Professional Documents
Culture Documents
MOCK EXAM 1
Morning Session
Time Limit: 3 Hours
1.
Tenence recently passed the CFA examination. When he seek for potential
employers, he writes in the cover letter: "I have passed all three levels of the CFA
Program and may be eligible for the CFA charter after I get the required work
experience." According to AIMR Standards of Professional Conduct, Terence:
A.
B.
C.
D.
2.
Amy, a CFA candidate, recently joined A&F Asset Management, and reports
directly to Tammy. Shortly after joining the firm, Amy learned that A&F Asset
Management does not have a copy of the Code and Standards. Which of the
following statements best complies with AIMR Standards of Professional Conduct?
A.
B.
C.
D.
3.
The following are not the AIMR members with supervisory responsibility
EXCEPT:
A. Not expected to prevent violations of laws, rules and regulations by non-AIMR
member employees.
B. In compliance with AIMR Standards after warning an offending employee to stop
violating the applicable statutes, regulations, and provisions of the AIMR Code and
Standards.
C. Expected to evaluate personally the conduct of their employees concerning
applicable statutes, regulations, and provisions of the AIMR Code and Standards on
a continuing basis regardless of how many employees they supervise.
D. Expected to establish and implement written compliance procedures about
applicable statutes, regulations, and provisions of the AIMR Code and Standards.
4.
D.
5.
Keith, CFA, has been invited to join a group of analysts in touring the riverboats of
A & K Limited. Since commercial flight schedules are inconvenient and not
practical for the group's time schedule, A & K Limited has arranged chartered
flights from casino to casino. A & K Limited has also arranged to pay the hotel bill
for the three nights of the tour. The trip is purely business. According to AIMR
Standards of Professional Conduct, Keith should:
A.
B.
C.
D.
6.
Daniel, CFA, is a portfolio manager with the trust department of Citi Nation Bank.
One of his accounts is his children's trust fund. Daniel allocated IPO shares to his
children's trust fund before he has completely satisfied all the needs of his other
accounts. According to AIMR Standards of Professional Conduct, which of the
following standards did Daniel violate?
A.
B.
C.
D.
8.
Karen, CFA, is the investment manager of a corporate pension plan. Under ERISA,
she owes her fiduciary duty to:
A.
B.
C.
D.
7.
9.
As part of an AIMR investigation into the conduct of Helen, CFA, AIMR requests
records from Helen about her investment accounts. Helen writes AIMR a letter
stating that under Standard IV (B.5), Preservation of Confidentiality, that she is
unable to comply with their request. Which of the following statement is TRUE?
A.
B.
C.
D.
10. Vivian, CFA, a research analyst assigned to Double Limited, has been
recommending the stock's purchase in her quarterly report. Vivian has recently
married and just discovered her husband's trust account owns several million
dollars worth of Double Limited. The stock makes up more than 50 percent of the
trust's value but less than 5 percent of Double Limited's outstanding shares.
According to AIMR Standards of Professional Conduct, Vivian should:
A.
B.
C.
D.
11. Which of the following statements concerning the AIMR Performance Presentation
Standards about the calculation of composite returns is True?
A.
B.
C.
D.
13.
Gloria, CFA, has been assigned by her employer to analyze Well Limited. Which of
the following actions would most likely violate AIMR's Standard III(C), Disclosure
of Conflicts to Employer? Gloria does NOT report to her employer that:
A.
B.
C.
D.
15.
Paul, CFA, heads the research department of a large brokerage firm. Paul has
supervisory responsibility over 25 analysts. If Paul delegates some supervisory
duties, which statement best describes his responsibilities based on the AIMR
Standards of Professional Conduct?
A.
B.
C.
D.
16.
Paul is not responsible for those duties he has delegated to his subordinates.
Paul's supervisory responsibilities only apply to analysts with the CFA designation.
Paul retains supervisory responsibility for all subordinates despite his delegation of
some duties.
The AIMR standards prevent Paul from delegating supervisory duties to
subordinates.
