlawed, firms will haveto revert to the second-best technology, which will increase their costs of production. This is represented by a shift to the left in the industry supply curve. At each price level, the quantity supplied will be less than before.Just as a technological improvement will cause firms that adopt it early to earn economic profits that attract new entrants to the industry, prohibition of the cost-minimizing technology will cause economic losses and typically force some firms to exit the industry. Under perfect competition, profit is always maximized at the level of output where marginal cost equals the market price. The state of technology is one factor that determines the level of output at which this occurs.4 . Monopolistic competition differs from pure monopoly in that:A)barriers to entry are high under monopoly, but low under monopolistic competition.B)monopolists maximize profit; monopolistic competitors do not.C)monopolistic competitors are price takers, monopolists are not.The correct answer was AMonopolistic competition is characterized by the low barriers to enter its competitive markets. In contrast, a monopoly exists only where there are high barriers to market entry.5 . Which of the following is the most likely effect of a subsidy in the market for corn?A)Marginal costs will be less than marginal benefit.B)The supply curve for corn will shift to the right.C)The equilibrium quantity of corn will decrease.The correct answer was: BA subsidy causes a shift rightward in the supply curve (increase in supply at a given price level) by the amount of the subsidy. The equilibrium quantity will increase and the price paid by buyers will decrease. Marginal cost will exceed marginal benefit and a deadweight loss will result from overproduction.。
CFA一级模考
3 . A stock is expected to pay a dividend of $1.50 at the end of each of the next three years. At the end of three years the stock price is expected to be $25. The equity discount rate is 16 percent. What is the current stock price? A)$24.92. B)$19.39. C)$17.18.
5 . Compared to a publicly traded firm, a private equity firm is most likely to: A)be more concerned with short-term results. B)exhibit stronger corporate governance. C)disclose less information about its financial performance.
The correct answer was C Private equity firms are not held to the same financial reporting requirements as publicly traded firms. Less public scrutiny and limited financial disclosure may lead to weaker corporate governance. However, with less pressure from public shareholders, a private equity firm is typically more able to focus on long-term performance.
CFA一级模考
CFA一级模考题1 . A stock has an expected return of 4% with a standard deviation of returns of 6%. A bond has an expected return of 4% with a standard deviation of 7%. An investor who prefers to invest in the stock rather than the bond is best described as:A) risk neutral.B) risk averse.C) risk seeking.The correct answer was BGiven two investments with the same expected return, a risk averse investor will prefer the investment with less risk. A risk neutral investor will be indifferent between the two investments. A risk seeking investor will prefer the investment with more risk.2 . Which of the following is NOT a rationale for the importance of the policy statement in investing? It:A) forces investors to take risks.B) allows the investor to judge performance by objective standards.C) specifies a benchmark against which to judge performance.The correct answer was ABy no means should the policy statement force the investor to take risks. The statement forces investors to understand the risks of investing.3 . A stock's abnormal rate of return is defined as the:A) rate of return during abnormal price movements.B) expected risk-adjusted rate of return minus the market rate of return.C) actual rate of return less the expected risk-adjusted rate of return.The correct answer was CAbnormal return = Actual return – expected risk-adjusted return4 . Which of the following asset class specifications is most appropriate for asset allocation purposes?A) Emerging markets.B) Consumer discretionary.C) Domestic bonds.The correct answer was CAn asset class should be specified by type of security (e.g., stocks, bonds, alternative assets, cash) and can then be further subdivided by region or industry classification. An asset class defined only as "emerging markets" or "consumer discretionary firms" should identify the type of securities (e.g., equities or debt).5 . Which of the following statements about systematic and unsystematic risk is least accurate?A) The unsystematic risk for a specific firm is similar to the unsystematic risk for other firms in the same industry.B) Total risk equals market risk plus firm-specific risk.C) As an investor increases the number of stocks in a portfolio, the systematic risk will remain constant.The correct answer was AThis statement should read, "The unsystematic risk for a specific firm is not similar to the unsystematic risk for other firms in the same industry." Thus, other terms for this risk are firm-specific, or unique, risk.Systematic risk is not diversifiable. As an investor increases the number of stocks in a portfolio the unsystematic risk will decrease at a decreasing rate. Total risk equals systematic (market) plus unsystematic (firm-specific) risk.。
CFA一级模考
CFA一级模考题1 .Edelman Enginenering is considering including an overhead pulley system in this year's capital budget. The cash outlay for the pully system is $22,430. The firm's cost of capital is 14%. After-tax cash flows, including depreciation are $7,500 for each of the next 5 years.Calculate the internal rate of return (IRR) and the net present value (NPV) for the project, and indicate the correct accept/reject decision.NPV IRR Accept/RejectA) $3,318 20% AcceptB) $15,070 14% AcceptC) $15,070 14% RejectThe correct answer was A)$3,318 20% AcceptUsing the cash flow keys:CF0 = -22,430; CFj = 7,500; Nj = 5; Calculate IRR = 20%I/Y = 14%; Calculate NPV = 3,318Because the NPV is positive, the firm should accept the project.2 .Which of the following is least likely to be considered a “best practice” regarding corporate governance?A) Use of a third party to tabulate votes and retain voting records.B) A code of ethics that is audited and improved periodically.C) Board members are limited to a six-year term.The correct answer was C) Board members are limited to a six-year term.Anything beyond 2- or 3-year term limits on board membership has the potential to restrict the ability for shareholders to change the composition of the board if its members are not acting in the shareholders’ best interest.3 . The expected annual dividend one year from today is $2.50 for a share of stock priced at $25. What is the cost of equity if the constant long-term growth in dividends is projected to be 8%?A) 19%.B) 15%.C) 18%.The correct answer was C) 18%.Ks = (D1 / P0) + g = (2.5/25) + 0.08 = 0.18 or 18%.5 . Ferryville Radar Technologies has five-year, 7.5% notes outstanding that trade at a yield to maturity of 6.8%. The company’s marginal tax rate is 35%. Ferryville plans to issue new five-year notes to finance an expansion. Ferryville’s cost of debt capital is closest to:A) 4.9%.B) 4.4%.C) 2.4%.The correct answer was BFerryville’s cost of debt capital is kd(1 - t) = 6.8% × (1 - 0.35) = 4.42%. Note that the before-tax cost of debt is the yield to maturi ty on the company’s outstanding notes, not their coupon rate. If the expected yield on new par debt were known, we would use that. Since it is not, the yield to maturity on existing debt is the best approximation.。
