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Topics of CFA CFA-Level-I: CFA Institute CFA Level I Chartered Financial Analyst Exam
Before preparation begins, candidates need to know the examination topics. And it’s going to help them to reach the center. CFA Level 1 dumps will include the following topics:
- Quantitative Methods In this section, we explore quantitative concepts and techniques used in financial analysis and investment decision making. We present descriptive statistics for conveying important data attributes, such as central tendency, location, and dispersion, and introduce characteristics of return distributions. The section also considers probability theory and its application in quantifying risk for investment decision making.
- Economics
- Ethical and Professional Standards The focus of this topic is ethics, related challenges to ethical behavior, and the role ethics and professionalism play in the investment industry. We provide a framework to support ethical decision making and examine the CFA Institute Code of Ethics and Standards of Professional Conduct and Global Investment Performance Standards (GIPS).
In this section, we introduce analysis of fundamental concepts of supply and demand for individual consumers and firms. We also cover the various market structures that firms operate in as well as macroeconomic concepts and principles, including aggregate output and income measurement, aggregate demand and supply analysis, and analysis of economic growth factors. The section concludes with coverage of the business cycle and its effect on economic activity.
Fixed Income In this topic, we explain how to describe fixed income securities and their markets, yield measures, risk factors, and valuation measurements and drivers. We also cover calculating yields, values of fixed income securities, the securitization of assets, the fundamentals of bond returns and risks, and basic principles of credit analysis.
Corporate finance In this topic, we provide an introduction to corporate governance as well as investing and financing decisions. We present an overview of corporate governance along with a framework for understanding and analyzing corporate governance and stakeholder management. We also highlight the growing impact of environmental and social considerations in investing. We cover how companies make use of leverage and manage their working capital to meet short-term operational needs.
Equity Investments Here we explore the characteristics of equity investments, security markets, and indexes and explain how to analyze industries, companies, and equity securities as well as the use of basic equity valuation models. Global equities are important for meeting longer-term growth and diversification objectives.
Derivatives In this section, we build the conceptual framework for understanding the basic derivatives and derivative markets. We then introduce essential features and valuation concepts for forward commitments such as forwards, futures, swaps, and contingent claims. Finally, we examine arbitrage, a critical concept that links derivative pricing to the price of the underlying asset.
Portfolio Management In this topic, we explain the fundamentals of portfolio and risk management, including return and risk measurement and portfolio planning and construction. We examine the needs of individual and institutional investors along with the range of available investment solutions. The capital asset pricing model is used to identify optimal risk in portfolios.
Alternative Investments This topic explores alternative investments, including hedge funds, private equity, real estate, commodities, and infrastructure. We cover the use of alternative investments for diversification and higher returns. In this curriculum, we define alternative investments and the characteristics they have in common.
NEW QUESTION 227
Kiawah Corp. sold bonds at a price of 96.2 plus accrued interest. At the time of this issuance, the carrying value of the bonds would be less than: Face Value of the Bonds : Cash Received by Kiawah
(ignore fees)
- A. No : Yes
- B. Yes : Yes
- C. Yes : No
Answer: B
Explanation:
Since the carrying value (face value less discount) at issuance is equal to the purchase price, the carrying amount would be less than both the face value (price of 100) and the cash received since the latter includes accrued interest.
NEW QUESTION 228
A 10-year, 8% coupon bond has a duration of 4.1 and a convexity measure of 168. If this bond is currently trading at 101.25 of par, what is its price value of a basis point (PVBP)?
- A. $0.1325
- B. $0.0415
- C. $0.415
Answer: B
Explanation:
PVBP = 0.0001 * P0 D = 0.0001 * 101.25 * 4.1 = $0.0415.
NEW QUESTION 229
Which of the following statements characterizes an operating lease?
- A. The lessor records depreciation expense and lease revenue.
- B. The lessee records amortization expense and interest expense.
- C. The lessor transfers title of the leased property to the lessee only for the duration of the lease term.
Answer: A
Explanation:
For operating leases the lessee records rent expense and the lessor would record the related revenue and would amortize the asset.
NEW QUESTION 230
Assume that Company B is the only producer of breakfast cereal. If at the current level of production, the marginal revenue for a box of cereal is $2.50 while the marginal cost is $2.00, we would expect
Company B to
- A. increase the level of production.
- B. raise the price of a box of cereal.
- C. hold the level of production constant.
Answer: A
Explanation:
The monopolist will continue to increase production as long as marginal revenue is greater than marginal cost.
NEW QUESTION 231
If a firm has been experiencing rapid growth with higher property, plant and equipment expenditures, which of the following would probably occur?
- A. The deferred tax asset would increase over time
- B. The deferred tax liability would increase over time
- C. The deferred tax liability would decrease over time
Answer: B
Explanation:
The higher expenditures in fixed assets would result in higher amounts being put into the deferred tax liability account than would be reversing out. Thus, the account would continue to increase and would not reverse.
NEW QUESTION 232
Which one of the following is a way that a company can increase its intensity of asset utilization?
- A. Increase NOPAT (net operating profit after taxes)
- B. Reduce average assets
- C. Decrease sales
Answer: B
Explanation:
This will increase asset turnover, and consequently will increase asset utilization.
NEW QUESTION 233
What is the probability that a value of 30 or more will be observed from a normal distribution with a mean of 15 and standard deviation of 25?
- A. 27.4%
- B. 60%
- C. 50%
Answer: A
Explanation:
We need to calculate the standard normal variance, z = (30 - 15)/25 = 0.60. From the standard normal tables, Prob(z = 0.60) = 0.7257. Thus, Prob(z >= 0.60) = 1 - 0.7257 = 0.2743, or 27.4%.
