[UPDATED 2022] Free CFA CFA-Level-I Exam Questions Self-Assess Preparation
CFA-Level-I Free Sample Questions to Practice One Year Update
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The price of the CFA Level 1 exam is $700. For more information related to exam price, please visit the official website CFA Website as the cost of exams may be subject to vary county-wise. Our CFA Level 1 pdf exam dumps include answers of questions that are similar of the true CFA Level 1 exam.
NEW QUESTION 354
In the mid-1990s, the United States considered requiring tomatoes to be stacked in boxes without padding. The effect of this regulation would have been to ruin vine-ripened tomatoes imported from
Mexico. Such an act is considered an example of a
- A. quota.
- B. non-tariff barrier.
- C. VER.
Answer: B
Explanation:
Non-tariff barriers are indirect regulatory restrictions on imports and exports. Shipping requirements are an example of this.
NEW QUESTION 355
Michelieu tells a prospective client, "I may not have a long-term track record yet, but I'm sure that you'll be very pleased with my recommendations and service. In the three years that I've been in the business, my equity-oriented clients have averaged a total return of more than 26 percent a year." The statement is true, but Michelieu only has a few clients and one of his clients took a large position in a penny stock (against Michelieu's advice) and realized a huge gain. This large return caused the average of all of Michelieu's clients to exceed 26 percent a year. Without this one investment, the average gain would have been 8 percent a year.
Has Michelieu violated the Standards?
- A. Yes, because his statements do not fairly and accurately reflect his track record.
- B. Yes, because he did not consider the clients investment preferences when stating his performance.
- C. No, because the 30% return is in fact a true record of Kent's performance.
Answer: A
Explanation:
Standard I (C) - Misrepresentation. Although Michelieu's statement regarding the total return of his client's accounts on average may be technically true, it is misleading because the majority of the gain resulted from one client's large position taken against Michelieu's advice. He has not taken steps to present a fair, accurate and complete presentation of performance. Even though he is not guaranteeing future results, his words are still a misrepresentation of performance. Not disclosing the risk preferences of clients does not make a statement misleading and is not a violation of the Standards in this context.
NEW QUESTION 356
Which of the following is/are true?
I). The mean deviation can never be negative.
II). The range of a data set can never be negative.
III). The mean deviation is always less than the mean absolute deviation (MAD).
- A. I and II.
- B. I and III.
- C. II and III.
Answer: A
Explanation:
Range of a dataset = maximum value - minimum value. Therefore, the range can never be negative. Also, since the mean deviation is the average of the absolute deviations from the mean, the MD can never be negative, either. Finally, mean deviation and mean absolute deviation are one and the same thing.
NEW QUESTION 357
Robert Haley has "CFA Level 2" on his business cards. He has passed the Level 2 examination and is registered for the Level 3 examination to be given next June.
- A. He has violated the Standards because he is only aCFA candidate.
- B. He has violated the Standards because the designation "CFA" is not allowed on business cards.
- C. He has not violated the Standards.
Answer: A
NEW QUESTION 358
The key difference between investors and information-motivated traders is:
- A. the risks they take.
- B. their motives for trading.
- C. their expected holding periods.
Answer: B
Explanation:
Investor can take high or low risk positions, and their holding periods can be long or short.
The characteristic that most distinguishes investors from information-motivated traders is the return they expect.
NEW QUESTION 359
How many three-digit numbers can you form using the digits 1, 3, 5, 7 and 9 if you are allowed to repeat any of the aforementioned digits any number of times within the number to be formed?
- A. 0
- B. 1
- C. 2
Answer: A
NEW QUESTION 360
Which of the following statements related to the LIFO method of inventory valuation is false?
- A. Under LIFO, companies can manage earnings at the end of an accounting period by purchasing additional inventory.
- B. The LIFO conformity rule is a tax ruling prohibiting the use of LIFO for tax purposes unless it is also used for external financial reporting purposes.