CFA一级模考
CFA一级模考CFA一级模考题1 . Lane Industries has a project with the following cash flows:Year Cash Flow0 ?$200,0001 60,0002 80,0003 70,0004 60,0005 50,000The project's cost of capital is 12%. The discounted payback period is closest to:A) 2.9 years.B) 3.9 years.C) 3.4 years.The correct answer was: BThe discounted payback period method discounts the estimated cash flows by the project’s cost of capital and then calculates the time needed to recover the investment.Year Cash Flow Discounted Cash Flow Cumulative Discounted Cash Flow0 ?$200,000 ?$200,000.00 ?$200,000.001 60,000 53,571.43 ?146,428.572 80,000 63,775.51 ?82,653.063 70,000 49,824.62 ?32,828.444 60,000 38,131.08 5,302.645 50,000 28,371.30 33,673.98discounted payback period =number of years until the year before full recovery +2 .Which of the following rights concerning shareholder-sponsored board nominations and shareholder-sponsored resolutions would be advantageous to an investor?A) The right to nominate or remove board members in certain circumstances, and the right to propose initiatives for consideration at the annual meeting.B) The right to propose initiatives for consideration at the annual meeting, but not the right to nominate or remove board members in certain circumstances.C) The right to nominate or remove board members in certain circumstances, but not the right to propose initiatives for consideration at the annual meeting.The correct answer was A The right to nominate or remove board members in certain circumstances, and the right to propose initiatives for consideration at the annual meeting. Investors need the power to put forth an independent board nominee. In addition, the right to propose initiatives for consideration at the annual meeting is an important method to send a message to management.3 . Additional debt should be used in t he firm’s capital structure if it increases:A) the value of the firm.B) firm earnings.C) earnings per share.The correct answer was A the value of the firm.The key to finding the optimal capital structure is identifying the level of debt that will maximize firm value. Earnings and earnings per share are not critical in and of themselves when assessing firm value, because they do not consider risk.4 .Carlos Rodriquez, CFA, and Regine Davis, CFA, wererecently discussing the relationships between capital structure, capital budgets, and net present value (NPV) analysis. Which of the following comments made by these two individuals is least accurate?A) “The optimal capital budget is determined by the intersection of a firm’s marginal cost of cap ital curve and its investment opportunity schedule.”B) “A break point occurs at a level of capital expenditure where o ne of the component costs of capital increases.”C) “For projects with more risk than the average firm project, NPV computations should b e based on the marginal cost of capital instead of the weighted average cost of capital.”The correct answer was C) “F or projects with more risk than the average firm project, NPV computations should be based on the marginal cost of capital instead of the weighted average cost of capital.”The marginal cost of capital (MCC) and the weighted average cost of capital (W ACC) are the same thing. If a firm’s capital structure remains constant, the MCC (W ACC) increases as additional capital is raised.5 . Sincl air Construction Company’s Board of Directors is considering repurchasing $30,000,000 worth of common stock. Sinclair assumes that the stock can be repurchased at the market price of $50 per share. After much discussion Sinclair decides to borrow $30 million that it will use to repurchase shares. Sinclair’s Chief Executive Officer (CEO) has compiled the following informat ion regarding the repurchase of the firm’s common stock:Share price at the time of buyback = $50Shares outstanding before buyback = 30,600,000EPS before buyback = $3.33Earnings yield = $3.33 / $50 = 6.7%After-tax cost of borrowing = 8.0%Planned buyback = 600,000 sharesBased on the inform ation above, Sinclair’s earnings per share (EPS) after the repurchase of its common stock will be closest to:A) $3.18.B) $3.32.C) $3.23.The correct answer was: BTotal earnings = $3.33 × 30,600,000 = $101,898,000Since the 8.0% after-tax cost of borrowing is greater than the 6.7% earnings yield (E/P) of the shares, the share repurchase reduces Sinclair’s EPS.。
CFA一级模考
The correct answer was B The P/E ratio may be defined as: Payout ratio / (k - g), so if k is constant and g goes to zero, the P/E will decrease.
2 . A firm is most likely to have pricing power if: A)costs to exit the industry are high. B)its product is differentiated. C)its market share is high.
The correct answer was: A Accounting data on sales is used to calculate the P/S multiple. The P/S multiple is thought to be more reliable because sales figures are not as easy to manipulate as the earnings and book value, both of which are significantly affected by accounting conventions. However, it is not true that "sales data cannot be distorted by management" because aggressive revenue recognition practices can influence reported sales.
The correct answer was B Firms offering products that are differentiated in terms of quality and features are more likely to have pricing power than firms that produce undifferentiated (commodity-like) products. High market share does not necessarily imply pricing power; for example, if four firms each have 25% market share, none of them are likely to have significant pricing power. High exit costs can create overcapacity in an industry and result in a high degree of price competition as firms try to maintain production volume during a period of reduced demand.
