-
Based on put-call parity for European options, a synthetic put is most likely equivalent to a:
-
If the implied volatility for options on a broad-based equity market index goes up, then it is most likely that:
-
Which statement best describes option price sensitivities? The value of a:
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A European company issues a five-year euro-denominated bond with a face value of EUR50,000,000. The company then enters into a five-year currency swap with a bank to convert the EUR exposure into USD exposure. The notional principals of the swap are EUR50,000,000 and USD70,000,000. The European company pays a fixed rate of 5%, and the bank pays a fixed rate of 4.5%. Payments are made semiannually on a basis of 30 days per month and 360 days per year. The payment from the bank to the company at the end of Year 4 is closest to:
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A portfolio manager enters into an equity swap with a swap dealer. The portfolio manager agrees to pay the return on the Value Index and receive the return on the Growth Index. The swap's notional principal is $50 million, and the payments will be made semi-annually. The levels of the equity indices are as follows:
The net amountowedtothe portfolio manager aftersix monthsis closest to:
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An industry experiencing slow growth, high prices, and volumes insufficient to achieve economies of scale is most likely in the:
-
Which of the following statements concerning different valuation approaches is most accurate?
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According to behavioral finance, observed overreaction in securities markets most likely occurs because of:
-
A corporate manager pursuing a low-cost strategy will most likely:
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A trader buys 500 shares of a stock on margin at $36 a share using an initial leverage ratio of 1.66. The maintenance margin requirement for the position is 30%. The stock price at which the margin call will occur is closest to:
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An equity analyst follows two industries with the following characteristics:
Industry 1 :
A few companies with proprietary technologies, products with unique features, high switching costs, and minimal regulatory influences.
Industrv 2:
A few companies producing relatively similar products, sales varying with disposable income and employment levels, high capital costs and investment in physical plants, rapid shifts in market shares of competing firms, and minimal regulatory influences.
Based on the above information, the analyst will most appropriately conclude that, compared with the firms in Industry 2, those in Industry 1 would potentially have:
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A trader seeking to sell a very large block of stock for her client will most likely execute the trade in a(n):
-
The Gordon growth model is most appropriate for valuing the common stock of a dividend paying company that is:
-
Which of the following statements is least accurate? A firm's free cash flow to equity (FCFE):
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An observation that stocks with above average price-to-earnings ratios have consistently underperformed those with below average price-to-earnings ratios least likely contradicts which form of market efficiency?
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A market index contains the following two securities:
The total return on an equal-weighted basis is closest to:
-
An investor gathers the following data to estimate the intrinsic value of a company's stock using the justified forward price-to-earnings ratio (P/E) approach.
The intrinsic value per share is closest to:
-
Which of the following is most likely a limitation of the yield to maturity measure?
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Assume the following annual forward rates were calculated from the yield curve.
The four-year spot rate is closest to:
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Centro Corp. recently issued a floating-rate note (FRN) that includes a feature that prevents its coupon rate from falling below a prespecified minimum rate. This feature in an FRN is most likely referred to as a:
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A portfolio manager holds the following three bonds, which are option free and have the indicated durations.
The portfolio's duration is closest to:
-
For bonds that are otherwise identical, the one exhibiting the highest level of positive convexity is most likely the one that is:
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A BBB rated corporation wishes to issue debt to finance its operations at the lowest cost possible. If it decides to sell a pool of receivables into a special purpose vehicle (SPV), its primary motivation is most likely to:
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The following table provides information about a portfolio of three bonds.
Based on this information, the duration of the portfolio is closest to:
-
Holding all other characteristics the same, the bond exposed to the greatest level of reinvestment risk is most likely the one selling at:
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What type of risk most likely affects an investor's ability to buy and sell bonds in the desired amounts and at the desired time?
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A bond is currently trading for $109.246 per $100 of par value. If the bond's yield to maturity falls by 25 bps, the bond's full price is expected to rise to $110.481. If the bond's yield to maturity rises by 25 bps, the bond's full price is expected to fall to $108.029. The bond's approximate convexity is closest to:
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Using the following US Treasury forward rates, the value of 2?-year $100 par value Treasury bond with a 5% coupon rate is closest to:
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Which of the following is least likely a component of the "Four Cs of Credit Analysis" framework?
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Consider a $100 par value bond with a 7% coupon paid annually and 5 years to maturity. At a discount rate of 6.5%, the value of the bond today is $102.08. One day later, the discount rate increases to 7.5%. Assuming the discount rate remains at 7.5% over the remaining life of the bond, what is most likely to occur to the price of the bond between today and maturity?
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Using the following US Treasury spot rates, the arbitrage-free value of a two-year $100 par value Treasury bond with a 6% coupon rate is closest to:
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Which of the following is least likely a part of the execution step of the portfolio management process?
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If Investor A has a lower risk aversion coefficient than Investor B, will Investor B's optimal portfolio most likely have a higher expected return on the capital allocation line?