Before disseminating changes in his firm's buy/sell list. Johnson, a CFA candidate,
calls his best clients to apprise them of the pending change. Based on the AIMR
Standards of Professional Conduct, what standard, if any, did Johnson violate?
A.
B.
C.
D.
17.
18.
An analyst tells a prospective client that investment grade bonds involve less
default risk than junk bonds.
A bond trader tells a client that he can assist the client in all the client's investment
needs: equity, fixed income, and derivatives.
An investment manager recommends to a prospective client an investment in
mortgage IO strips because they are guaranteed by an agency of the federal
government.
A broker guarantees that a specific common stock will double in value over the
next six months.
19. John receive $1,000 at the beginning of each for the next 10 years. Assume that the
interest rate is 12%, calculate the value of this annuity at the end of the ten-year
period.
A.
B.
C.
D.
$13,578.24
$17,548.74.
$19,654.58.
None of the above.
20. There is a perpetuity of $500 and the interest rate is 10%. Calculate the present
value of this perpetuity.
A.
B.
C.
D.
$500.
$5,000.
$5,500.
None of the above.
21. John buy the computer through creating a loan of $40,000. It is to be paid off using
6 percent over ten years. Calculate the monthly payment.
A.
B.
C.
D.
$421.72.
$444.08.
$478.59.
None of the above.
23. For a binomial random variable B(n=12,p=0.5), Find out the mean and variance.
A.
Mean
6
Variance
3
B.
C.
D.
7
3.5
8
4
None of the above.
24. Which of the following statements best describes the binomial distribution?
A.
B.
C.
D.
25. Peter buys a stock for $25 per share. At the end of the one-year holding period the
price of the stock is $40 per share. Assume that it pays no dividends, calculate the
continuously compounded return.
A.
B.
C.
D.
35%.
47%.
56%.
None of the above.
Consists of a range of values that bracket the parameter with a specified level of
probability 1- is a confidence internal estimate.
Cross-sectional data are a set of values of a particular variable in sequential time
periods.
A point estimate is a single estimate of an unknown population.
None of the above.
28. Based on the following table, if the discount rate is 10%, calculate the present value
of the cash flow.
1
$100
4
$250
If the discount rate is 12 percent, the present value of this stream of cash flows is
closest to:
A.
B.
C.
D.
$636.36
$579.87
$535.89
None of the above.
29. There is 5-year annuity of $3,000 per year. However, the first payment will not pay
until year 3. Assuming the interest rate is 10%, calculate the present value of this
annuity.
A.
B.
C.
D.
30.
31.
Weakest
Ordinal
Ordinal
Nominal
Nominal
Strongest
Interval
Ratio
Interval
Ratio
32.
$8397.
$9,399.
$10,258.
None of the above.
The following shows the yearly returns of aggressive equity funds for four years:
1999 = +5%
2000 = +2%
2001 = +1%
2002 = -4%
Assume that this distribution can represent either the population or a sample of
aggressive equity funds. Calculate the population and sample standard deviation.
A.
B.
C.
D.
Population
Standard Deviation
2.73%
3.09%
3.24%
None of the above.
Sample
Standard Deviation
3.99%
4.55%
3.74%
33.
95%.
75%.
68%.
None of the above.
Total
70
130
200
0.15.
0.3.
0.5.
None of the above.
What is the probability that a randomly selected individual from this group will be
either an analyst or someone who thinks this legislation will have a positive impact
on the economy?
A.
B.
C.
D.
36.
What is the probability of selecting an analyst who thinks that the legislation will
have a negative impact on the economy?
A.
B.
C.
D.
35.
0.35.
0.58.
0.64.
None of the above.
The crowding-out model implies that deficits will have a upward pressure on the
real rate of interest.
The new classical model contends that deficits exert little impact on interest rates.
Empirical studies consistently show a statistically significant relationship between
D.
38.
Based on the following information, if the Federal Reserve buys $150 million of
Treasury Bills from public, what is the effect on money supply?
Reserve requirement: 25%
Bank keeps no excess reserve
A.
B.
C.
D.
39. If there is an unanticipated increase in the money supply, what will be the effect?
A.
B.