- C. Despite the many benefits of LIFO, it is used by fewer U.S. companies than both FIFO and weighted average.
Answer: C
Explanation:
LIFO is more commonly used than weighted average for inventory valuation purposes.
NEW QUESTION 361
Suppose that P(A) = 0.2 and P(B|A) = 0.6, find P(AB).
- A. 0.80
- B. 0.12
- C. 0.30
Answer: B
Explanation:
The correct answer is P(AB) = P(B|A) P(A) = 0.6 x 0.2 = 0.12
NEW QUESTION 362
In order to calculate a bond's present value we use the
- A. current yield.
- B. realized yield.
- C. yield to maturity.
Answer: C
NEW QUESTION 363
Which of the following is not a typical example of non-recurring items?
- A. Sale of a subsidiary or a building.
- B. An extremely large loss on operations.
- C. Lawsuits
Answer: B
Explanation:
Gains or losses from the sale of corporate fixed assets, lawsuits, or similar events that would not be expected to occur often, if ever again.
NEW QUESTION 364
Which of the following is a misconception about beta?
- A. Beta can be viewed as a standard measure of systematic risk.
- B. Beta is defined as the covariance between the security or portfolio and the market portfolio divided by the variance of the market portfolio.
- C. Beta is the relevant measure of risk in the CAPM and is equivalent to unsystematic risk.
Answer: C
Explanation:
Beta measures systematic, not unsystematic risk.
NEW QUESTION 365
If a researcher were to choose random days and calculate the difference in sales volume for the two fish markets in New Bedford, Massachusetts and analyze those differences, what type of experiment is being conducted?
- A. paired difference
- B. t test
- C. F test
Answer: A
NEW QUESTION 366
The more perfectly the monopoly can price discriminate,
- A. the farther its output gets from the competitive output and the less efficient is the outcome.
- B. the closer its output gets to the competitive output and the more efficient is the outcome.
- C. the farther its output gets from the competitive output and the more efficient is the outcome.
Answer: B
Explanation:
The more perfectly a monopoly can price discriminate, the closer its output gets to the competitive output (P = MC) and the more efficient is the outcome.
NEW QUESTION 367
Which of the following combinations would not be a likely outcome by combining an interest rate swap with a currency swap?
- A. A fixed rate in the U.S. dollar swapped for floating rate in U.S. dollar.
- B. A floating rate in the U.S. dollar swapped for fixing rate in foreign currency.
- C. A fixed rate in the U.S. dollar swapped for floating rate in a foreign currency.
Answer: A
Explanation:
A fixed rate in U.S. dollar swapped for floating rate in U.S. dollar is just a plain vanilla interest rate swap. Hence, this structure would not involve a currency swap and it would not constitute a correct answer.
NEW QUESTION 368
Which of the following is NOT evidence of the fact that investors are risk-averse?
I). Investors purchase various types of insurance.
II). The difference in the promised yield for different grades of bonds that supposedly have different grades of credit risk.
- A. Both are evidences of risk aversion.
- B. II only.
- C. I only.
Answer: A
NEW QUESTION 369
Suppose we roll a die and let A be the event that the number of spots showing on the die is 6. We then toss a coin and let B be the event that the coin comes up heads. Then, the P(A and B) is
- A. 4/6
- B. 7/12
- C. 1/12
Answer: C
Explanation:
The two events are independent since the outcome of the die cannot influence the outcome of the coin. In this case, P(A) = 1/6 and P(B) = 1/2. Because the events are independent, we can use the multiplication rule for independent events to find P(A and B) = P(A)xP(B)
NEW QUESTION 370
A project may have multiple IRRs because
- A. it has a small investment at the beginning and a very large cash flow at the end.
- B. it may have cash outflows at the end of the project in addition to the investment outlay at the beginning.
- C. its cash flows are received far into the future or it has negative NPV
Answer: B
Explanation:
A project has multiple IRRs due to its cash flows switching signs multiple times.