-
A portfolio contains equal weights of two securities having the same standard deviation. If the correlation between the returns of the two securities was to decrease, the portfolio risk would most likely:
-
In general, which of the following institutions will most likely have a high need for liquidity and a short investment time horizon?
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The following table shows data for the stock of JKU and a market index.
Based on the capital asset pricing model (CAPM), JKU is most likely:
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Carlos Cruz, CFA, is one of two founders of an equity hedge fund. Cruz manages the fund's assets, and the other co-founder, Brian Burkeman, CFA, is responsible for fund sales and marketing. Cruz notices the most recent sales material used by Burkeman indicates assets under management are listed at a higher value than the current market value. Burkeman justifies the discrepancy by stating recent market declines account for the difference. In order to comply with the CFA Institute Standards of Professional Conduct, Cruz should least likely take which of the following actions?
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Linda Chin, CFA, is a member of a political group advocating less governmental regulation in all aspects of life. She works in a country where local securities laws are minimal and insider trading is not prohibited. Chin's politics are reflected in her investment strategy, where she follows her country's mandatory legal and regulatory requirements. Which of the following actions by Chin is most consistent with the CFA Institute Standards of Professional Conduct?
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Wouter Duyck, CFA, is the sole proprietor of an investment advisory firm serving several hundred middle-class retail clients. Duyck claims to be different from his competitors because he conducts research himself. He discloses that to simplify the management of all these accounts, he has created a recommended list of stocks, from which he selects investments for all of his clients based on their suitability. Duyck's recommended list of stocks is obtained from his primary broker, who has completed due diligence on each stock. Duyck's recommended list least likely violates which of the following CFA Institute Standards of Professional Conduct?
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Lisa Hajak, CFA, specialized in research on real estate companies at Cornerstone Country Bank for 20 years. Hajak recently started her own investment research firm, Hajak Investment Advisory. One of her former clients at Cornerstone asks Hajak to update a research report she wrote on a real estate company when she was at Cornerstone. Hajak updates the report, which she had copied to her personal computer without the bank's knowledge, and replaces references to the bank with her new firm, Hajak Investment Advisory. Hajak also incorporates the conclusions of a real estate study conducted by the Realtors Association that appeared in the Wall Street Journal. She cites the Journal as her source in her report. She provides the revised report free of charge along with a cover letter for the bank's client to become a client of her firm. Concerning the reissued research report, Hajak least likely violated the CFA Institute Standards of Professional Conduct because she:
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Tonya Tucker, CFA, is a financial analyst at Bowron Consolidated. Bowron has numerous subsidiaries and is actively involved in mergers and acquisitions to expand its businesses. Tucker analyzes a number of companies, including Hanchin Corporation. When Tucker speaks with the CEO of Bowron, she indicates many of the companies she has looked at would be attractive acquisition targets for Bowron. After her discussion with the CEO, Tucker purchases 100,000 shares of Hanchin Corporation at $200 per share. Bowron does not have any pre-clearance procedures, so the next time she meets with the CEO, Tucker mentions she owns shares of Hanchin. The CEO thanks her for this information but does not ask for any details. Two weeks later, Tucker sees a company-wide email from the CEO announcing Bowron's acquisition of Hanchin for $250 a share. In regard to her purchase of Hanchin stock, Tucker leastlikelyviolated the CFA Institute Standards of Professional Conduct concerning:
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When a client asks her how she makes investment decisions, Petra Vogler, CFA, tells the client she uses mosaic theory. According to Vogler, the theory involves analyzing public and nonmaterial nonpublic information, including the evaluation of statements made to her by company insiders in one-on-one meetings where management discusses new earnings projections not known to the public. Vogler also gathers general industry information from industry experts she has contacted. Vogler most likelyviolates the CFA Institute Standards of Professional Conduct because of her use of:
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Lin Liang, CFA, is an investment manager and an auto industry expert. Last month, Liang sent securities regulators an anonymous letter outlining various accounting irregularities at Road Rubber Company. Shortly before he sent the letter to the regulators, Liang shorted Road stock for his clients. Once the regulators opened an investigation, which Liang learned about from his sources inside the company, Liang leaked this information to multiple sources in the media.
When news of the investigation became public, the share price of Road immediately dropped30%. Liang then covered the short positions and made $5 per share for his clients. Liang least likelyviolated which of the CFA Institute Standards of Professional Conduct?
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Sanjay Gupta, CFA, is interviewed by the First Faithful Church to manage the church's voluntary retirement plan's equity portfolio based upon his superior return history. Each church staff member chooses whether to opt in or out of the retirement plan according to his or her own investment objectives. The plan trustees tell Gupta that stocks of companies involved in the sale of alcohol, tobacco, gambling, or firearms are not acceptable investments given the objectives and constraints of the portfolio. Gupta tells the trustees he cannot reasonably execute his strategy with these restrictions and that all his other accounts hold shares of companies involved in these businesses because he believes they have the highest alpha. By agreeing to manage the account according to the Trustees' wishes, does Gupta violate the CFA Institute Standards of Professional Conduct?