C.
D.
For decreasing cost industries, the supply cuve slopes downward to the right.
For increasing cost industries, the supply curve sweeps upward to the right.
For constant cost industries, the supply curve is horizontal.
All of the above.
43.
Which of the following is the reason for the Oligopolists to collude and to cheat on
collusive agreements?
A.
B.
C.
D.
Restrict output.
Restrain trade.
Increase its share of the joint profit.
All of the above.
44. Under a system of flexible exchange rates, if there is a decrease in demand for the
U.S. dollar in the foreign exchange market will cause:
A.
B.
C.
D.
45. Which of the following are the two specific conditions that must be met for revenue
recognition to take place under the accrual concept of income?
A.
B.
C.
D.
46.
In a flexible or floating change rate system, which of the following types of changes
is least likely to affect the exchange-rate?
A.
B.
C.
D.
47.
If the real interest rates in the U.S. are lower than its trading partners, what is the
effect on the foreign exchange value of the dollar?
A.
B.
C.
D.
48.
Cash is received.
Delivery of goods and services and the absence of significant contingent obligation
on the part of the seller.
Passage of risk of ownership from seller to buyers.
Completion of the earnings process and assurance of payment.
Depreciate.
Appreciate,
Remain steady.
Uncertain.
Which of the following statements about the foreign exchange market is TRUE?
A.
B.
C.
10
D.
49.
0.273.
0.398.
0.436.
None of the above.
$1,065.
$1,090.
$1,135.
None of the above.
-$200.
-$175.
+$175.
+$200.
$20.
$100.
$120.
None of the above.
11
A common size balance sheet expresses all balance sheet accounts as a percentage
of total asset.
Common size ratios are useful in comparing companies of different sizes.
Common size ratios are useful to examine trends over time within a single
company.
All of the above.
The company had 1,000,000 shares outstanding at the beginning of the year.
On June 30th the company declared and issued a 20 percent stock dividend.
On September 30th the company sold 200,000 shares of common stock at par.
A.
B.
C.
D,
1,000,000.
1,200,000.
1,250,000.
1,400,000.
55. During deflation and decreasing inventory quantities, a company using last-in firstout (LIFO) rather than first-in first-out (FIFO). What is the effect on inventory
turnover and net profit margin?
Inventory Turnover Net Profit Margin
A.
B.
C.
D.
Higher
Higher
Lower
Lower
Lower.
Higher.
Lower.
Higher.
A.
B.
C.
D.
Cash Flow
Lower.
Lower.
Higher.
Higher.
57.
The following information is calculated by using LIFI method, calculate the cost of
goods sold using FIFO.
2000
2001
Beginning Inventory
$80,000
$70,000
Ending Inventory
$70,000
$50,000
LIFO Reserve
$5,000
$8,000
LIFO Cost of Goods Sold
$300,000
$250,000
A.
B.
C.
D.
$219,000.
$238,000.
$247,000.
none of the above.
12
58. Two growing companies are identical except that Company X capitalizes whereas
Company Y expenses costs for long-lived resources. Which of the following
statements about financial statement effects is FALSE? Company X will show:
A.
B.
C.
D.
59. A company retires bond before the maturity date. Assume that the bond is initially
sold at discount, the difference between the bonds market value and the bonds
book value will:
A.
B.
c.
d.
60. Which of the following is NOT a criteria for classifying a capital lease?
A.
B.
C.
D.
The term of the lease is 75 percent or more of the estimated economic life.
It contains a bargain purchase option.
Transfer ownership.
The present value of the minimum lease payments equals or exceeds 80 percent of
the fair value of the leased property.
61. Assume the present value discounted by 15% is $3,500,000 and it is used the
straight-line depreciated method. Find out the reported lease related expense for
the first year.
The lease is a 10-year capital lease with annual payments of $500,000.
There is a guaranteed residual value of $500,000 at the end of the lease.
A.
B.
C.
D.
$525,000.
$830,000.
$970,000.
None of the above.
62. What is the reason for an analyst should consider whether a company acquired
assets through a capital lease or an operating lease?
