Professional Documents
Culture Documents
Afternoon Session
Economics 33-44 18
Derivatives 91-96 9
1. Collin Nel, CFA has tendered his resignation to his current employer Farrell Capital Advisors
& is serving the mandatory three-month notice period. He is planning to open his
independent asset management firm. While serving the notice period he undertakes a few
activities. Which of the following activity is least likely a violation of Standard IV (A) –
Loyalty to Employer?
A. Making a copy of the marketing material of Farrell which highlights his performance.
B. Buying premises for his new firm.
C. Retaining the computer models for valuation, developed by him at Farrell.
Mock Test 1 – CFA Level I
2. Raj Kumar, CFA is explaining an investment strategy to his HNI client, who he feels is
suitable for the strategy. He states, “the central election results of India will be out in two
days. Previously in 2009, the markets gave a thumbs-up to the clear mandate of the people
& hit the upper circuit breakers for the next two days. Prior to that, in 2004, on the election-
results day, market recorded its biggest fall because of the broken mandate & an indication
of hung Parliament. I would recommend you to invest heavily in the index call & put options
because the markets are bound to move up or down drastically. The windfall profits on one
position will easily cover the cost of other position & leave you with a huge profit.”
Raj has most likely:
A. not violated any standard because he is suggesting an acceptable strategy & has
backed his recommendation with adequate evidence.
B. violated the Standard V (B) – Communication with clients.
C. violated the Standard II (B) – Market Manipulation.
3. Which of the following statements is least accurate regarding the Global Investment
Performance Standards (GIPS)?
A. Firms claiming compliance with GIPS are mandatorily required to verify their claim
from an independent third party.
B. All fee-paying, discretionary portfolios must be included in at least one composite.
C. Only full compliance can be made on a firm-wide basis.
4. Julia Stephens, CFA been recently hired as a portfolio manager by Camas Capital. In order to
impress her new bosses, she contacts few old clients known to her through her former
employer. She gives them a detailed performance presentation of Camas.
Which of the following statements is most accurate?
A. Julia can solicit these clients only after notifying her previous employer.
B. Julia is prohibited from soliciting these clients by CFA Institute’s Standards of
Professional Conduct.
C. Julia is not prohibited from soliciting these clients as long as she is relying on her
memory & publicly available contact information.
Mock Test 1 – CFA Level I
5. According to Standard III (A) – Loyalty, Prudence and Care, brokerage is an asset of the :
A. broking firm.
B. investment managing firm.
C. client.
6. Greg Murphy, CFA is suspicious of his colleague’s trading activities which he feels is illegal.
The colleague is a CFA Level III candidate. As per Standards of Professional Conduct, Murphy
should:
7. Van Der Saar, CFA is a small-cap portfolio manager. He has decided to buy a sizeable
position of Derek Inc., a regional retail company for his client. Derek is a listed company but
its trading volume in the market is very low. Van is worried that his order will pump up the
liquidity causing the prices to soar which will result in a higher cost-price per share. Hence,
Van executes a series of block trades to reduce the price impact.
According to CFA Institute Standards of Professional Misconduct:
8. Zack Carter, CFA manages an endowment fund. The fund as a significant stake in Bell Inc.’s
common stock. Zack also holds small amount of common stock of Bell in his personal
portfolio.
Zack is invited to a selective analyst conference where CFO of Bell will interact with selected
analysts. The CFO admits of some financial irregularities in the company committed by
middle-level management but the investigation is not yet completed. The matter is being
dealt with by the company behind closed doors. CFO says that there will be a press release
by the company regarding this matter within 2 days.
According to CFA Institute Standards of Professional Conduct, at present Zack can:
A. sell Bell’s stock from the endowment’s portfolio but not from his personal portfolio.
B. not sell Bell’s stock either from endowment’s portfolio or from his personal
portfolio.