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Jorge Lopez, CFA, is responsible for proxy voting on behalf of his bank's asset management clients. Lopez recently performed a cost-benefit analysis, showing that proxy-voting analysis might not benefit the bank's clients. As a result, Lopez immediately changes the proxy-voting policies and procedures without informing anyone else of the change. Lopez now votes client proxies on the side of management on all issues with the exception of major mergers where a significant impact on the stock price is expected. Lopez least likely violated the CFA Institute Standards of Professional in regard to:
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Tamlorn Mager, CFA, is an analyst at Pyallup Portfolio Management. CFA Institute recently notified Mager that his CFA Institute membership was suspended for a year because he violated the CFA Code of Ethics. A hearing panel also came to the same conclusion. Mager subsequently notified CFA Institute he does not accept the sanction, or the hearing panel's conclusion. Which of the following actions by Mager is most consistent with the CFA Institute Professional Conduct Program?
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Edo Ronde, CFA, an analyst for a hedge fund, One World Investments, is attending a key industry conference for the microelectronics industry. At lunch in a restaurant adjacent to the conference venue, Ronde sits next to a table of conference attendees and is able to read their nametags. Ronde realizes the group includes the president of a publicly traded company in the microelectronics industry, Fulda Manufacturing, a company Ronde follows. Ronde overhears the president complain about a production delay problem Fulda's factories are experiencing. The president mentions the delay will reduce Fulda earnings more than 20% during the next year if not solved. Ronde relays this information to the portfolio manager he reports to at One World explaining that in a recent research report he recommended Fulda as a buy. The manager asks Ronde to write up a negative report on Fulda so the fund can sell the stock. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, Ronde should least likely:
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Jennifer Ducumon, CFA, is a portfolio manager for high-net-worth individuals at Northeast Investment Bank. Northeast holds a large number of shares in Baby Skin Care Inc., a manufacturer of baby care products. Northeast obtained the Baby Skin Care shares when it underwrote the company's recent IPO. Ducumon has been asked by the investment-banking department to recommend Baby Skin Care to her clients, who currently do not hold any shares in their portfolios. Although Ducumon has a favorable opinion of Baby Skin Care, she does not consider the shares a buy at the IPO price nor at current price levels. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, the most appropriate action for Ducumon is to:
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Heidi Halvorson, CFA, is the chief investment officer for Tukwila Investors, an asset management firm specializing in fixed-income investments. Tukwila is in danger of losing one of its largest clients, Quinault Jewelers, which accounts for nearly one-third of its revenues. Quinault recently told Halverson that Tukwila would be fired unless the performance of Quinault's portfolio improves significantly. Shortly after this conversation, Halvorson purchases two corporate bonds she believes are suitable for any of her clients based upon third-party research from a reliable and diligent source. Immediately after the purchase, one bond increases significantly in price while the other bond declines significantly. At the end of the day, Halvorson allocates the profitable bond trade to Quinault and the other bond to two of her largest institutional accounts. Halvorson most likely violated the CFA Institute Standards of Professional in regard to:
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Randolf is single and willing to invest a portion of his assets very aggressively; Kitagawa wants to achieve a steady rate of return with low volatility so she can pay for her child's current college expenses. Amadon recommends investing 20% of both clients' portfolios in the stock of very low yielding small-cap companies. Amadon least likely violated the CFA Institute Code of Ethics and Standards of Professional Conduct in regard to his investment recommendations for:
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Thomas Turkman recently hired Georgia Viggen, CFA, as a portfolio manager for North South Bank. Although Viggen worked many years for a competitor, West Star Bank, the move was straightforward because she did not have a non-compete agreement with her previous employer. Once Viggen starts working for Turkman, the first thing she does is to bring a trading software package she developed and used at West Star to her new employer. Using public information, Viggen contacts all of her former clients to convince them to move with her to North South. Viggen also convinces one of the analysts she worked with at West Star to join her at her new employer. Viggen most likelyviolated the CFA Institute Code of Ethics and Standards of Professional Conduct concerning her actions involving:
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Suni Kioshi, CFA, is an analyst at Pacific Asset Management, where she covers small-capitalization companies. On her own time, Kioshi often speculates in low-price thinly traded stocks for her own account. Over the last three months, Kioshi has purchased 50,000 shares of Basic Biofuels Company, giving her a 5% ownership stake. A week after this purchase, Kioshi is asked to write a report on stocks in the biofuels industry, with a request to complete the report within two days. Kioshi wants to rate Basic as a "buy" in this report but is uncertain how to proceed. Concerning the research report, what action should Kioshi most likely take to prevent violating any of the CFA Institute Code of Ethics and Standards of Professional Conduct?