NEW QUESTION 371
For the long investor, when the commodity market is in contango,
- A. The roll yield is negative.
- B. The spot yield if positive.
- C. The collateral yield is negative.
Answer: A
Explanation:
This is because the long investor is buying futures at a price higher than the spot price.
NEW QUESTION 372
An American option is more valuable than a European option on the same dividend paying stock with the same terms because the:
- A. American option can be exercised from date of purchase until expiration but the European option can be exercised only at expiration.
- B. European option does not conform to the Black-Scholes model and is often mispriced.
- C. European option contract is not adjusted for stock splits and stock dividends.
Answer: A
Explanation:
It is possible that the stock price reaches its maximum or minimum value during the period from date of purchase to expiration, not just on the expiration date. Only an American option can take this kind of opportunity to make profits by being exercised during this period. So it is more valuable.
NEW QUESTION 373
What is the interest rate risk, in percentage price change, of a semiannual-pay 9%, 15-year bond with an 8.5% yield if rates increase by 60 basis points?
- A. -4.55%
- B. -4.80%
- C. 4.80%
Answer: B
Explanation:
Current Price = 104.19, Full Valuation = 99.19, % Change = -4.80%
NEW QUESTION 374
The firm's short-run supply curve is:
- A. the marginal cost curve.
- B. the marginal cost curve above average total cost.
- C. the marginal cost curve above average variable cost.
Answer: C
Explanation:
The marginal cost curve shows what quantity the firm will produce, given that price is at least equal to minimum average variable cost. Below minimum average variable cost, the firm supplies zero in the short run.
NEW QUESTION 375
The distribution of the annual incomes of a group of middle management employees approximated a normal distribution with a mean of $37,200 and a standard deviation of $800. About 68 percent of the incomes lie between what two incomes?
- A. $36,400 and $38,000
- B. $34,800 and $39,600
- C. $35,600 and $38,800
Answer: A
Explanation:
68/2 = 0.34. The z value for 0.34 is 1. x = u +-- z*sigma. So x = 37200 +- 1*800. so x is between 36,400 and 38,000.
NEW QUESTION 376
Which of the following statements is (are) true with respect to the nature of bonds?
I). For premium bonds, its yield to maturity is always lower than its current yield.
II). For discount bonds, the duration equals the maturity of the bond.
III). Since longer term interest rates are more stable than shorter term interest rates, longer term bonds are less price sensitive than shorter term bonds.
IV). Not even U.S. government bonds are immune from interest rate risk.
- A. I, II, III and IV.
- B. II and III.
- C. I and IV.
Answer: C
Explanation:
I is true: the reason a bond trades above par is because it is paying a coupon rate that is greater than what the market requires (which is represented through yield to maturity).
II is incorrect because the only instance where the bond duration equals its maturity is if the bond is a zero coupon bond, an extreme form of a discount bond.
NEW QUESTION 377
The staff of a company is 45% female. The probability of a female requesting a sick leave is 12% versus 10% for males. An individual who requested a sick leave was randomly selected from the staff of this company. The probability that this individual is a female would be closest to:
- A. 55%
- B. 45%
- C. 50%
Answer: C
Explanation:
Use Bayes' formula to compute this probability. Assume the following events:
F: individual is a female, P(F) = 0.45
M: individual is a male, P(M) = 0.55)
S: individual requests a sick leave, P(S|F) = 0.12 and P(S|M) = 0.10.
P(F|S) = [P(S|F) x P(F)] / [P(S|F) x P(F) + P(S|M) x P(M)] = 0.495.
NEW QUESTION 378
What is the GDP in this example?
- A. $780.
- B. $870.
- C. $865.
Answer: B
Explanation:
GDP is calculated here by summing personal consumption(200), gross private domestic investment(500), government consumption and investment (100 + 40), and net exports (exports (120)- imports(90)) = $870.
NEW QUESTION 379
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