CFA Institute CFA Level I Chartered Financial Analyst (CFA-Level-I) Free Practice Test
Question 1
A portfolio consists of 45% of wealth invested in the market portfolio and the remaining in risk-free
T-bills yielding 6.3%. The market portfolio has an expected return of 17% and a standard deviation of 19%.
The beta of the portfolio is ______.
T-bills yielding 6.3%. The market portfolio has an expected return of 17% and a standard deviation of 19%.
The beta of the portfolio is ______.
Correct Answer: C
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Question 2
The difference between economic profit and accounting profit is equal to:
Correct Answer: C
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Question 3
Which of the following is true for monopolistically competitive firms in long-run equilibrium?
Correct Answer: C
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Question 4
Purchasing factory equipment on credit results in a
Correct Answer: A
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Question 5
Jumbo, Inc. had sales of $8,000 in November, $14,000 in December, and projects sales of $10,000 in
January, $12,000 in February, and $8,000 in March. The firm's COGS in any given month is equal to 70% of the next month's sales. The firm collects its receivables in 60 days and pays its payables in 30 days.
The firm begins January 1 with 10,000 in cash. All sales and purchases are on credit. There are no other costs or revenues. What is Jumbo's cash balance at the end of February? Assume there are 30 days in every month.
January, $12,000 in February, and $8,000 in March. The firm's COGS in any given month is equal to 70% of the next month's sales. The firm collects its receivables in 60 days and pays its payables in 30 days.
The firm begins January 1 with 10,000 in cash. All sales and purchases are on credit. There are no other costs or revenues. What is Jumbo's cash balance at the end of February? Assume there are 30 days in every month.
Correct Answer: B
Question 6
The change in the quantity of money that results from a given change in the monetary base is determined by the
Correct Answer: A
Question 7
If prices have risen by 5% in one year, real output:
Correct Answer: A
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Question 8
Which of the following statements regarding duration and a bond's price volatility is (are) correct?
I). Duration is a linear estimate of a bond's price change given an expected change in market interest rates.
II). Duration actually underestimates a bond's price increase and decrease given an expected change in market interest rates.
III). The combined effect of a bond's duration and convexity will be greater than a bond's expected change related to duration alone.
IV). Convexity is an attempt to mitigate the error included with the duration measure.
A I and II
B. I and IV.
C. III and IV.
I). Duration is a linear estimate of a bond's price change given an expected change in market interest rates.
II). Duration actually underestimates a bond's price increase and decrease given an expected change in market interest rates.
III). The combined effect of a bond's duration and convexity will be greater than a bond's expected change related to duration alone.
IV). Convexity is an attempt to mitigate the error included with the duration measure.
A I and II
B. I and IV.
C. III and IV.
Correct Answer:
B
Explanation: Duration is a linear estimate and the application of convexity is an attempt to remedy the errors related to duration. Duration underestimates the bond price increase when market interest rates decline and overestimates the bond price decline when market interest rates rise. Convexity, which can be either positive or negative, may add or reduce the effective change suggested by duration alone.
Explanation: Duration is a linear estimate and the application of convexity is an attempt to remedy the errors related to duration. Duration underestimates the bond price increase when market interest rates decline and overestimates the bond price decline when market interest rates rise. Convexity, which can be either positive or negative, may add or reduce the effective change suggested by duration alone.
Question 9
Which of the following could lead to a rise in receivable days as calculated from the financial statements?
Correct Answer: B
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