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Solomon Sulzberg, CFA, is a research analyst at Blue Water Management. Sulzberg's recommendations typically go through a number of internal reviews before they are published. In developing his recommendations, Sulzberg uses a model developed by a quantitative analyst within the firm. Sulzberg made some minor changes to the model but retained the primary framework. In his reports, Sulzberg attributes the model to both the quantitative analyst and himself. Before the internal reviews of his reports are completed, Sulzberg buys shares in one of the companies. After the internal review is complete, he fails to recommend the purchase of the stock to his clients and erases all of his research related to this company. Sulzberg least likely violated the CFA Institute Code of Ethics and Standards of Professional Conduct related to:
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Chris Rodriguez, CFA, is a portfolio manager at Nisqually Asset Management, which specializes in trading highly illiquid shares. Rodriguez has been using Hon Securities Brokers almost exclusively when making transactions for Nisqually clients, as well as for his own relatively small account.
Hon always executes Rodriguez's personal trades at a more preferential price than for Rodriguez's clients' accounts. This occurs regardless of whether or not Rodriguez personally trades before or after clients. Rodriguez should least likely do which of the following in order to comply with the CFA Institute Code of Ethics and Standards of Professional Conduct?
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A borrower is considering three competing mortgage loan offers from her bank, The amount borrowed on the mortgage is $100,000 with monthlv compounding,
The rate on the ARM resets at the end of Year 3. Assuming the ARM is reset at 5.500% (i.e., the remaining balance on the loan will now be repaid with 5.500% nominal annual interest), which of the three loans will have the smallest monthly payment after the rate reset at the end of Year 3?
-
A U.S. Treasury bill (T-bill) has 90 days to maturity and a bank discount yield of 3.25%. The effective annual yield (EAY) for the T-bill is closest to:
-
By definition, the probability of any event, E, is a number between:
-
A variable is normally distributed with a mean of 5.00 and a variance of 4.00. Calculate the probability of observing a value of negative 0.40 or less. That is, calculate P (Xi ≤ -0.40) given X is distributed as N(5,4). Use this excerpt from the cumulative distribution function for the standard normal random variable table to calculate your answer.
Cumulative Probabilities for a Standard Normal Distribution
P(Z ≤x) = N(x) for x ≥ 0 or P(Z ≤ z) = N(z) for z ≥ 0
The calculated value is closest to:
-
In setting the confidence interval for the population mean of a normal or approximately normal distribution and given that the sample size is small, Student's t-distribution is the preferred approach when the variance is:
-
A two-tailed test of the null hypothesis that the mean of a distribution is equal to 4.00 has a p-value of 0.0567. Using a 5% level of significance (i.e., α = 0.05), the best conclusion is to:
-
Using the above data, an analyst is trying to test the null hypothesis that the population variances are equal 
against the alternative hypothesis that the variances are not equal 
at the 5% level of significance. The table of the F-Distribution is provided below.
Table of the F-Distribution
Panel A: Critical values for right-hand tail areas equal to 0.05
Panel B: Critical values for right-hand tail areas equal to 0.025
Which of the following statements is most appropriate? The critical value is:
-
In Elliott Wave Theory, Wave 2 commonly exhibits a pattern best described as a(n):
-
An investor wants to maximize the possibility of earning at least 5% on her investments each year. Using Roy's safety-first criterion, which of the following portfolios is the most appropriate choice?
-
Which of the following is the least likely characteristic of the normal probability distribution. The normal probability distribution:
-
A technical analyst observes a head and shoulders pattern in a stock she has been following. She notes the following information:
Based on this information, her estimate of the price target is closest to:
-
The following table represents the history of an investment in a company:
The investor does not reinvest the dividends that he receives. Assuming no taxes on dividends, the time-weighted rate of return on this investment is closest to:
-
Which of the following most accurately describes a distribution that is more peaked than normal?
-
A fund manager would like to estimate the probability of a daily loss higher than 5% on the fund he manages. He decides to employ a method that uses the relative frequency of occurrence based on historical data. The resulting probability is best known as:
-
The market demand function for item X is a function of its price, household income, and the price of item Y.
Given the above elasticity coefficients for the two items, which of the following statements is most accurate?
-
The monthly demand curve for playing tennis at a particular club is given by the following equation: PTennis Match = 9 - 0.20 × QTennis Matrix. The club currently charges members $4.00 to play a match but is considering changing to a new flat-rate monthly membership fee for unlimited play. The most that the club will be able to charge for the flat-rate monthly membership is closest to:
-
With its existing production facilities, a monopolist firm can produce up to 100 units. It faces the following demand and cost schedules:
The optimal output level for this producer (in units) is closest to:
-
The following information applies to an economy:
The unemployment rate in the economy is closest to:
-
In an economy, consumption is 70% of pre-tax income and the average tax rate is 25% of total income. If planned government expenditures are expected to increase by S1.25 billion, the increase in total incomes and spending ($ in billions) is closest to:
-
An Australian firm purchased a patent for USD20,000 and machinery for USD21,500 from a U.S. firm when the exchange rates were as follows:
The impact of these transactions on the capital account of Australia (in AUD) is closest to:
-
Which of the following statements with respect to Giffen and Veblen goods is least accurate?