C. sell Bell’s stock from the endowment’s portfolio & subsequently from his portfolio.
Mock Test 1 – CFA Level I
10. Sarah Fowler, CFA has been hired by Jensen Inc., to manage its pension fund. Sarah’s
fiduciary duty is owed to:
A. shareholders of Jensen.
B. management of Jensen.
C. pension plan participants & beneficiaries.
11. Kate Park, CFA is an equity research analyst with an asset management firm. She has
researched on the common stock of Lite Inc. & has decided to change her recommendation
from a buy to sell.
She mails this change in recommendation to all her clients. Next day a client calls her &
places a buy order for 1000 shares of Lite.
Kate should:
12. Samuel Elliot, CFA is working as an independent equity advisor for the last 5 years. He has
recently developed a spread-sheet model based on historical data of last 5 years to select
growth stocks. He back-tested the model by incorporating the data of the last 10 years. The
model displayed 70% accuracy in selecting growth stocks which outperformed the S&P 500
index over the last 10 years.
He decides to use the results in his promotional material. The advertisement states that
Samuel has consistently outperformed the S&P 500 with the help of self-generated
computer software which has high level of accuracy in selecting outperforming growth
stocks.
Samuel has most likely:
14. Graham Fleming, CFA is the personal wealth advisor of Warren Bush, President of London
Football Club. Warren, in an informal conversation with Graham’s assistant Hugh Damon,
CFA states that he has been suffering from cancer & will tender his resignation from the
President’s post. The assistant passes this information to Graham.
Hugh has most likely:
15. Paulo Anceloti is employed with Hampton Financial Advisors. He passed the CFA Level II
exam two years ago. But owing to his busy work schedule, he has not appeared for the
Level III exam. He thinks it would be wastage of money to register for the exam & then
appear it without adequate preparations. But he continuously updates his knowledge by
attending the seminars of local CFA societies. He is planning to get himself registered for the
Mock Test 1 – CFA Level I
next year’s exam & then take a 3-month leave prior to exam. He uses the designation of CFA
Level III candidate on his business cards.
Paulo has most likely:
16. Ed Heart was very nervous before the CFA Level II exam. His demanding work schedule did
not allow him to study properly for the exam. He noted down few formulae on a piece of
paper & hid it under his socks.
After entering the examination room, he does not risk pulling the paper out of his socks due
to the intense vigilance of the exam proctors. But he managed to glance the answer sheet
of the person sitting ahead of him.
Ed has most likely:
A. violated Standard VII (A) – Conduct as Members & Candidates in the CFA Program
for taking notes into the examination room & for glancing the answer sheet of
another person.
B. not violated any standard because he did not refer the notes during the exam &
glancing was accidental.
C. Violated Standard VII (A) – Conduct as Members & Candidates in the CFA Program
for glancing the answer sheet of another person but not for taking notes into the
examination room since he did not refer the notes eventually.
18. Alfred Cook, CFA is a citizen of Zambia but resides in South Africa.
It is not illegal to trade on material non-public information in Zambia.
In South Africa, it is permissible to allocate some portion of over-subscribed IPO to your
own account before allocating it to your clients.
Which of the following statement is most accurate?
A. Alfred can trade on material non-public information in Zambia & he can allocate
some portion of over-subscribed IPO to his own account before allocating it to his
clients in South Africa.
B. Alfred can allocate some portion of over-subscribed IPO to his own account before
allocating it to his clients in South Africa but he cannot trade on material non-public
information in Zambia.
C. Alfred can neither trade on material non-public information in Zambia & nor can he
allocate some portion of over-subscribed IPO to his own account before allocating it
to his clients in South Africa.
