Best Way To Study For CFA CFA-Level-I Exam Brilliant CFA-Level-I Exam Questions PDF
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Passing the CFA Level I exam is a significant achievement for anyone pursuing a career in finance. It demonstrates a strong understanding of the foundational concepts and principles of investment management and financial analysis. For many candidates, passing the exam is the first step towards earning the prestigious CFA designation and opening up new opportunities for career advancement.
CFA CFA-Level-I Exam Syllabus Topics:
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NEW QUESTION # 677
The following securities are generally backed by the full faith and credit of the United States government:
- A. municipal securities.
- B. securities issued by the Government National Mortgage Association and Federal National Mortgage
Association. - C. moral obligation bonds.
Answer: B
NEW QUESTION # 678
Under the P/E method derived from the DDM, which of the following does not impact the P/E ratio?
I). the expected divided payout ratio.
II). the required rate of return.
III). the expected growth rate of dividends.
- A. None of these.
- B. II only.
- C. I and III.
Answer: A
Explanation:
All of them impact the P/E ratio: P/E1 = (D1/E1)/(k - g)
NEW QUESTION # 679
One feature common to both the trading and available for sale classifications is:
- A. Unrealized gains (losses) are reported in current income.
- B. Unrealized gains (losses) are reported in other comprehensive income.
- C. Investments are reported at market value.
Answer: C
Explanation:
All investment securities for which a public market exists are reported at market value on the balance sheet. This applies to both available-for-sale and trading classifications.
NEW QUESTION # 680
Information regarding the defined-benefit pension plan of Tri Cities Transport included the following for 2003 ($ in millions):
Service cost: 48. Interest cost: 32.Actual and expected return on plan assets: 26. Amortization of unrecognized net gain: 3. Amortization of unrecognized prior service cost: 5. Retiree benefits paid (end of year): 50.
What is Tri Cities' pension expense for 2003?
- A. $98 million.
- B. $56 million.
- C. $62 million.
Answer: B
Explanation:
Service cost ($48) + interest cost ($32) - expected return on plan assets ($26) -amortization of unrecognized net gain ($3) + amortization of unrecognized prior service cost ($5) [in millions].
NEW QUESTION # 681
A trial generates only two results, "success" and "failure." The probability of success is higher than that of failure. The variance of the number of failures in 20 trials equals 2.35. The probability of success on a given trial equals ________.
- A. 0.136
- B. 0.452
- C. 0.864
Answer: C
Explanation:
For a binomial distribution with N trials, with the probability of success = p in each trial, the variance equals Np(1-p). Hence, 20 x p x (1 - p) = 2.35. Solving this gives quadratic equation gives p =
0 .136 or p = 0.864.
NEW QUESTION # 682
The characteristics of indifference curves do not include which of the following?
- A. Indifference curves are always concave from below.
- B. Indifference curves are everywhere dense and cannot cross.
- C. Indifference curves lying farthest to the northeast of a diagram are always preferred.
Answer: A
Explanation:
Indifference curves are always convex from below, not concave. The other characteristics assure that all bundles of goods can be compared, that a bundle with less is not viewed indifferently when compared to a bundle with more, and goods are substitutable at a decreasing rate.
NEW QUESTION # 683
A project may have multiple IRRs because
- A. it may have cash outflows at the end of the project in addition to the investment outlay at the beginning.
- B. its cash flows are received far into the future or it has negative NPV
- C. it has a small investment at the beginning and a very large cash flow at the end.
Answer: A
Explanation:
A project has multiple IRRs due to its cash flows switching signs multiple times.
NEW QUESTION # 684
Assume that six months ago you bought 2,500 shares of a stock at $70 per share using margin. The margin rate was 40%, and the interest rate on the margin loan was 8%. Assume no commissions. What is your gain or loss if the current stock price is $71 per share?
- A. $6,700
- B. -$1,700
- C. $2,500
Answer: B
Explanation:
Original equity = 40% of (2,500 x $70) = (.40)($175,000) = $70,000 Original Loan = 60% of
(2,500 x $70) = (.60)($175,000) = $105,000 Interest on loan = 1/2 of 8% of $105,000 = (1/2)($8,400) =
$ 4,200 C l $105 000 $4 200 $109 200 Current loan = $105,000 + $4,200 = $109,200 Current Equity =
(QP-L) = (2,500 x $71 - $109,200) = $177,500 - $109,200 = $68,300 $ return = $68,300 - $70,000 = -
$ 1,700 (Rate of return = -1,700/70,000= -2.43%)
NEW QUESTION # 685
Which of the following statements is false?
- A. Depreciation is the largest but not the only non-cash expense.
- B. Depreciation is not a cash flow since it is not a cash expense for the firm.
- C. Interest payments should be included in the estimated cash flows because the effects of debt financing are reflected in the cost of capital.
Answer: C
Explanation:
The cost of capital reflects the effects of debt financing. Including interest payments in the estimated cash flows would double-count the cost of debt.
NEW QUESTION # 686
Suppose a fully employed economy had only two industries, one a monopoly and the other competitive.