CFA一级模考
CFA一级模考题1 . Which of the following should least likely be included as a constraint in an investment policystatement (IPS)?A) Constraints put on investment activities by regulatory agencies.B) Any unique needs or preferences an investor may have.C) How funds are spent after being withdrawn from the portfolio.C was correct!How funds are spent after withdrawal would not be a constraint of an IPS.2. Based on historical data for the United States, compared to long-term bonds, equities havetended to exhibit:A) higher average annual returns and higher standard deviation of returns.B) higher average annual returns and lower standard deviation of returns.C) lower average annual returns and higher standard deviation of returns.A was correct!Based on data for securities in the United States from 1926 to 2008, both small-cap stocks and large-cap stocks have exhibited higher average annual returns and higher standard deviations of returns than long-term corporate bonds and long-term government bonds.3. An analyst has developed the following data for two companies, PNS Manufacturing (PNS)and In Charge Travel (In Charge). PNS has an expected return of 15% and a standarddeviation of 18%. In Charge has an expected return of 11% and a standard deviation of 17%.PNS’s correlation with the market is 75%, while In Charge’s correlation with the market is 85%. If the market standard deviation is 22%, which of the following are the betas for PNS and In Charge?Beta of PNS Beta of In ChargeA) 0.66 0.61B) 0.92 1.10C) 0.61 0.66C was correct!Beta i = (s i/s M) × r I, MBetaPNS = (0.18/0.22) × 0.75 = 0.6136BetaInCharge = (0.17/0.22) × 0.85 = 0.65684. Which is NOT an assumption of capital market theory?A) Investments are not divisible.B) There are no taxes or transaction costs.C) There is no inflation.A was correct!Capital market theory assumes that all investments are infinitely divisible. The otherstatements are basic assumptions of capital market theory.5. Which of the following statements about portfolio theory is least accurate?A) When the return on an asset added to a portfolio has a correlation coefficient of less thanone with the other portfolio asset returns but has the same risk, adding the asset will notdecrease the overall portfolio standard deviation.B) Assuming that the correlation coefficient is less than one, the risk of the portfolio willalways be less than the simple weighted average of individual stock risks.C) For a two-stock portfolio, the lowest risk occurs when the correlation coefficient is closeto negative one.A was correct!When the return on an asset added to a portfolio has a correlation coefficient of less than onewith the other portfolio asset returns but has the same risk, adding the asset will decrease the overall portfolio standard deviation. Any time the correlation coefficient is less than one, there are benefits from diversification. The other choices are true.。
CFA一级模考
CFA一级模考题1 . The primary reason for a firm to issue equity securities is to:A)improve its solvency ratios.B)acquire the assets necessary to carry out its operations.C)increase publicity for the firm’s products.The correct answer was BWhile issuing equity securities c an improve a company’s solvency ratios and increase the firm’s visibility with the public, the primary reason to issue equity is to raise the capital needed to acquire operating assets.2. If a company has a "0" earnings retention rate, the firm's P/E ratio will equal:A)1 / kB)k + gC)D/P + gThe correct answer was r: AP/E = div payout ratio / (k − g)where g = (retention rate)(ROE) = (0)(ROE) = 0Dividend payout = 1 − retention ratio = 1 − 0 = 1P/E = 1 / (k − 0) = 1 / k3 . The Sustainable Growth Rate is equal to:A)(ROE) x (1+RR).B)(ROE) x (RR).C)(ROE) x (1-RR).The correct answer was BThe Sustainable Growth Rate is equal to the return on the equity portion of new investments (ROE) multiplied by the firm's retention rate (RR).4 . A company with a return on equity (ROE) of 27%, required return on equity (ke) of 20%, and a dividend payout ratio of 40% has an implied sustainable growth rate closest to:A)12.00%.B)16.20%.C)10.80%.The correct answer was Bg = (RR)(ROE)= (.60)(.27)= 0.162 or 16.2%5 . Regarding the estimates required in the constant growth dividend discount model, which of the following statements is most accurate?A)Dividend forecasts are less reliable than estimates of other inputs.B)The model is most influenced by the estimates of "k" and "g."C)The variables "k" and "g" are easy to forecast.The correct answer was BThe relationship between "k" and "g" is critical - small changes in the difference between these two variables results in large value fluctuations.。
CFA一级模考
CFA一级模考题1 . Which of the following statements regarding leverage is most accurate?A) A firm with low operating leverage has a small proportion of its total costs in fixed costs.B) A firm with high business risk is more likely to increase its use of financial leverage thana firm with low business risk.C) High levels of financial leverage increase business risk while high levels of operatingleverage will decrease business risk.A was correct!A firm with high operating leverage has a high percentage of its total costs in fixed costs.2 . Which of the following is a key determinant of operating leverage?A) The competitive nature of the business.B) The tradeoff between fixed and variable costs.C) Level and cost of debt.B was correct!Operating leverage can be defined as the trade off between variable and fixed costs.3 . One of the issues shareholders should consider is the issue of confidential voting of proxies.Which of the following statements would be considered most accurate in regard to proxy voting and confidential votes?A) It is an SEC requirement that the proxy voting process be confidential.B) Confidentiality of voting does not ensure that all votes are counted equally.C) Shareholders are more likely to vote conscientiously if allowed to do so confidentially.C was correct!Shareholders will be more likely to vote and vote conscientiously if they are sure that board members and/or management will not find out how they voted. There is no SEC requirement of confidentiality regarding proxy voting. Confidentiality of voting does insure that all votes are counted equally.4 . A critical corporate governance issue is ensuring that the board and its members have therequisite experience needed to properly govern the firm for the shareholders’ benefit. When considering board member qualifications, investors and shareholders should consider whether board members can act with care and competence as a result of their experience with all of the following EXCEPT:A) legal issues.B) the competitive landscape the firm faces.C) technologies, products, services which the firm offers.B was correct!Knowledge of the firm’s competitive landscape