QUANTITATIVE METHODS
19. Following is the table about citizens of a town based on whether they are males or females
& whether they are married or single. The probability of being either a female or a single
person is closest to:
Married Single Total
Male 200,000 425,000 625,000
Female 200,000 375,000 575,000
Total 400,000 800,000 1,200,000
A. 32%
B. 73%
C. 83%
20. Albert purchased 1 share each of 60% of the companies in the S&P 500 index, while Pinto
purchased 1 share each of the remaining 40%. 25% of John’s shares are of companies based
in New York, while 20% of Pinto’s shares are of companies based in New York. If a randomly
selected share is of a company based in New York, what is the probability Albert selected it?
A. 60%
B. 65%
C. 15%
Mock Test 1 – CFA Level I
21. An investor is considering investing in infrastructure sector of the stock index. He wants to
invest in 6 stocks from the sector which comprises of 20 stocks. How many 6-stock
infrastructure portfolios can be made if the order in which he buys the stock is not
important?
A. 542,640
B. 38,760
C. 42,530
23. A company is considering taking up a new project. The average NPV of the project is
$250,000 & standard deviation of NPV is $200,000. What is the probability that the IRR of
the project will be greater than the discounting rate used to discount the cash flows?
A. 89.44%
B. 80.00%
C. 55.55%
24. Which of the following statements regarding Monte Carlo simulation is least accurate?
A. It is very complex.
B. The results are no better than the assumptions.
C. It is a very analytical method.
25. The average return of S&P 500 is 11.4% & the standard deviation of returns is 15.5%. If
returns are approximately normal, 95% confidence interval for the index next year is closest
to?
A. -14% to 37%
B. -19% to 42%
C. -29% to 51%
Mock Test 1 – CFA Level I
26. Portfolio X has an average return of 10.5% & a standard deviation of 12%.
Portfolio Y has an average return of 15.8% & a standard deviation of 17%.
Portfolio Z has an average return of 8% & a standard deviation of 9%.
The investor wants to select a portfolio which will minimize the probability of losing money.
Which portfolio should investor select?
A. Portfolio X
B. Portfolio Y
C. Portfolio Z
A. Consistency
B. Efficiency
C. Unbiasedness
28. Which of the following statements regarding Central Limit Theorem is least accurate?
29. A value of 1.2 in the short-term Trading Index most likely indicates that:
30. Charles Harper, CFA is analysing the markets of developing countries. In order to test if
Indian stock market is more volatile than Chinese stock market, he observes the levels of
their market indices to a construct a sample of the two indices. The appropriate test
statistic to carry out the test is:
A. T-test.
B. Chi-square test.
C. F-test.
Mock Test 1 – CFA Level I
31. When sampling from a non-normal distribution with known variance, which statistic should
be used if the sample size is large & if the respective sample size is small?
A. z-statistic; t-statistic
A. z-statistic; not available
B. t-statistic; z-statistic
ECONOMICS
33. Suppose two countries A and B have the following cost of production for two goods:
A. Since, country B has absolute advantage in production of both the products, it would
not benefit from trade with A.
B. Since, country A has a comparative advantage in the production of X, it would export X
to country B.
C. Since, country B has a comparative advantage in the production of X, it would export X
to country A.
34. The money supply curve on a graph with interest rate on the Y-axis & quantity of real
money on the X-axis, is :
35. Which of the following situation will decrease the aggregate demand of a country?
36. When potential real GDP is less than actual real GDP, the economy is facing
A. Inflation.
B. Recession.
C. Unemployment.
37. Which school of economic thought believed that shifts in aggregate demand due to changes
in expectations are the primary cause of business cycles?
A. A: Classical.
B. B: Keynesian.
C. C: Monetarist.
39. If a country depreciates its home currency with respect to US dollars, what is the most
likely immediate impact on the net exports?
A. Net exports would increase
B. Net exports would decrease
C. Net exports would not change
Mock Test 1 – CFA Level I
40. Given the market share of the leading firms in the textile industry of US, compute the 4 firm
concentration ratio and the 3 firm HHI.
A. 46% 0.326
B. 33.3% 141.3
C. 65% 0.2306
43. Which of the following set of actions by the government will result in maximum increase of
the aggregate demand?