Assuming there are no economies of large-scale production, government action to break the monopoly into many competitive firms would lead to a(n)
- A. increase in output in the monopolized industry and a decrease in output in the competitive industry.
- B. decrease in output in the monopolized industry and an increase in output in the competitive industry.
- C. increase in output for both industries.
Answer: A
Explanation:
Since breaking up the monopoly in which there are no economies of scale would increase output and lower prices, resources would have to be diverted from the competitive industry. Thus, the increased output in the former monopoly would come at the expense of the competitive output. This is because a fully employed economy has no slack resources. Therefore, the increased usage of factors of production in the former monopoly must come from the competitive industry. So the output in the competitive industry would fall.
NEW QUESTION # 687
In a statement of cash flows, the acquisition of land by issuing capital stock:
- A. Is shown as an investing/financing activity.
- B. Is not shown at all, since no cash was received or disbursed.
- C. Is shown in a supplementary schedule as a noncash investing and financing transaction.
Answer: C
NEW QUESTION # 688
The marginal revenue product of a resource
- A. is equal to marginal revenue, i.e. the increase in the firm's total revenue which is generated by selling one more unit of output.
- B. is the marginal product of the resource multiplied by the price of that resource.
- C. is the marginal product of the resource multiplied by the price of the output it is used to produce.
Answer: C
Explanation:
Marginal revenue product is the addition to the total revenue of the firm generated by adding one more unit of a resource. It is equal to the increase in output multiplied by the marginal revenue of the output.
NEW QUESTION # 689
Which industry is likely to be fragmented with strong pricing power?
- A. Private Banking.
- B. Airlines.
- C. Radio Broadcasting.
Answer: A
Explanation:
There are many players in this industry (e.g. Northern Trust, Credit Suisse) and many have posted high profit margins.
NEW QUESTION # 690
On December 31, 2003, Acadia Corp. leased machinery with a fair value of $420,000 from Clive
Leasing. The agreement is a six-year noncancelable lease requiring annual payments of $80,000 beginning December 31, 2003. The lease is appropriately accounted for by Acadia as a capital lease.
Acadia's incremental borrowing rate is 11%. Acadia knows the interest rate implicit in the lease payments is 10%.
The present value of an annuity due of 1 for 6 years at 10% is 4.7908. The present value of an annuity due of 1 for 6 years at 11% is 4.6959.
In its December 31, 2003 balance sheet, Acadia should report a lease liability of:
- A. $303,264.
- B. $383,264.
- C. $375,672.
Answer: A
Explanation:
The liability is the present value of the payments due. ($80,000 x 4.7908) - $80,000 =
$ 303,264.
NEW QUESTION # 691
Suppose the Brazilian real is quoted at US$:R = 0.9955-1.0076 and the Thai baht is quoted at US$:B
= 25.2513-3986. What is the direct quote for the real in Bangkok (R:B=?)?
- A. 30.5541 - 6456
- B. 25.0608 - 5134
- C. 25.1376 - 2654
Answer: B
Explanation:
Bid cross rate for the real R:B = 25.2513/1.0076 = 25.0608. Ask cross rate for the real R:B =
25.3986/0.9955 = 25.5134. Therefore the direct quotes for the real in Bangkok are R:B = 25.0608 - 5134.
NEW QUESTION # 692
Assuming that you believe a particular company has internally-generated goodwill, which of the following costs would you capitalize and then amortize over their estimated useful lives?
- A. internally-generated goodwill should never be capitalized
- B. the cost of maintaining the goodwill
- C. both the costs of maintaining and restoring the goodwill
Answer: A
Explanation:
The only way that goodwill can be capitalized is when it is purchased as part of a company. It is the excess of the price paid for the business over the market value of its net assets.
NEW QUESTION # 693
Which of the following is an example of a conservative accounting policy?
- A. Accruing reserves for potential contingency losses.
- B. Using lower estimates for estimating bad-debt expenses.
- C. Using FIFO inventory method when prices are rising.
Answer: A
Explanation:
Accruing reserves for potential losses is a conservative policy.
NEW QUESTION # 694
Which of the following statements about the futures market are true?
I). Allows investors to hedge
II). Allows investors to speculate
III). Helps evaluate prices in the spot market
- A. I and II.
- B. I, II and III.
- C. I and III.
Answer: B
Explanation:
Hedging is a process for lessening or eliminating risk by taking a position in the market opposite to your original position. For example, someone who owns wheat can sell a futures contract to protect against future price declines.
NEW QUESTION # 695
One characteristic of a Giffen good is that it
- A. is an inferior good.
- B. is a luxury good.
- C. has an upward-sloping demand curve.
Answer: A
Explanation:
All Giffen goods must be inferior, but not all inferior goods are Giffen goods.
NEW QUESTION # 696
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CFA Level I exam is a challenging and rigorous exam that requires significant preparation and dedication. CFA-Level-I exam is designed to test the candidate's knowledge and understanding of the fundamental concepts and principles of finance and investment. Candidates are required to demonstrate their ability to analyze and interpret financial data, apply financial models and techniques, and make sound investment decisions.
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