is likely beyond what a board member should have intimate knowledge about. The other items are all issues a board member should be knowledgeable about. Other issues board members should have experience with includefinancial operations, accounting and auditing topics, and business risks the firm faces.5 . Shareholder-sponsored resolutions are something investors can consider in order to be “heard”.These resolutions do have implications for investors. Which of the following statementsregarding shareholder-sponsored resolutions is least accurate?A) The ability shareholders have to propose needed changes in a firm can serve to erodeshareholder value.B) The right to propose initiatives for consideration at the firm’s annual meeting is one wayfor shareholders to send a message that they are dissatisfied with the way the board ishandling one or more firm matters.C) The right to propose initiatives for consideration at the firm’s annual meeting is one wayfor shareholders to send a message that they are dissatisfied with the way management is handling one or more firm matters.A was correct!The ability to bring issues in front of the board and/or management can serve to preventerosion of shareholder value.。
CFA一级模考
CFA一级模考题1 . Stock A has a standard deviation of 4.1% and Stock B has a standard deviation of 5.8%. If thestocks are perfectly positively correlated, which portfolio weights minimize the portfolio’s standard deviation?Stock A Stock BA) 63% 37%B) 0% 100%C) 100% 0%C was correct!Because there is a perfectly positive correlation, there is no benefit to diversification. Therefore, the investor should put all his money into Stock A (with the lowest standard deviation) to minimize the risk (standard deviation) of the portfolio.2. The covariance of the market's returns with the stock's returns is 0.008. The standard deviationof the market's returns is 0.1 and the standard deviation of the stock's returns is 0.2. What isthe correlation coefficient between the stock and market returns?A) 0.40.B) 0.91.C) 0.00016.A was correct!Cov A,B = (r A,B)(SD A)(SD B), where r = correlation coefficient and SD x = standard deviationof stock xThen, (r A,B) = Cov A,B / (SD A × SD B) = 0.008 / (0.100 × 0.200) = 0.40Remember: The correlation coefficient must be between -1 and 1.3. Which of the following types of investors is likely to have the shortest investment horizon?A) Property and casualty insurance company.B) Foundation.C) Life insurance company.A was correct!Foundations and life insurance companies typically have long investment horizons. Property and casualty insurance companies typically have shorter investment horizons than life insurance companies because claims against their policies occur sooner on average.4. Which of the following statements about the optimal portfolio is NOT correct? The optimalportfolio:A) lies at the point of tangency between the efficient frontier and the indifference curve withthe highest possible utility.B) is the portfolio that gives the investor the maximum level of return.C) may be different for different investors.B was correct!This statement is incorrect because it does not specify that risk must also be considered.5. A model that estimates expected excess return on a security b ased on the ratio of the firm’sbook value to its market value is best described as a:A) market model.B) single-factor model.C) multifactor model.B was correct!A model that estimates a stock’s expected excess re turn based only on the book-to-market ratiois a single-factor model. The market model is a single-factor model that estimates expectedexcess return based on a security’s sensitivity to the expec ted excess return of the marketportfolio. A multifactor model would estimate expected excess return based on more than one factor.。
CFA一级模考
CFA一级模考题1 . A large, creditworthy manufacturing firm would most likely get short-term financing by:A) factoring its receivables.B) entering into an agreement for a committed line of credit.C) issuing commercial paper.The correct answer was C issuing commercial paper.Large, creditworthy firms can get the lowest cost of financing by issuing commercial paper. Selling receivables to a factor is a higher cost source of funds used by firms with poor credit quality. A committed line of credit requires payment of a fee and represents bank borrowing, which would be attractive to a firm that did not have the size or creditworthiness to issue commercial paper.2 .All else equal, which of the following statements about operating leverage is least accurate?A) Lower operating leverage generally results in a higher expected rate of return.B) Operating leverage reflects the tradeoff between variable costs and fixed costs.C) Firms with high operating leverage experience greater variance in operating income.The correct answer was: AOperating leverage is the trade off between fixed and variable costs. Higher operating leverage typically is indicative of a firm with higher levels of risk (greater income variance). Given the positive risk/return relationship, higher operating leverage firms are expected to have a higher rate of return. And, lower operating leverage firms are expected to have a lower rate of return.3 . Which of the following shows the key dividend dates in their proper sequence?A) Declaration date, holder-of-record date, ex-dividend date, payment date.B) Declaration date, ex-dividend date, holder-of-record date, payment date.C) Ex-dividend date, holder-of-record date, declaration date, payment date.The correct answer was B Declaration date, ex-dividend date, holder-of-record date, payment date.The board of directors announce the amount of the dividend, the holder-of-record date, and payment date. The ex-dividend date is two business days prior to the holder-of-record date, giving the firm time to identify the rightful owner of the dividends.4 .Which of the following statements is most accurate regarding a firm’s cost of preferred shares?A firm’s cost of preferred stock is:A) the dividend yield on the fir m’s newly-issued preferred stock.B) the market price of the preferred shares as a percentage of its issuance price.C) approximately equal to the market price of the firm’s debt as a percentage of the market price of its common shares.The correct answer was: AThe newly-issued preferred shares of most companies generally sell at par. As such, the dividend yield on a firm’s newly-issued preferred shares is the market’s required rate of return. The yield on a BBB corporate bond reflects a pre-tax cost of debt. Both remaining choices make no sense.5 .Nelson, Inc. has fixed financing costs of $3 million, fixed operating costs of $5 million, and variable costs of $2.00 per unit. If the price of Nelson’s product is $4.00, Nelson’s operating breakeven quantity of sales is:A) 1.0 million units.B) 2.5 million units.C) 4.0 million units.The correct answer was B 2.5 million units.Operating breakeven quantity = fixed operating costs / (price – variable cost per unit) = $5 million / ($4.00 – $2.00) = 2,500,000 units.。