-
The following data apply to a country in its domestic currency units:
Using the expenditures approach, the country's gross domestic product (GDP) is closest to:
-
As a monetary policy tool, quantitative easing (QE) will most likely help revive an ailing economy in which of the following environments?
-
A firm in the market environment characterized by monopolistic competition will most likely:
-
A company entered into a three-year construction project with a total contract price (all figures in '000s) of $5,300 and expected costs of $4,400. The company recognizes revenue using the percentage of completion method. The data below relate to the contract.
The amount of revenue (in $'O00s) the company will recognize in Year 2 is closest to:
-
In the audit report, an additional paragraph that explains an exception to an accounting standard is best described as a(n):
-
Which of the following is least likely a characteristic of an effective financial reporting framework?
-
The following relates to a company's common ecluity over the course of the year:
If the company's net income for the year is $5,000,000, its diluted EPS is closest to:
-
An analyst has compiled the following information on a company:
The amount of dividends declared (￡ '000s) during the year is closest to:
-
A cell phone manufacturer has switched to high margin premium-priced products with the most innovative features as part of its product differentiation strategy. Which of the following other changes is most consistent with this strategy?
-
Which of the following is the most likely reason for an analyst to choose the direct method rather than the indirect method for analyzing a firm's operating cash flows?
-
In the current year, a company increased its deferred tax asset by $500,000. During the year, the company most likely:
-
A country implements policies that are expected to increase taxes by €100 million, increase government spending by €50 million, and reduce investments and private sector savings by €25 million each. As a result, the country's current account balance will most likely:
-
In early 2011, the British pound (GBP) to New Zealand dollar (NZD) spot exchange rate was 2.0979. LIBOR interest rates, quoted on a 360-day year basis, were 1.6025% for the British pound and 3.2875% for the New Zealand dollar. The 180-day forward points (scaled up by four decimal places) in G BP/NZD would be closest to:
-
The following selected balance sheet and ratio data are available for a company:
Which of the following ratios decreased between 2011 and 2012?
-
The following annual financial data are available for a company:
Interest expense for the year is closest to:
-
Financial ratios alone are least likely helpful to determine a company's:
-
A company manufactures aluminum cans for the beverage industry and prepares its financial statements in accordance with IFRS. During its latest full fiscal year, the company recorded the following data:
The total costs included in inventory (in €) for the year are closest to:
-
An accounting document that records transactions in the order in which they occur is best described as a:
-
Which of the following statements is most accurate with respect to financial reporting requirements?
-
Income statements for two companies (A and B) and the common-sized income statement for the industry are provided below:
The best conclusion an analyst can make is that:
-
The following information is from a company's accounting records:
The company's total comprehensive income (in € millions) is closest to:
-
Based on the above information about a company's trade receivables, the bad debt expense (in millions) for 2012 is closest to:
-
An analyst has gathered the following information about a company:
The cash flow debt coverage ratio for the year is closest to:
-
Which inventory method best matches the actual historical cost of the inventory sold with their physical flow if a company is using a perpetual inventory system?
-
On 1 January, a company, which prepares its financial statements according to IFRS, arranged financing for the construction of a new plant. The company:
·borrowed NZ$5,000,O00 at an interest rate of 8%,
·issued NZ$5,000,O00 of preferred shares with a cumulative dividend rate of 6%, and
·temporarily invested NZ$2,000,O00 of the loan proceeds for the first six months of construction and earned 7% on that amount.
The amount of financing costs to be capitalized (NZ$) to the cost of the plant in the first year is closest to:
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A company purchased equipment in 2010 for ￡25,000. The year-end values of the equipment for accounting purposes and tax purposes are as follows:
Which of the following statements best describes the effect of the change in the tax rate on the company's 2011 financial statements? The deferred tax liability:
-
A company took the following actions related to $5 million of lO-year bonds with a coupon rate of 8% payable semi-annually on 30 June and 31 December:
-
On a cash flow statement prepared using the indirect method, which of the following would most likely increase the cash from investing activities?
-
An analyst has gathered the followin information about a company's capital assets:
As of the end of 2012, the expected remaining life of the assets, in years, is closest to:
-
Given the following information about a firm:
·debt-to-equity ratio of 50%
·tax rate of 40%
·cost of debt of 8%
·cost of equity of 13%,
the firm's weighted average cost of capital (WACC) is closest to:
-
The unit contribution margin for a product is $20. A firm's fixed costs of production of up to 300,000 units is $500,000. The degree of operating leverage (DOL) is most likely the lowest at which of the following production levels (in units)?
-
Which of the following share repurchase methods will most likely take the longest amount of time to execute?
