[Oct-2021] Pass CFA-Level-I Exam in First Attempt UpdatedCFA-Level-I DumpsKing Exam Question
CFA Level Dumps CFA-Level-I Exam for Full Questions - Exam Study Guide
NEW QUESTION 1152
Which account does not affect retained earnings?
- A. Dividends.
- B. Common Stock.
- C. Sales Revenue / Rent Expense.
Answer: B
Explanation:
The Dividends account does affect retained earnings because it is closed to the Retained
Earnings account during the closing process. The Sales Revenue and Rent Expense accounts also affect retained earnings because they are closed to the Income Summary account, which is closed to the
Retained Earnings account. The Common Stock account does not affect retained earnings. Common stock represents stockholders' claims arising from their investment in the company. Retained earnings represent stockholders' claims arising from profitable operations.
NEW QUESTION 1153
A share of preferred stock pays a specific dividend on a specific schedule for as long as the issuing company exists. Assume that a share of preferred stock pays an annual, per-share, dividend of $6.75 at the end of each year. The (present) value of this share of preferred stock is $75.62. Assume that the company paying the dividends will exist forever. What interest rate or rate of return do this dividend and price represent?
- A. 8.92%
- B. 11.20%
- C. 9.75%
Answer: A
Explanation:
r = A/PV
NEW QUESTION 1154
Suppose that the future short-term outlook for the economy is favorable, with probability 0.6, and unfavorable with probability 0.4. For two stocks, F and G, the return on each stock is 0.25 and 0.2 respectively in favorable conditions, and 0.01 and 0.02 in unfavorable conditions. Calculate cov(Rf,Rg).
- A. 0.0041472.
- B. 0.010368.
- C. 0.0062208.
Answer: B
Explanation:
E[Rf] = 0.6*0.25 + 0.4*0.01= 0.154. E[Rg] = 0.6*0.2 + 0.4*0.02 = 0.128. Cov(Rf,Rg) = E[{Rf -
E(Rf)}*{Rg - E(Rg)}]= 0.6 * [{0.25-0.154}*{0.2-0.128}] + 0.4 * [{0.01 - 0.154}*{0.02-0.128}] = 0.010368.
NEW QUESTION 1155
The equation of exchange states that:
- A. money supply divided by velocity equals real GDP.
- B. money supply multiplied by nominal GDP equals velocity.
- C. velocity multiplied by money supply equals nominal GDP.
Answer: C
Explanation:
The equation of exchange implies that when the existing money stock M is multiplied by the umber of times V that money is used to buy final products, this yields the economy's nominal GDP (or output times the price level).
NEW QUESTION 1156
In 2008 an American taught spoken English in China and he made $30,000 that year. When he came back to the US he brought with him $25,000 home and then bought a new computer for $2,000 and an used car for $12,000. He then deposited the rest of the money in his bank account. Through the series of transactions the amount counted towards US GDP should be:
- A. 2,000.
- B. 14,000.
- C. 0, since he did not make the money in the US.
Answer: A
Explanation:
The income was not generated within the borders of the United States. However, the purchase of a new computer counted towards US GDP but the purchase of the used car did not.
NEW QUESTION 1157
Craig Pol is an investment analyst. Information was handed to Craig by his client in order to investigate an investment option for future expansion plans for a company. A financier finds out about this information and asks Craig to send him a copy of the information. According to the Standards of
Professional conduct, what should Craig do?
- A. Send the information to the financier since in due course the public will anyway get to see the results.
- B. Not send the information in order to preserve the confidentiality of his client.
- C. Send the information to the financier and then inform his client.
Answer: B
Explanation:
Standard IV(B.5): Preservation of Confidentiality Information handed to a member to investigate an investment option for e.g. future expansion plans etc. should clearly not be given to external persons to view, unless the prior permission of the client is obtained.
NEW QUESTION 1158
Diane Corporation had 400 units of inventory on hand at July 1, 2002, costing $20 each. Purchases and sales of goods during the month of July were as follows:
July 12, 2002 Sales 200 units @ $40 July 15, 2002 Purchases 100 units @ $26 July 25, 2002 Purchases
3 00 units @ $28 July 30, 2002 Sales 200 units @ $40
Assume Diane Corporation does not maintain perpetual inventory records. According to a physical count,
4 00 units were on hand on July 31, 2002.
The cost of inventory at July 31, 2002, using the LIFO cost method, is:
- A. $8,000
- B. $9,500
- C. $11,000
Answer: A
Explanation:
Using LIFO, the costs allocated to ending inventory will be the oldest costs. Therefore, if 400 units are remaining, the ending inventory value will be 400 @ $20 = $8,000.
NEW QUESTION 1159
Which of the following statements regarding the weighted average cost of capital formula is false?
- A. It can be used to take account of issue costs and other such financing side effects
- B. It assumes the project is a carbon copy of the firm
- C. It requires knowledge of the required return on the firm if it is all-equity financed
Answer: B
NEW QUESTION 1160
When enacted tax rates change:
- A. an adjustment is made to bring the deferred tax liability or asset to an amount based upon the new rates
- B. an adjustment is made using estimated rates applied to the current deferred tax asset or liability balance
- C. an adjustment is made using the new rates applied to the income tax expense and payable.
Answer: A
Explanation:
This adjustment is made such that the deferred tax asset or liability will be the expected amount to reverse based upon the new rates.
NEW QUESTION 1161
This is an example of ______.
- A. bar chart.
- B. candlestick chart.
- C. line chart.
Answer: B
Explanation:
Note that the body of each candle is either shaded or clear.
NEW QUESTION 1162
______ ADRs are used to raise capital on U.S. market.
- A. Level I, II and III.