CFA一级模考
CFA一级模考题1 . There are a lot of issues to consider in determining board independence. What would be thebest definition of true “independence”? Independence, as it relates to board members, refers to:A) the degree to which these persons are not biased or otherwise controlled by firmmanagement or the outside audit group.B) avoidance of material conflicts of interest.C) the degree to which these persons are not biased or otherwise controlled by firmmanagement or other groups which may have some degree of control over management.C was correct!Avoiding material conflicts of interest is important, but this is not a true definition ofindependence. Independent board members should be independent from the outside audit group, but this is not part of the actual definition. Benefiting management interests should not be a board priority.2. A 30-day bank certificate of deposit has a holding period yield of 1%. What is the annual yieldof this CD on a bond-equivalent basis?A) 11.83%.B) 12.17%.C) 12.00%.B was correct!The bond-equivalent yield is calculated as the holding period yield times (365 / number of days in the holding period). BEY = 1% × (365/30) = 12.17%.3. In order to more accurately estimate the cost of equity for a company situated in a developingmarket, an analyst should:A) use the yield on the sovereign debt of the developing country instead of the risk free ratewhen using the capital asset pricing model (CAPM).B) add a country risk premium to the risk-free rate when using the capital asset pricingmodel (CAPM).C) add a country risk premium to the market risk premium when using the capital assetpricing model (CAPM).C was correct!In order to reflect the increased risk when investing in a developing country, a country risk premium is added to the market risk premium when using the CAPM.4. Julius, Inc., is in a 40% marginal tax bracket. The firm can raise as much capital as needed inthe bond market at a cost of 10%. The preferred stock has a fixed dividend of $4.00. The price of preferred stock is $31.50. The after-tax costs of debt and preferred stock are closest to: Debt Preferred stockA) 10.0% 7.6%B) 6.0% 12.7%C) 6.0% 7.6%B was correct!After-tax cost of debt = 10% × (1 – 0.4) = 6%.Cost of preferred stock = $4 / $31.50 = 12.7%.5. When examining a firm’s ownership structure, it is imperative to examine any super-votingrights by certain classes of shareholders. Which of the following statements concerning these voting rights is most accurate?A) If a company has a significant minority shareowner group, such as a founding family,cumulative voting to elect board members can be a positive factor for shareholders.B) Firms with a single class of common equity could encourage prospective acquirers toonly deal directly with shareholders with the supermajority rights.C) Super-voting rights by certain classes of shareholders impair the firm’s ability to raisecapital for the future.C was correct!Firms with dual classes of common equity could encourage prospective acquirers to only deal directly with shareholders with the supermajority rights. If the firm has a significant minority ownership group, such as a founding family, use of cumulative voting to elect board members can favor specific interests at the expense of the interests of other shareholders.。
CFA一级模考
CFA一级模考题1 . According to the GIPS standards, which of the following statements is most accurate?A. Firms are required to obtain independent third-party verification for a claim of GIPS compliance.B. GIPS compliant firms are required to maintain written documentation of policies and procedures used, to establish and maintain compliance with GIPS.C. To initially claim compliance with GIPS, a company must present a minimum of ten years (or since the firm's inception if less than ten years) of GIPS-compliant performance data.解析: B GIPS require firms that claim compliance to maintain written documentation of their policies and procedures for complying with GIPS. Verification of GIPS compliance is optional. In order to initially claim compliance with GIPS, a firm must have a minimum of five years (or since firm inception) of GIPS-compliant data. After the first compliant presentation, another year of compliant performance must be added each year until the compliant performance history reaches at least ten years.2 . Geno Hanson is a portfolio manager at Bigtime Investments. James Ward, an old friend of Hanson's, is an executive recruiter in the same city. Ward refers to Hanson's firm any high-level executives that Ward places locally. In return, Hanson allows Ward to play a round of golf at Hanson's country club for each new client referred. According to the Standard on referral fees, Hanson is required to disclose the arrangement with Ward to:A. his employer, all clients, and all prospective clients.B. prospective clients referred by Ward, but not to his employer.C. his employer and to prospective clients referred by Ward.解析: C Standard VI(C) Referral Fees states that members and candidates must disclose to employers and to affected clients, before entering into any formal agreement for services, any benefits received for the recommendation of services provided by the member.3 . Yvette Michaelson, a junior analyst for Torborg Investments, covers healthcare and consumer discretionary stocks alongside a senior analyst at the firm. Michaelson inadvertently overhears a conversation between two executives regarding Collective Healthcare 's proposed tender offer for Network Healthcare at a 12% premium, which will be announced next week. Michaelson has followed both companies extensively and feels consolidation would be very beneficial for both companies. She tells her senior analyst about the proposed tender offer. According to the Standard concerning material nonpublic information, Michaelson's actions are:A. in violation of the Standard.B. not in violation of the Standard because she is not trading any securities based on the information.C. not in violation of the Standard under the mosaic theory since she has followed both companies extensively, and the tender offer information substantiates her beliefs about the benefits of consolidation.解析：A Michaelson has violated Standard II(A) Material Nonpublic Information. Members who possess material nonpublic information are prohibited from acting or causing others to act on that inf'ormation. Since the information Michaelson received during her flight involved Collective's proposed tender offer f'or the shares of Network, she was in possession of material nonpublic information and should not have shared the information with others in her firm who might act on it.4．