-
Assume a 365-day year and the following information for a company:
The firm's days in payables for the current year is closest to:
-
A project has the following cash flows (￡):
Assuming a discount rate of 11% annually, the discounted payback period (in years) is closest to:
-
Based on best practices in corporate governance procedures, it is most appropriate for a company's compensation committee to:
-
Which action is most likely considered a secondary source of liquidity?
-
A company has a fixed $1,100 capital budget and has the opportunity to invest in the four independent projects below.
The combination of projects that provides the best choice is:
-
Which of the following statements is the most appropriate treatment of floatation costs for capital budgeting purposes? Floatation costs should be:
-
A firm is uncertain about both the number of units the market will demand and the price it will receive for them. This type of risk is best described as:
-
Which of the following statements is most accurate?
-
An investor who wants to estimate the enterprise value multiple (EV/EBITDA) of a company has gathered the following data:
The company's EV/EBITDA multiple is closest to:
-
An investor gathers the following data to estimate the intrinsic value of a company's stock using the justified forward P/E approach.
The intrinsic value per share is closest to:
-
A company's series B,8% preferred stock has the following features:
·A par value of $50 and pays quarterly dividends.
·Its current market value is $35.
·The shares are retractable (at par) with the retraction date set for three years from today.
·Similarly rated preferred issues have an estimated nominal required rate of return of 12%.
·Analysts expect a sustainable growth rate of 4% for the company's earnings.
The intrinsic value estimate of a share of this preferred issue is closest to:
-
Which of the following inferences concerning market efficiency is most accurate?
-
Which of the following multiples is most useful when comparing companies with significant differences in capital structure?
-
An investor buys stock on margin and holds the position for exactly one year.
Assuming that the interest on the loan and the dividend are both paid at the end of the year, the price at which the investor sold the stock is closest to:
-
A market index only contains the following three securities:
Which approach to indexing will most likely give Security X a weight of 18%?
-
Which of the following is most accurate concerning key characteristics of different types of preference shares?
-
An equity portfolio manager is evaluating her sector allocation strategy for the upcoming year. She expects global economic slowdown for the next two years. Further, she believes that companies will be facing diminishing growth rates with respect to revenues and profits. Owing to these beliefs, the portfolio manager will most likely:
-
A company has issued non-callable, non-convertible preferred stock with the following features:
·Par value per share $10
·Annual dividend per share $2
·Maturity 15 years
If an investor's required rate of return is 8% and the current market price per share of the preferred stock is $25, the most likely conclusion is that the preferred stock is:
-
Which of the following statements is least accurate? A firm's free-cash-flow-to-equity (FCFE):
-
Which of the following statements best describes an advantage of a forward contract over a futures contract? A forward contract:
-
A forward rate agreement (FRA) that expires in 180 days and is based on 90-day LIBOR is quoted at 2.2%. At expiration of the FRA,90-day LIBOR is 2.8%. For a notional principal of USDI,000,000, the payoff of this FRA is closest to:
-
Consider a U.S. Treasury bond futures contract where the hypothetical deliverable bond has a coupon of 3.0%. At expiration of the futures contract, the short chooses to deliver a bond with a coupon of 3.8%. The conversion factor of this bond is most likely:
-
An investor purchases a put option on AAA shares that has a strike price of €50 and expires in three months. One month later, AAA shares are trading at €54. At that time, the put most likely has:
-
The tenor of a swap is best described as the:
-
An investor purchases 100 shares of common stock at €50 each and simultaneously sells call options on 100 shares of the stock with a strike price of €55 at a premium of €1 per option. At the expiration date of the options, the share price is €58. The investor's profit is closest to:
-
An investor purchases the bonds of JLD Corp., which pay an annual coupon of 10% and mature in 10 years, at an annual yield to maturity of 12%. The bonds will most likely be selling at:
-
A portfolio manager holds the following three bonds, which are option free and have the indicated durations.
The portfolio's duration is closest to:
-
For a collateralized mortgage obligation (CMO), the first tranche of bonds most likely has the:
-
A bond with a par value of $100 matures in 10 years with a coupon of 4.5%, paid semiannually; is priced to yield 5.83%; and has a modified duration of 7.81. If the yield of the bond declines by 0.25%, the approximate percentage price change for the bond is closest to:
-
When are credit spreads most likely to narrow? During:
-
If the yield to maturity on an annual-pay bond is 7.75%, the bond-equivalent yield is closest to:
-
The duration and convexity of an option-free bond priced at $90.25 are 10.34 and 75.80, respectively. If yields increase by 200 basis points, the percentage change of the price is closest to:
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Which of the following is most likely a limitation of the yield-to-maturity measure?
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Which of the following, rnost likely exhibits negative convexity?
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An investor is least likely exposed to reinvestment risk from owning, a(n):
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All other things being equal, a decrease in expected yield volatility most likely increases the price of:
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Which of the following is least likely an interest rate policy tool available to the U.S. Federal Reserve?
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U.S. farmers have become concerned that the future supply of wheat production will exceed demand. Any hedging activity to sell forward would most likely protect against which market condition?