- B. Level II and III.
- C. Level III only.
Answer: C
Explanation:
New shares are not issued with Level I and I ADRs.
NEW QUESTION 1163
A company had sales of 23,085 for the just concluded year, with a gross margin of 45%. Its accounts receivables increased by 2,317 and inventory decreased by 894. On the basis of the direct statement of cash flows, what were the sales and COGS on cash basis?
- A. Sales: 20,768; COGS: 13,591
- B. Sales: 25,402; COGS: 13,591
- C. Sales: 20,768; COGS: 11,803
Answer: C
Explanation:
Since accounts receivables increased, cash sales were less than shown, i.e., Cash sales =
Accrual sales - Increase in A/C Rec. = 23,085 - 2,317 = 20,768
According to the accounting entity, COGS = Opening Inventory + Purchases - Closing Inventory,
Purchases = COGS + Change in Inventory. Thus, Cash COGS = 12,697 - 894 = 11,803
NEW QUESTION 1164
A venture capital project has the following estimated probabilities of failure over the next five years.
Year 1 2 3 4 5 Prob 10% 25% 30% 10% 10%
If it "survives", the payoff is expected to be $80 million. The initial investment required is $20 million. If the risk-adjusted discount rate is 20%, what is the project's expected NPV? (Round to the nearest $100,000)
- A. -$8.5 million
- B. -$7.7 million
- C. -$7.1 million
Answer: B
Explanation:
The probability of success equals the probability that the investment "survives" until the end of the fifth year: Probability of success = 0.90 x 0.75 x 0.70 x 0.90 x 0.90 = 0.3827 Expected payoff =
$ 80,000,000 x 0.3827 = $30,616,000
Discounted payoff = $30,616,000/(1.20)5 = $12,303,884 NPV = $12,303,884 - $20,000,000 = -$7,696,116
NEW QUESTION 1165
Which of the following best describes the relationship between revenue and retained earnings?
- A. Revenue increases net income, which in turn increases retained earnings.
- B. Revenue represents the price of goods sold or services rendered; retained earnings represents cash available for paying dividends.
- C. Revenue represents a cash receipt; retained earnings is an element of stockholders' equity.
Answer: A
NEW QUESTION 1166
Which of the following is/are true about advantages of international trade?
I). It leads to lower prices for imported goods.
II). It leads to lower prices for exported goods.
III). It leads to an expansion of consumption possibilities.
IV). It leads to an expansion of the production possibility frontier.
- A. I, III and IV.
- B. I, II and IV.
- C. I, II and III.
Answer: A
Explanation:
International trade takes advantage of the comparative advantages that the trading partners have in producing goods and services. This expands the production possibilities and hence, the consumption possibilities. Further, in the presence of exports, the supply of an exported good in the domestic market is lower than it would be otherwise. This causes a higher price for the exported good to prevail in the domestic market. hence, (II) is incorrect. The reverse occurs for imported goods, so that (I) holds.
NEW QUESTION 1167
Which is true of positively skewed distributions?
I). They have a limited, but frequent, upside.
II). Their downside is less frequent but more unlimited.
III). They are attractive to investors because their mean is larger than their median.
- A. II
- B. I and III
- C. III
Answer: C
Explanation:
I and II are false. The correct statements for them would be: 1) positively skewed distributions have a limited, but frequent, downside, and 2) they have a less frequent, but more unlimited, upside. III is true.
NEW QUESTION 1168
An industry experiencing slowing growth, intense competition and declining profitability is best characterized as being in the _____ stage.
- A. shakeout
- B. growth
- C. mature
Answer: A
Explanation:
Companies should focus on reducing their cost structure and building brand loyalty.
NEW QUESTION 1169
At the end of 2010, a firm changes its depreciation method from the double-declining balance method to straight line. The firm only has one asset, a building that cost $4,000,000 and has a salvage value of $200,000 after a life of 20 years. The tax rate is 20%. The asset was purchased in January of
2 008. What will be the cumulative effect of the change on the 2010 depreciation resulting from the years
2 008 and 2009?
- A. $380,000 lower
- B. $190,000 lower
- C. $210,000 lower
Answer: A
Explanation:
Depreciation under the straight-line method would be $190,000 each year [($4,000,000 -
$ 200,000)/20]. Depreciation under the double-declining balance method would be $400,000 in the first year. The double-declining rate is 10% [(100%/20) x 2]. Applying the rate of 10% to the beginning book value of $4,000,000 = $400,000 for the first year. The second year will be the beginning book value of
$ 3,600,000 ($4,000,000 - $400,000) x .1 = $360,000. The difference between $400,000 and $190,000, of
$ 210,000, will be the change in the depreciation expense for the year 2008. The second year for the straight line is $190,000. The difference between $360,000 and $190,000, of $170,000, will be the change in the depreciation expense for the year 2009. The cumulative effect of the change for the year 2010 will be $210,000 + $170,000 = $380,000 lower.
NEW QUESTION 1170
Which of the following should be classified as financing cash flow?
I). purchase and sale of debt of other entities.
II). purchase and sale of equity securities of other entities.
III). loans to other entities and collection of loans to other entities.
IV). issuance and redemption of debt (bonds and notes).
V. issuance of equity securities and reacquisition of capital stock.
- A. all of them.
- B. IV and V.
- C. I, III and IV.
Answer: B
Explanation:
Purchase of debt and equity securities of other entities (sale of debt or equity securities of other entities), loans to other entities (collection of loans to other entities) are considered investing activities. However, issuance of debt (bonds and notes) and equity securities are financing cash inflows, and payment of dividend, redemption of debt, and reacquisition of capital stock are financing cash outflows.
NEW QUESTION 1171
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