44. Which one of the following is most likely to lose if there is an unanticipated increase in
inflation in the economy?
A. $20,000
B. $25,000
C. $10,000
46. Which of the following statement about intangible asset is least accurate?
A. considered as a liability.
B. ignored.
C. added to equity.
48. Arsenal Inc. has machinery with a tax base of $1.2 million & a carrying value of $1 million.
Arsenal also has a tax-loss carry forward of $0.8 million which will certainly be utilized after
two years.
The current tax rate applicable to Arsenal is 30% which is expected to decrease to 25%.
What is the net effect of the change in tax rate on the income statement?
49. Select the best alternative which describes the effect of a valuation allowance. A valuation
allowance :
50. Liverpool Inc. has issued 8%, $2.5 million bonds at par with issuance costs of $100,000. If
Liverpool is preparing its financial statements under US GAAP, what will be the effects of
this issue on the financial statements of Liverpool Inc.?
52. Totten ham Inc. issued $2,000,000 face-value 2-year zero coupon bonds on 31st December
2010 to yield 10%. In 2011, Totten ham recorded an interest expense of $165,289. In 2012,
Totten ham recorded an interest expense of $181,818 & redeemed the bonds in full
amount. On the basis of these transactions only, Totten ham’s cash flow statement would
show Cash Flow from Operations of:
53. Loss arising due to changes in assumptions about the retirement ages or the rate of salary
growth with respect to the pension expense is known as :
A. Service cost.
B. Prior service cost.
C. Actuarial Loss.
A. Employees
B. Employer
C. Trustee
55. Which one of the following is least likely a criterion under US GAAP for classifying a lease as
a finance lease?
A. The lessee has an option to purchase the asset for its fair value at the termination of
the lease.
B. The present value of the minimum lease payments is 90% or more of the fair value
of the leased asset.
C. The lease term is 75% or more of the estimated life of the leased asset.
56. Bradford Inc. and Watford Inc. are completely identical except that Bradford uses finance
leases & Watford uses operating leases. Bradford’s debt-to-equity ratio & current ratio
relative to Watford would be:
Select the best alternative regarding the correctness of the above two statements.
58. Duckworth Inc. follows LIFO method. Following is the data regarding its inventory & COGS:
Calculate the inventory as on 31st December 2011 & COGS for the year 2011 under FIFO
method.
Inventory COGS
A. $142,000 $753,000
B. $348,000 $835,000
C. $348,000 $711,000
59. Which of the following statement regarding treatment of extra-ordinary items is most
accurate?
60. Portsmouth Inc. received interest of $60,000 on tax-exempt government bonds. The tax
rate applicable to Portsmouth is 30%.
What is the effect of this difference between taxable income & pre-tax income?
61. Everton Inc. has 2,500,000 common shares outstanding. There are 200,000 warrants
outstanding to purchase the stock at $50 & there are 150,000 stock options outstanding to
purchase the stock at $70. The average market price of the stock over the year was $60 &
the current market price is $80.
What is the number of shares used to calculate the diluted EPS?
A. 2,533,333
B. 2,593,750
C. 2,508,333
62. The management of Golden Textile Inc. is negotiating terms of a new contract with its
labour union. Which of the following would least likely indicate a manipulation by the
management to improve its bargaining position?
63. Burke Inc. is in the alkaline chemical industry, which has an average receivables turnover
ratio of 22 times. If Burke’s receivables turnover is more than that of the industry, Burke’s
average collection period is most likely
A. 20 days
B. 14 days
C. 18 days
64. Aston Inc. &Fulham Inc. are companies on an expansion spree. They are identical in all
aspects except that Aston Inc. capitalizes some costs that Fulham Inc. expenses. As
compared to Aston, Fulham will most likely show
65. Bolton Inc. shows dividends paid & interest received under cash flow from operations. This
treatment is acceptable under
Calculate Stokes’ rent & wages expense for the year ended 31st December, 2011.