A.
B.
C.
D.
13
Which of the following factor that affect the cost of capital and it is not control by
the company?
A.
B.
C.
D.
65. Which of the following statements about business risk and financial risk is TRUE?
A.
B.
C.
D.
The fourth market describes direct trading of securities using the Internet.
The primary market is where most of the trading takes place on major exchanges
such as the New York Stock Exchange.
The secondary market describes block trades conducted by exchange members off
the exchange floor.
All of the above.
14
numerous buyers and sellers are willing to trade at prices about and below the
current price.
the current price of a security fully reflects all the information currently available
about the security.
market participants can buy and sell quickly at a known price.
transaction costs are low.
70. Study the following information about a stock, calculate the price earning ratio:
A.
B.
C.
D.
3.8.
4.7.
5.6.
None of the above.
71. There is a stock selling for $25 and it has an expected annual dividend of $4.
Assume it will have a sustainable growth rate of 9% perpetual and the capital
markets are in equilibrium; calculate the market discount rate for this stock.
A.
B.
C.
D.
20%.
25%.
30%.
None of the above.
72. Study the following information; calculate the expected rate of return.
A.
B.
C.
D.
73. Which of the following statement about market value added, Economic Value
Added and the franchise factor is TRUE?
A.
B.
C.
D.
The critical factors determining the franchise P/E are the risk premium.
Market Value added is used primarily for evaluating management.
Economic Value Added is a measure of external performance.
The franchise factor concept is similar to Economic Value Added because it
recognizes that adding value requires investing in projects that provide excess net
present value.
15
74.
75.
76.
related revenues and expenses are accounted for during the same time period.
an entity should match the cash payment and cash receipt.
an entity should match the income and expense monthly.
none of the above.
An extraordinary item.
Correction of error.
A prior period adjustment.
None of the above.
$940.
$1020.
$860.
none of the above.
16
79.
80.
81.
Use of cash.
Adjusting entry.
Non-cash flow item.
None of the above.
Study the following information, find out the cash conversation cycle.
Receivables Turnover: 30
Inventory Turnover: 15
Payable Turnover: 20
A.
B.
C.
D.
15 days.
18.25 days.
25.34 days.
none of the above.
82.
A.
B.
C.
D.
83.
25.9%.
28.3%
31.5%
none of the above.
84.
A. 30%.
B. 32%.
C. 34%.
D. none of the above.
Which of the following statements about dilative securities is TRUE?
17
A.
B.
C.
D.
85.
86.
Based on the following information, calculate the basic earnings per share.
A.
B.
C.
D.
$3.23.
$3.52.
$4.97.
None of the above.
during deflation compared with FIFO companies, LIFO companies will have:
A.
B.
C.
D.
Which of the following is not the result of using an straight line depreciation
method instead of accelerated depreciation method in the early years of assets
life?
A.
B.
C.
D.
89.
Have higher cash flow from operations and lower cash flow from investing.
Have better debt/equity ratios.
Have better debt/asset and debt/equity ratios.
All of the above.
Which of the following definitions used in accounting for income taxes is TURE?
A.
B.
C.
D.
18
90.
Permanent differences are differences between taxable and pretax income that are
never reversed.
Temporary differences are differences between taxable and pretax incomes that
will reverse in future years.
Both Statement A and B are correct.
None of the above.
91. What is the name for the collateralized borrowed arrangement used by
institutional investors in the bond market?
A.
B.
C.
D.
Futures.
Options.
A repurchase agreement.
None of the above.
-3.0%.
0%.
2%.
3%.
94. Using Bond B as the reference bond, calculate the relative yield spread.
A.
B.
C.
D.
40%.
43%.
47%.
None of the above.
95. Using Bond B as the reference bond, calculate the yield ratio.
A.
B.
C.
0.89.
1.43.
1.77.
19
D.
96. There is a $100 par value, 8% percent semiannual; 10 year debenture bond is
currently selling for $130. Find the bond's current yield.
A.
B.
C.
D.
5.77%.
6.25%.
8.34%.
None of the above.