The odds for an event occurring are calculated by dividing:A. one by the probability that the event occurs.B. the probability that the event does not occur by the probability that an event occurs.C. the probability that the event occurs by the probability that the event does not occur.解析：C IFp is the probability that an event occurs, then the odds for the event occurring are expressed as p / (1 - p), or the probability that the event occurs divided by the probability chat the event does not occur. The odds against the event are expressed as the reciprocal of the odds for the event.5 . A successful investor has decided to set up a scholarship fund for deserving students at her alma mater. Her plan is for the fund to be capable of awarding $25,000 annually in perpetuity. The first scholarship is to be awarded and paid out exactly four years from today. The funds will be deposited into an account immediately and will grow at a rate of4%, compounded semiannually, for the foreseeable future. How much money must the investor donate today to fund the scholarship?A. $528,150.B. $549,487.C. $574,253.解析： B The investor has to ensure that the amount deposited now will grow into the amount needed to fund the perpetuity . With semiannual compounding , the effective annual rate (EAR) earned on funds in the account is :The present value of the perpetuity = $25,000/0.0404 = $618,811.88Note that since the first scholarship award is paid out in four years, the present value ofthe perpetuity represents the amount that must be in the account at time t = 3. We canfind the required deposit from:。
CFA一级模考
The correct answer was: A A multistage model is the most appropriate model because the company is growing dividends at a higher rate than can be sustained in the long run. Though the company may be able to grow dividends at a higher-than-sustainable 25% annual rate for a finite period, at some point dividend growth will have to slow to a lower, more sustainable rate. The Gordon growth model is appropriate to use for mature companies that have a history of increasing their dividend at a steady and sustainable rate. A single stage free cash flow to equity model is similar to the Gordon growth model, but values future free cash flow to equity rather than dividends.
The correct answer was B Decrease in the expected inflation rate. The expected inflation rate is a component of ke (through the nominal risk free rate). ke can be represented by the following: nominal risk free rate + stock risk premium, where nominal risk free rate = [(1 + real risk free rate)(1 + expected inflation rate)] – 1. If the rate of inflation decreases, the nominal risk free rate will decrease. ke will decrease. The spread between ke and g, or the P/E denominator, will decrease. P/E ratio will ier was: A
CFA一级模考
CFA一级模考题1 . In a two-asset portfolio, reducing the correlation between the two assets moves the efficient frontier in which direction?A) The efficient frontier is stable unless the asset’s expected volatility changes. This depends on each asset’s standard deviation.B) The frontier extends to the left, or northwest quadrant representing a reduction in risk while maintaining or enhancing portfolio returns.C) The efficient frontier is stable unless return expectations change. If expectations change, the efficient frontier will extend to the upper right with little or no change in risk.The correct answer was: BReducing correlation between the two assets results in the efficient frontier expanding to the left and possibly slightly upward. This reflects the influence of correlation on reducing portfolio risk.2 . Which of the following statements about risk and return is NOT correct?A) Return objectives should be considered in conjunction with risk preferences.B) Return-only objectives provide a more concise and efficient way to measure performance for investment managers.C) Return objectives may be stated in dollar amounts.The correct answer was: BReturn-only objectives may actually lead to unacceptable behavior on the part of investment managers, such as excessive trading (churning) to generate excessive commissions.3 . Which of the following statements concerning the efficient frontier is most accurate? It is the:A) set of portfolios that gives investors the lowest risk.B) set of portfolios that gives investors the highest return.C) set of portfolios where there are no more diversification benefits.The correct answer was CThe efficient frontier outlines the set of portfolios that gives investors the highest return for a given level of risk or the lowest risk for a given level of return. It is also the point at which there are no more benefits to diversification.4 . Which of the following measures is NOT considered when calculating the risk (variance) of a two-asset portfolio?A) Each asset’s standard deviation.B) Each asset weight in the portfolio.C) The beta of each asset.The correct answer was CThe formula for calculating the variance of a two-asset portfolio is:σp2 = WA2σA2 + WB2σB2 + 2WAWBCov(a,b)5 . The market portfolio in the Capital Market Theory contains which types of investments?A) All risky and risk-free assets in existence.B) All risky assets in existence.C) All stocks in existence.The correct answer was: BThe market portfolio contains all risky assets in existence. It does not contain any risk-free assets.。
CFA一级模考
CFA一级模考题1 .A firm pays an annual dividend of $1.15. The risk-free rate (RF) is 2.5%, and the total risk premium (RP) for the stock is 7%. What is the value of the stock, if the dividend is expected to remain constant?A)$25.00.B)$12.10.C)$16.03.The correct answer was BIf the dividend remains constant, g = 0.P = D1 / (k-g) = 1.15 / (0.095 - 0) = $12.102 . Gwangwa Gold, a South African gold producer, has as its primary asset a mine which is shown on the balance sheet with a value of R100 million. An analyst estimates the market value of this mine to be 90% of book value. The company’s balance sheet shows other assets of R20 million and liabilities of R40 million, and the analyst feels that the book value of these items reflects their market values. Using the asset-based valuation approach, what should the analyst estimate the value of the company to be?A)R70 million.B)R80 million.C)R110 million.The correct answer was: AMarket value of assets = 0.9(R100 million) + R20 million = R110 millionMarket value of liabilities = R40 millionEstimated net value of company = R110 million − R40 million = R70 million.3 . An equity security that requires the firm to pay any scheduled dividends that have been missed, before paying any dividends to common equity holders, is a:A)participating preference share.B)convertible preference share.C)cumulative preference share.The correct answer was CCumulative preference shares (cumulative preferred stock) must receive any dividends in arrears before the firm may pay any dividends to common shareholders.4 . What is the value of a preferred stock that is expected to pay a $5.00 annual dividend per year forever if similar risk securities are now yielding 8%?A)$40.00.B)$60.00.C)$62.50.The correct answer was C$5.00/0.08 = $62.50.5 . For a non-dividend paying firm, an increase in net income must increase:A)market value of equity.B)book value of equity.C)both book value and market value of equity.The correct answer was BBook value of equity is the company’s assets minus its liabilities. For a non-dividend paying firm, positive net income will increase the book value of equity. An increase in book value of equity may or may not increase the market value of equity. An increase in net income that does not meet investors’ prior expectations may decrease the market value of equity.。