A: $245,000 $168,000
B: $275,000 $207,000
C: $215,000 $147,000
67. The ratio of operating cash flow to net income would least likely be an accounting red flag
when it is:
A. highly variable
B. less than one
C. declining over time.
68. Wigan Inc. has a long-term ‘take or pay’ commitment with its supplier. For analytical
purposes, an analyst should
A. add the present value of the minimum future commitment to the company’s
liabilities only.
B. subtract the present value of the minimum future commitment to the company’s
assets only.
C. add the present value of the minimum future commitment to the assets & liabilities
of the company.
Mock Test 1 – CFA Level I
CORPORATE FINANCE
71. Which of the following types of companies are most likely to use pay-back period method to
evaluate projects?
Year 0 - $750,000
Year 1 $200,000
Year 2 $225,000
Year 3 $250,000
Year 4 $300,000
Year 5 $400,000
The required return is 13%. Calculate the project’s discounted pay-back period.
Mock Test 1 – CFA Level I
A. 4.04 years
B. 4.18 years
C. 4.82 years
73. What will be the effect on WACC of a company having equal amounts of equity & debt, if
the corporate tax of the company increases?
A. Increase
B. Decrease
C. Insufficient information to ascertain
74. Elite Inc. has 8%, $1million bond outstanding (annual coupon).The par value of one bond is
$100 & the bonds will mature in 5 years. The bonds are trading at $98.5 in the open market.
Elite’s marginal tax rate is 30%. Using bond-yield plus method, calculate Elite’s cost of
equity assuming a risk premium of 5%
A. 13.38%
B. 10.87%
C. 10.60%
A. include the cost of market research but ignore the effect on soda sales.
B. exclude the cost of market research but consider the effect on soda sales.
C. include the cost of market research & the effect on soda sales.
76. Jefferson Inc. is planning to start a new project in its defunct textile mill. However there is
divergence of opinion in the management regarding the project. Some executives are of the
opinion that that the defunct mill should be sold instead of starting a project. However in-
house research was conducted for the feasibility of the project & it produced the following
estimates:
The project would require an outlay of $600,000, the amount being paid one year from
now. Thereafter, the project will generate cash inflows of $250,000 annually over
Mock Test 1 – CFA Level I
subsequent 8 years. It will then cost $200,000 to shut the project over the following
year. Assume all cash flows occur at the end of the year.
What should the minimum price be set for the mill if the company decides against the
commencement of project? The required rate of return is 15%
A. $404,329
B. $464,978
C. $396,913
77. The Board of New Age Inc. is planning to consider repurchasing (buy-back) $1,000,000
worth of common stock. The Board is planning to repurchase the shares at the prevailing
market price. After much deliberation, the Board has decided to borrow the funds for the
repurchase. Following is the information regarding the buy-back:
Prevailing price = $25
Number of shares outstanding before buy-back = 1,040,000
EPS prior to buy-back = $1.5 per share
After-tax cost of borrowing = 6%
What will be the EPS of New Age after the proposed buy-back?
A. $1.75
B. $1.25
C. $1.50
EQUITY INVESTMENTS
79. Karthik, CFA wants to compare other Asian equity funds with Indian stock indices. He selects
a sample of funds that have minimum 10-year performance history. On the basis of the
returns of these funds, Karthik reaches a conclusion that other Asian equity funds have
Mock Test 1 – CFA Level I
consistently outperformed the Indian stock indices over the 10-year period. The results of
Karthik’s test are most likely subject to :
A. Sample selection bias
B. Survivorship bias
C. Small sample bias
A. Company’s financials
B. Industry’s prospects
C. Economy’s projected performance
81. Holding other things constant, a company’s earnings multiplier would increase if
What is the equity value of East American Hotel based on average EV multiple?