NEW QUESTION 234
Under the completed-contract method, the billings on construction contract represents:
- A. a measure of the revenue recognized to date.
- B. a measure of the contractor's performance to date.
- C. a measure of the contractor's obligation to perform on the contract.
Answer: C
Explanation:
The billings on construction contract account is the amount that has been billed to the purchaser and represents a measure of the contractor's obligation to perform on the contract.
NEW QUESTION 235
Jane Smith has been granted permission to use the CFA designation. Jane has NOT paid her annual
CFA Institute dues. Which of the following statements regarding Jane's use of the CFA designation are correct?
- A. Jane may use the CFA designation but must state that she has not paid her annual CFA Institute dues.
- B. Jane may not use the CFA designation since she has not paid her annual dues.
- C. Jane may use the CFA designation if she plans to pay her annual CFA Institute's dues in the near future, but has not done so yet.
Answer: B
Explanation:
No use of the CFA designation is allowed, under any circumstances, as long as a member's annual CFA Institute dues have not been paid.
NEW QUESTION 236
Refer to the graph below. Assuming that the monopoly maximizes profit it will earn profits of:
- A. $40,000 per day.
- B. $160,000 per day.
- C. $8,000 per day.
Answer: A
Explanation:
Total profits equal per unit profits ($200) times output (200), or $40,000.
NEW QUESTION 237
Cash payments for interest 15 Retirement of common stock 38 Cash payments to merchandise suppliers 85 Sale of equipment 35 Payment of dividends 38 Purchase of land 10 Cash payment for salaries 38 Cash collections from customers 271 Purchase of equipment 45
What are cash flows from investing activities?
- A. 0
- B. 1
- C. 2
Answer: C
Explanation:
Cash flows from investing activities = Sale of equipment - purchase of land - purchase of equipment(35 - 10 - 45) = -20
NEW QUESTION 238
Callable common shares ______ at a pre-specified price.
- A. give investors the option to buy shares from the issuing company.
- B. give the issuing company the option to back its shares from its shareholders.
- C. give investors the option to buy shares from other investors.
Answer: B
Explanation:
A callable stock can be recalled or redeemed by the issuer of the stock. Generally, callable stock is issued with a specific redemption price appearing in the terms and conditions of the sale.
NEW QUESTION 239
Industry consolidation usually happens in the _____ stage.
- A. mature
- B. decline
- C. shakeout
Answer: A
NEW QUESTION 240
If E(EUR)/$ = 0.7928 and E(GBP)/$ = 0.5311 then:
- A. E(EUR)/E(GBP) = 0.6699
- B. E(GBP)/E(EUR) = 0.2617
- C. E(EUR)/E(GBP) = 1.4928
Answer: C
Explanation:
(0.7928)/(0.5311) = 1.4928 = E(EUR)/E(GBP).
NEW QUESTION 241
A firm has EBIT of $15 million, interest expense of $5 million, and faces a tax rate of 40 percent. There are 12 million shares outstanding. The change in EPS resulting from a 20% decrease in EBIT would be closest to:
- A. a 40% decrease.
- B. a 50% decrease.
- C. a 30% decrease.
Answer: C
Explanation:
The EPS is currently [($15 - $5) x (1 - .40)]/12 = $0.50 per share. If EBIT decreased to $12 million, the EPS would be [($12 - $5) x (1 - .40)]/12 = $0.35 per share. The change in EPS would be a
3 0% decrease.
NEW QUESTION 242
Two events, A and B, are independent if:
- A. P(A and B) = 1
- B. P(A and B) = P(A) P(B)
- C. P(A and B) = P(A) + P(B)
Answer: B
Explanation:
This is the definition of independence.
NEW QUESTION 243
A coin is tossed five times. What is the probability of obtaining exactly three heads?
- A. 5/16
- B. 1/4
- C. 3/16
Answer: A
Explanation:
Probability of 3 events occurring in 5 trials:
x (n-x)
Combination of 3 events in 5 trials * (outcome for each event) * (outcome for each event) where: Combination of 3 events in 5 trials = n! / (x! * (x-1)!) = 5! / (3! * 2!) = 120 / 12 = 10
3 (5-3)
Probability = 10 * (1/2) * (1/2) = 5/16
NEW QUESTION 244
Interstate Transportation Company exchanged a number of used trucks plus cash for vacant land that might be used for a future plant site. The trucks have a combined book value of $42,000 (cost
$ 64,000 less $22,000 accumulated depreciation) and estimated market value of $49,000. Interstate must pay $17,000 cash and trucks for the land. How much should Interstate record as the land's value?
- A. $59,000.
- B. $66,000.
- C. $81,000 book value and $22,000 accumulated depreciation.
Answer: B
Explanation:
$49,000 + $17,000 = $66,000.
The cost of a non-monetary asset acquired in exchange for a dissimilar non-monetary asset is usually recorded at the fair market value of the asset given up, and a gain or loss is recognized (in this case, a gain on disposal of trucks: 49,000 - 42,000 = $7,000).
NEW QUESTION 245
The line of best fit for a scatter diagram showing the rates of return of an individual risky asset and the market portfolio of risky assets over time is called the ______.
- A. security market line.
- B. security characteristic line.
- C. capital asset pricing model.
Answer: B
Explanation:
The security characteristic line is the line of best fit for a scatter diagram showing the excess rates of return of an individual risky asset and the excess return of market portfolio of risky assets over time.
NEW QUESTION 246
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