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Relative to traditional investments.alternative investments are best characterized as having:
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Adding alternative investments to a portfolio of traditional investments will most likely result in a new combined portfolio with returns and standard deviation that are, respectively:
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For a hedge fund investor, a benefit of investing in a fund of funds is least likely the:
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Which attributes would a private equity firm most likely consider when deciding if a company is particularly attractive as a leveraged buyout target?
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High-water marks are typically used when calculating the incentive fee on hedge funds. They are most likely used by clients to:
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Which of the following is least likely a part of the execution step of the portfolio management process?
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The correlation between the historical returns of Stock A and Stock B is 0.75. If the variance of Stock A is 0.16 and the variance of Stock B is 0.09, the covariance of returns of Stock A and Stock B is closest to:
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The point of tangency between the capital allocation line (CAL) and the efficient frontier of risky assets most likely identifies the:
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The stock of G BK Corporation has a beta of 0.65. If the risk-free rate of return is 3% and the expected market return is 9%, the expected return for G BK is closest to:
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A return-generating model that provides an estimate of the expected return of a security based on factors such as earnings growth and cash flow generation is best described as a:
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A portfolio manager generated a rate of return of 15.5% on a portfolio with beta of 1.2. If the risk-free rate of return is 2.5% and the market return is 11.8%, Jensen's alpha for the portfolio is closest to:
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Bailey Watson, CFA manages 25 emerging market pension funds. He recently had the opportunity to buy 100,000 shares in a publicly listed company whose prospects are considered “above industry norm” by most analysts. The company's shares rarely trade because most managers take a “buy and hold” strategy because of the company's small free float. Before placing the order with his dealer, Watson allocated the shares to be purchased according to the weighted value of each of his clients' portfolios. When it came time to execute the trades, the dealer was only able to purchase 50,000 shares. To prevent violating Standard III (B) Fair Dealing, it would be most appropriate for Watson to reallocate the 50,000 shares purchased by:
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Dilshan Kumar, CFA, is a world-renowned mining analyst based in London. Recently, he received an invitation from Cerberus Mining, a London Stock Exchange listed company with headquarters in Johannesburg, South Africa. Cerberus asked Kumar to join a group of prominent analysts from around the world on a tour of its mines in South Africa, some of which are in remote locations, not easily accessible. The invitation also includes an arranged wildlife safari to Krueger National Park for the analysts. Kumar accepts the invitation, planning to visit other mining companies he covers in Namibia and Botswana after the safari. To prevent violating any CFA Institute Standards of Professional Conduct, it is most appropriate for Kumar to only accept which type of paid travel arrangements from Cerberus?
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Abdul Naib, CFA, was recently asked by his employer to submit an updated document providing the history of his employment and qualifications. The existing document on file was submitted when he was hired five years ago. His employer notices the updated version shows Naib obtained his Master of Business Administration (MBA) degree two years ago, whereas the earlier version indicated he had already obtained his MBA. Because the position Naib was hired for had a minimum qualification of an MBA, Naib is asked to explain the discrepancy. He justifies his actions by stating: “I knew you wouldn't hire me if I didn't have an MBA degree, but I already had my CFA designation. Knowing you required an MBA, I went back to school on a part-time basis after I was hired to obtain it. I graduated at the top of my class, but this shouldn't come as any surprise, as you have seen evidence I passed all of my CFA exams on the first attempt.” Did Naib most likely violate the CFA Institute Standards of Professional Conduct?
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Jack Steyn, CFA, recently became the head of the trading desk at a large investment management firm that specializes in domestic equities. While reviewing the firm's trading operations, he notices clients give discretion to the manager to select brokers on the basis of their overall services to the management firm. Despite the client directive, Steyn would most likely violate Standard III (A) Loyalty, Prudence, and Care if he pays soft commissions for which of the following services from the brokers?
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Elbie Botha, CFA, an equity research analyst at an investment bank, disagrees with her research team's buy recommendation for a particular company's rights issue. She acknowledges the recommendation is based on a well-developed process and extensive research but feels the valuation is overpriced based on her assumptions. Despite her contrarian view, her name is included on the research report to be distributed to all of the investment bank's clients. To avoid violating any CFA Institute standards, it would be least appropriate for Botha to undertake which of the following?
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Colleen O'Neil, CFA, manages a private investment fund with a balanced global investment mandate. Her clients insist that her personal investment portfolio replicate the investments within their portfolio to assure them she is willing to put her money at risk. By undertaking which of the following simultaneous investment actions for her own portfolio would O'Neil most likely be in violation of Standard VI (B) Priority of Transactions?