CFA一级模考
CFA一级模考题1 . A $1,000 par value bond has a modified duration of 5. If the market yield increases by 1% thebond's price will:A) increase by $50.B) decrease by $50.C) decrease by $60.B was correct!Approximate percentage price change of a bond = (-)(modified duration)(ΔYTM)(-5)(1%) = -5%($1000)(-0.05) = –$502. Assume that the current price of an annual-pay bond is 102.50. If its YTM increases by 0.5%the value of the bond decreases to 100 and if its YTM decreases by 0.5% the price of the bond increases to 105.5. What is the approximate modified duration of the bond?A) 5.50.B) 5.37.C) 5.48.B was correct!Approximate modified duration is computed as follows:Duration =105.50 − 100= 5.37 2 × 102.50 × 0.0053. Which of the following is the reason why credit spreads between high quality bonds and lowquality bonds widen during poor economic conditions?A) default risk.B) indenture provisions.C) interest risk.A was correct!During poor economic conditions the probability of default increases and thus credit spreads widen.4. Jequa is a Japanese company with the following selected financial information:¥ billions Year 1 Year 2 Year 3Operating income 262 361 503Depreciation & amortization 201 212 256Capital expenditures 78 97 140Cash flow from operations 303 466 361Total debt 2,590 2,717 2,650Dividends 70 70 72Jequa’s three-year average free cash flow-to-debt ratio on an after-dividend basis is closest to:A) 7.5%.B) 6.0%.C) 10.2%.A was correct!Free cash flow = cash flow from operations – capital expenditures – dividendsYear 1: 303 − 78 − 70 = ¥155 billionYear 2: 466 − 97 − 70 = ¥299 billionYear 3: 361 − 140 − 72 = ¥149 billionFCF/Debt:Year 1: 155 / 2,590 = 6.0%Year 2: 299 / 2,717 = 11.0%Year 3: 149 / 2,650 = 5.6%Three year average = 7.5%.5. Jayce Arnold, a CFA candidate, considers a $1,000 face value, option-free bond issued at par.Which of the following statements about the bond’s dollar price behavior is most likely accurate when yields rise and fall by 200 basis points, respectively? Price will:A) increase by $149, price will decrease by $124.B) decrease by $149, price will increase by $124.C) decrease by $124, price will increase by $149.C was correct!As yields increase, bond prices fall, the price curve gets flatter, and changes in yield have a smaller effect on bond prices. As yields decrease, bond prices rise, the price curve gets steeper, and changes in yield have a larger effect on bond prices. Thus, the price increase when interest rates decline must be greater than the price decrease when interest rates rise (for the same basis point change). Remember that this applies to percentage changes as well.。
CFA一级模考
CFA一级模考题1. Which of the following statements regarding diminishing marginal returns is most accurate?A) As the quantity produced rises, costs begin to rise at a decreasing rate.B) The total cost curve arches downward.C) As the quantity produced rises, costs begin to rise at an increasing rate.The correct answer was: C As the quantity produced rises, costs begin to rise at an increasing rate.At production levels that are consistent with decreasing marginal returns, costs will increase at an increasing rate as production rises.2 .Price discrimination is most accurately defined by which of the following? Price discriminationis the practice of charging different consumers different prices for:A) similar products that have different price elasticities of demand.B) similar products that have identical per-unit production costs.C) the same product or service.The correct answer was :C the same product or service.Price discrimination is the practice of charging different consumers different prices for the same product or service. Examples include different prices for airline tickets based on whether a Saturday-night stay is involved and different prices for movie tickets based on age.3 .The law of diminishing returns states that for a given production process, as more and more of aresource (such as labor) are added, holding the quantities of other resources fixed:A) output increases at a decreasing rate.B) cost declines at a decreasing rate.C) cost declines at an increasing rate.The correct answer was :A output increases at a decreasing rate.The law of diminishing returns states that for a given production process, as more and more resources (such as labor) are added holding the quantities of other resources fixed, output increases at a decreasing rate. This occurs because, at some point, adding more workers results in inefficiencies.4 .Which of the following situations is least likely to lead to high barriers to entry and monopolysupply?A) Economies of scale are present.B) Governmental licensing and regulations are present.C) Natural resources are spread among many firms.The correct answer was :C Natural resources are spread among many firms.All cases except wide distribution of a natural resource facilitate a monopoly. If naturalresource ownership is concentrated in one firm a monopoly would result.5 .Concentration measures are most likely to be used to:A) identify the market structure of an industry.B) measure elasticity of demand facing an industry.C) analyze barriers to entry into an industry.The correct answer was: Aidentify the market structure of an industry.Concentration measures are used to identify the market structure of an industry (perfect competition, monopolistic competition, oligopoly, or monopoly). Concentration measures do not directly indicate an industry’s barriers to entry or elasticity of demand.。
CFA一级模考