A. $76 million
B. $78 million
C. $80 million
83. The yield on a company’s 8% preferred stock with par value of $75 is 10%. What is the
intrinsic value of preferred stock?
A. $93.75
B. $60.00
C. $73.50
Mock Test 1 – CFA Level I
Calculate the price of a share of Emily Inc. using constant growth, dividend discount
model.
A. $15.56
B. $23.33
C. $35.00
85. Which form of Efficient Market Hypothesis implies that abnormal returns can be earned on
an average by using technical analysis?
A. Weak Form
B. Semi-strong
C. None
87. Which of the following index will exhibit a downward bias in the event of stock splits by the
companies in the index?
A. Value-weighted index
B. Price-weighted index
C. Equal-weighted index
Mock Test 1 – CFA Level I
89. Which class of shareholders has a priority in receiving their stipulated dividends, if in
arrears, before any dividends are paid to common equity shareholders?
A. Returns of defensive stocks have high correlation with returns of the market.
B. Cyclical companies often have high business or financial risk.
C. Value stocks are often characterized by low P/E ratios.
DERIVATIVES
91. Which of the following pair of statements about call & put options at expiration is most
accurate?
CALL PUT
A: The maximum loss to the buyer is The maximum gain to the buyer is
premium. unlimited.
The maximum gain to the buyer is The maximum loss to the writer
B:
unlimited. is(exercise price – premium)
The maximum loss to the writer is The maximum gain to the writer is
C: (exercise price – premium) premium.
92. The current market price of a stock is $28. The price of 3-month put option with an exercise
price of $25 on that stock is $1.25. Calculate the price of 3-month call option with an
exercise price of $25 on that stock. The risk-free rate is 5%.
A. $2.05
B. $4.55
C. $3.91
Mock Test 1 – CFA Level I
93. Shin & Chan are discussing various factors which affect the option values.
Shin says an increase in risk-free rate of interest decreases the price of call & put option. He
adds that increase in exercise price increases the price of put option but reduces the price
of call option.
Chan argues that increase in risk-free rate of interest increases the price of call option but
decreases the price of put option. He also adds that increase in volatility of the underlying
asset decreases the price of call & put option.
Do you agree with them?
A. Notional Principal is not swapped at initiation & termination; Interest payments are
netted at each settlement dates.
B. Notional Principal is swapped at initiation & termination; Interest payments are
netted at each settlement dates.
C. Notional Principal is swapped at initiation & termination; Full interest payments are
exchanged at each settlement date.
95. A bank has entered a $1 million, 2-year semi-annual plain-vanilla interest-rate swap as the
fixed rate payer. The fixed rate is 5% & the floating rate is 180-day LIBOR + 100 basis points.
Current LIBOR is 3.5%. Following is the data regarding 180-day LIBOR.
After 6 months: 3.8%
After 12 months: 4.2%
After 18 months: 4.4%
After 24 months: 4.5%
On the day of swap termination the bank will receive which of the following:
A. $2500
B. $4000
C. $2000
Mock Test 1 – CFA Level I
96. You purchase a share for $50 & simultaneously write a call on it with an exercise price for
$55 for a premium $6. What is the maximum profit you can earn if you hold the position till
expiration?
A. Unlimited
B. $11
C. $6
97. A coupon bond pays annual interest, has a par value of $1,000, matures in 4 years, has a
coupon rate of $100, and a yield to maturity of 12%. The current yield on this bond is:
A. 11.25%
B. 10.65%
C. 9.50%
98. Suppose that the six-month spot rate is equal to 7% and the two-year spot rate is 6%. The
one-and a half-year forward rate starting six months from now has to:
A. be less than 6%
B. lie between 6% and 7%
C. be more than 6%
100. Which of the following is least likely an example of external credit enhancement?
A. Payment of taxes
B. No additional debt
C. Maintenance of collateral
Mock Test 1 – CFA Level I
102. Consider a floating rate issue that has a coupon rate that is reset on January 1 of each
year. The coupon rate is defined as one-year London Interbank Offered Rate (LIBOR) + 125
basis points and the coupons are paid semi-annually. If the one-year LIBOR is 6.5% on
January 1, which of the following is the semi-annual coupon payment received by the
holder of the issue in that year?