97. There is a call option on a stock that is currently selling for $25 and it is in-themoney by $8. Find the call option's strike price:
A.
B.
C.
D.
$17.
$25.
$33.
None of the above.
98. Which of the following statement about American and European options is
FALSE?
A.
B.
C.
D.
The total number of options in Europe exceeds the number of American options.
European options can only exercise at expiration.
American options can exercise on or before expiration.
None of the above.
99. Given that there is a put on a stock with a strike price of $60 is priced at $5 per
share, while a call with a strike price of $60 is priced at $8. Find out the maximum
per share loss and the maximum per share gain to the writer?
A.
B.
C.
D.
100. Investors should NOT solely rely on the comparative sales approach to value real
estate? Because:
A.
B.
C.
D.
101. Which of the following statements about real estate limited partnerships (RELPs)
is TRUE?
A.
B.
C.
20
D.
102. The nominal rate of return investors require to take investments varies over time
and is a function of which of the following factors?
I.
Risk Premium.
II. Expected inflation rate.
III. Real risk-free rate.
A.
B.
C.
D.
I only.
I and II only.
II and III only.
I, II and III.
103. Which of the following factor determine the real risk-free rate of interest?
A.
B.
C.
D.
Consumer preferences for current consumption (time preference) and the set of
investment opportunities available in the economy (investment opportunities).
The set of investment opportunities available in the economy.
The uncertainty caused by the possibility of a major change in the political or
economic environment of a country (country risk).
None of the above.
104. Which of the following statements about the security market line is TRUE?
I.
II.
The security market line interact the y-axis at the real risk-free rate of return.
The tradeoff between risk and return is shown by movement along the security
market line.
III.
The slope of the security market line reflects investor's investment risk
premium.
A.
B.
C.
D.
II only.
III only.
I and III only.
II and III only.
105. Amy past the mid-point of their careers, identify the phase of lift cycle she is
typically in?
A.
B.
C.
D.
Accumulation.
Consolidation.
Gifting.
None of the above.
21
107. Which of the following is about the major constrains faced by mutual funds is
CORRECT?
A.
B.
C.
D.
Law to protect mutual fund investors, and those placed on the mutual fund's
managers by investors.
Capital markets, and those that represent choices made by the mutual fund's
managers.
Law to protect mutual fund investors and those that represent choices made by the
mutual fund's managers.
None of the above.
108. Which of the following statement described the security market line (SML)
correctly?
A.
B.
C.
D.
110. Based on the following information, calculate the required return on stock.
Beta=1
Risk-free rate=5%
Expected return on market=10%
A.
B.
C.
D.
10%.
12%.
14%.
16%.
111. Which of the following is the primary reason for the slope of security market line
changes over time?
A.
B.
C.
D.
Risk characteristics.
Attitudes-of investors toward risk.
Expected rate of inflation.
Market conditions.
112. In the investment policy statement, which of the following is included as an input?
A. Investor's return objectives.
B. Investment constraints.
22
Bank.
Pension fund.
Endowment fund.
None of the above.
115. Which of the following portfolios could NOT lie on the efficient frontier?
Portfolio
A
B
C
D
A.
B.
C.
D.
Expected Return
6
10
18
18
Standard Deviation
3
3
7
9
Portfolios A and B.
Portfolios A and D.
Portfolios B and C.
Cannot be determine.
116. Given that the covariance between two assets is 50 while their variances are 16 and
64, calculate the correlation coefficient between the two assets is closet to:
A.
B.
C.
D.
1.27
1.35
1.56
none of the above
118. Which of the following statements about the security market line (SML) and
23
119. Which of the following statements about the similarity between arbitrage pricing
theory (APT) and the capital asset pricing model (CAPM) is TRUE?
A.
B.
C.
D.
Both of them assume that unique effects are independent and will be diversified
away in a large portfolio
Both of them assume linear relationships between return and the factor(s) included
in the models.
Both of them are asset pricing models.
All of the above.
120. Which of the following is the least likely to explain how investing internationally
can benefit the investor's portfolio within a risk-return framework?
A.
B.
C.
D.
24