CFA一级模考题1 .An oligopoly is characterized by all of the following EXCEPT:A)a large number of sellers.B)large economies of scale.C)significant barriers to entry.The correct answer was AOligopolies consist of a small number of sellers. Their products may be either similar or differentiated.2 . Which one of the following is most likely to contribute to the presence of monopoly in an industry?A)Legal barriers to entry into the industry.B)Inefficiency attributable to bureaucratic decision-making procedures in the industry.C)Diseconomies of scale.The correct answer was AAn example of an industry with legal barriers is utility firms, which are granted exclusive rights to supply electricity in certain areas.3 . If quantity demanded increases 15% when the price drops 1%, demand for this good:A)perfectly elastic.B)inelastic, but not perfectly inelastic.C)elastic, but not perfectly elastic.The correct answer was CWhenever quantity demanded for a good changes by a greater percentage than price, the price elasticity of demand will be greater than 1.0 and demand for the product is considered to be elastic.4 . If quantity supplied = –28 + 7 × price, the slope of the supply curve is:A)1/7.B)4.C)–7.The correct answer was AThe supply curve for the good is determined by inverting the given supply function, which results in: price = 1/7 × quantity supplied + 4. The slope of this curve is 1/7.5 . The market for labor is best described as a:A)goods market.B)factor market.C)services market.The correct answer was BWhile some part of the labor market is dedicated to providing services, labor is generally viewed as a factor of production.。
CFA一级模考
CFA一级模考题1 . Investors can diversify their direct real estate holdings through all of the following vehiclesEXCEPT:A) commingled funds.B) co-operative shares.C) limited partnerships.B was correct!Real estate co-operatives are generally a tool with which multiple owners can purchaseshares in a single building or complex. This strategy spreads out risk among many investors but doesn’t offer much in the way of diversification for a single investor. Commingled funds and limited partnerships typically allow investors to spread their bets either geographically or through different property types.2.Mortgages are considered to be a form of real estate investment because:A) if the borrower defaults on the loan, the lender may end up owning the property.B) the investor receives a constant stream of cash flows.C) the borrower will own the property at the end of the loan term.A was correct!It is true that the borrower will own the property if all loan terms are met, but the question is stated in terms of the mortgage lender, not the borrower. The investor anticipates a constant stream of cash flows, similar to other fixed income investments, but is also subject to defaults as well as prepayments. If the borrower defaults on the terms of the loan, the property will revert back to the lender, and this exposure is the reason why mortgages are considered a real estate investment.3.Which of the following is least likely to be a form of real estate investment?A) Aggregation vehicles.B) Leveraged equity position.C) Property insurance.C was correct!Property insurance is not considered a category of real estate investment because theunderlying real estate does not revert to the insurer if the property holder allows the policy to lapse. A leveraged equity position and aggregation vehicles such as real estate investment trusts are each forms of real estate investment.4.Demand for real estate is a function of all of the following factors EXCEPT?A) Population characteristics of the community.B) Competitive properties.C) The terms and conditions of mortgage financing.B was correct!This is a determinant of the supply of real estate property. Both remaining choices aredeterminants of demand.5.Which of the following statements regarding real estate valuation is TRUE?A) The estimated market value of a property depends upon the particular investor.B) Each property is unique, so the investment value may be dependent upon the particularuse planned for the property.C) The most reliable real estate valuation method is the cost approach.B was correct!The market value is completely independent of any considerations based upon the investor or potential investor. There is not a ―most reliable‖ valuation met hod – all have their advantages and disadvantages. The investment value may be dependent upon the planned use of theproperty—remember that market value and investment value are two different things.。
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CFA一级模考题
1 . If the standard deviation of stock A is 13.
2 percent, the standard deviation of stock B is 17.6 percent, and the covariance between the two is 0, what is the correlation coefficient?
A) +1.
B) 0.31.
C) 0.
The correct answer was C
Since covariance is zero, the correlation coefficient must be zero.
2 . A mutual fund that invests in short-term debt securities and maintains a net asset value of $1.00 per share is best described as a:
A) money market fund.
B) balanced fund.
C) bond mutual fund.
The correct answer was A
Money market funds invest primarily in short-term debt securities and are managed to maintain a constant net asset value, typically one unit of currency per share. A bond mutual fund typically invests in longer-maturity securities than a money market fund. A balanced fund invests in both debt and equity securities.
3 . When the market is in equilibrium:
A) all assets plot on the CML.
B) investors own 100% of the market portfolio.
C) all assets plot on the SML.
The correct answer was C
When the market is in equilibrium, expected returns equal required returns. Since this means that all assets are correctly priced, all assets plot on the SML.
By definition, all stocks and portfolios other than the market portfolio fall below the CML. (Only the market portfolio is efficient.
4 . Which of the following statements regarding the covariance of rates of return is least accurate?
A) It is a measure of the degree to which two variables move together over time.
B) If the covariance is negative, the rates of return on two investments will always move in different directions relative to their means.
C) It is not a very useful measure of the strength of the relationship, there is absent information about the volatility of the two variables.
The correct answer was B
Negative covariance means rates of return will tend to move in opposite directions on average. For the returns to always move in opposite directions, they would have to be perfectly negatively correlated. Negative covariance by itself does not imply anything about the strength of the negative correlation.
5 . Which of the following statements about a stock's beta is CORRECT? A beta greater than one is:
A) risky, while a beta less than one is risk-free.
B) riskier than the market, while a beta less than one is less risky than the market.
C) undervalued, while a beta less than one is overvalued.
The correct answer was B
Beta is a measure of the volatility of a stock. The overall market's beta is one. A stock with higher
systematic risk than the market will have a beta greater than one, while a stock that has a lower systematic risk will have a beta less than one.。