A. 3.875%
B. 3.250%
C. 7.750%
103. A 20-year, $1,000 face value, 10% semi-annual coupon bond is selling for $875. The
bond's yield to maturity is:
A. 5.81%
B. 11.43%
C. 11.62%
104. Which of the following is a difference between an on-the-run and an off-the-run issue? An
on-the-run issue:
105. An investor plans to buy a 10-year, $1,000 par value, 8% semiannual coupon bond. If the
yield to maturity of the bond is 9%, the bond’s value is:
A. $1,067.95.
B. $934.96.
C. $935.82.
106. Which of the following statements regarding zero-coupon bonds and spot interest rates is
correct?
A. If the yield to maturity on a 2-year zero coupon bond is 6%, then the 2-year spot
rate is 3%.
B. Spot interest rates will never vary across the term structure.
Mock Test 1 – CFA Level I
107. Which of the following statements with regard to floating rate notes that have caps and
floors is most accurate?
A. A floor is a disadvantage to both the issuer and the bondholder while a cap is an
advantage to both the issuer and the bondholder.
B. A cap is an advantage to the bondholder while a floor is an advantage to the
issuer.
C. A cap is a disadvantage to the bondholder while a floor is a disadvantage to the
issuer.
108. What is the value of a 10-year, semi-annual, 8% coupon bond with a $1,000 face value if
similar bonds are now yielding 10%?
A. $875.38.
B. $1,373.87.
C. $1,000.00.
109. A bond is currently trading at $98.4. It is estimated that the price will fall to $96.9 if yield
rises 25 basis points & the price will increase to 100.2 if the yield falls 25 basis points.
Based on these estimates, the duration of the bond is
A. 3.87
B. 6.70
C. 13.40
111. A PE fund is planning to invest $1,500,000 in a new project that will pay $8,000,000 at the
end of four years, if successful. The required rate of return is 20%. Following are
estimated probabilities of failure of the project over the next four years. Each year’s
Mock Test 1 – CFA Level I
probability represents the probability of failure in that year, given the project survived till
that year.
Year Probability of failure
1 25%
2 25%
3 20%
4 20%
A. $969,136
B. $234,489
C. -$111,111
112. The main advantage of Fund of funds over a single hedge funds is
A. More Diversification
B. Higher Returns
C. Lower Management Fees
A. A company which has completed the development of product & is seeking funds
to translate it to commercial production
B. A company preparing for an IPO
C. A company that has started producing & selling goods is seeking funds for
further expansion.
114. Which of the following condition will result in a negative roll yield?
A. Backwardation
B. Future prices are higher than spot prices
C. Market is dominated by short hedgers.
Mock Test 1 – CFA Level I
PORTFOLIO MANAGEMENT
115. You are required to construct a portfolio comprising the market portfolio & risk-free
asset. The expected return of your portfolio should be 15%. Risk-free rate is 5% & the
expected market return is 20%. Standard deviation of the returns of the market is 18%.
The standard deviation of the portfolio is closest to
A. 18%
B. 12%
C. cannot be determined with the information provided.
The expected return on the market is 10% & the risk-free rate is 5%. Which of the stock
will plot above Security Market Line (SML)?
A. XYZ
B. ABC
C. LMN
117. Which of the following is most likely to be considered as a constraint in preparing the
investment policy statement?
A. Return Objective
B. Risk Tolerance
C. Liquidity Requirements
ii) The two types of risk are systematic risk & market risk.
A. Unsystematic Risk
B. Systematic Risk
C. Total Risk