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Christina Ng, a Level I CFA candidate, defaulted on a bank loan she obtained to pay for her Master's degree tuition when her wedding cost more than expected. A micro finance loan company lent her money to pay off the tuition loan in full, including penalties and interest. The micro finance loan company even extended further credit to pay for her parents' outstanding medical bills. Unfortunately, her parents' health problems escalated to the point where Ng had to take extensive time away from work to deal with the issues. She was subsequently fired and consequently defaulted on the second loan. Because she was no longer employed, Ng decided to file for personal bankruptcy. Do the loan defaults leading up to Ng's bankruptcy most likelyviolate Standard I (D) Misconduct?
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Charles Mbuwanga, a Level III CFA Candidate, is the business development manager for Sokoza Investment Group, an investment management firm with high-net-worth retail clients throughout Africa. Sokoza introduced listed Kenyan Real Estate Investment Trusts (REITs) to its line of investment products based on new regulations introduced in Kenya so as to diversify its product offering to clients. The product introduction comes after months of researching Kenyan property correlations with other property markets and asset classes in Africa. Sokoza assigns Mbuwanga as part of the sales team in introducing this product to its clients across Africa. Mbuwanga subsequently determines most of Sokoza's clients' portfolios would benefit from having a small Kenyan property exposure to help diversify their investment portfolios. By promoting the Kenyan REITs for Sokoza's client portfolios as planned, Mbuwanga would least likely violate which of the following standards?
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Victoria Christchurch, CFA, is a management consultant currently working with a financial services firm interested in curtailing its high staff turnover, particularly amongst CFA charter-holders. In recent months, the company lost 5 of its 10 most senior managers, all of whom have cited systemic unethical business practices as the reason for their leaving. To curtail staff turnover by encouraging ethical behavior, it would be least appropriate for Christchurch to recommend the company do which of the following?
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Henrietta Huerta, CFA, writes a weekly investment newsletter to market her services and obtain new asset management clients. A third party distributes the free newsletter on her behalf to those individuals on its mailing list. As a result, it is widely read by thousands of individual investors. The newsletter recommendations reflect most of Huerta's investment actions. After completing further research on East-West Coffee Roasters, Huerta decides to change her initial buy recommendation to a sell. To avoid violating the CFA Institute Standards of Professional Conduct it would be most appropriate for Huerta to distribute the new investment recommendation to:
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Danielle Deschutes, CFA, is a portfolio manager who is part of a 10-person team that manages equity portfolios for institutional clients. A competing firm, South West Managers, asks Deschutes to interview for a position within its firm and to bring her performance history to the interview. Deschutes receives written permission from her current employer to bring the performance history of the stock portfolio with her. At the interview, she discloses that the performance numbers represent the work of her team and describes the role of each member.
To bolster her credibility, Deschutes also provides the names of institutional clients and related assets constituting the portfolio. During her interview Deschutes most likely violated the CFA Institute Standards of Professional Conduct with regards to:
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When Abdullah Younis, CFA, was hired as a portfolio manager at an asset management firm two years ago, he was told he could allocate his work hours as he saw fit. At that time, Younis served on the board of three non-public golf equipment companies and managed a pooled investment fund for several members of his immediate family. Younis was not compensated for his board service or for managing the pooled fund. Younis' investment returns attract interest from friends and co-workers who persuade him to include their assets in his investment pool. Younis recently retired from all board responsibilities and now spends more than 80% of his time managing the investment pool for which he charges non-family members a management fee. Younis has never told his employer about any of these activities. To comply with the CFA Institute Standards of Professional Conduct with regards to his business activities over the past two years, Younis would least likely be required to disclose which of the following to his employer?
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Kim Klausner, CFA, monitors several hundred employees as head of compliance for a large investment advisory firm. Klausner has always ensured that his company's compliance program met or exceeded those of its competitors. Klausner, who is going on a long vacation, has delegated his supervisory responsibilities to Sue Chang. Klausner informs Chang that her responsibilities include detecting and preventing violations of any capital market rules and regulations, and the CFA Institute Code and Standards. Klausner least likely violated the CFA
Institute Standards of Professional Conduct by failing to instruct Chang to also consider:
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Sheila Schleif, CFA, is an equity analyst at an investment banking division of Mokara Financial Group, a full service financial group. Schleif uses a multi-factor computer model to make stock recommendations for all clients of Mokara. Schleif discovers the model contains an error. If the error were corrected, her most recent buy recommendation communicated to all clients would change to a sell. Schleif corrects the error, changing the buy to a sell recommendation, and then simultaneously distributes via e-mail the revision to all investment banking clients who received the initial recommendation. A week later, Schleif sells the same shares she held in her personal portfolio. Concerning her actions, Schleif most likely violated which of the following CFA Institute Standards of Professional Conduct?
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Rodney Rodrigues, CFA, is responsible for identifying professionals to manage specific asset classes for his firm. In selecting external advisers or sub advisers, Rodrigues reviews the adviser's investment process, established code of ethics, the quality of the published return information, and the compliance and the integrated control framework of the organization. In completing his review, Rodrigues most likely violated the CFA Institute Standards of Professional Conduct with regards to his due diligence on:
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Jackson Barnes, CFA, works for an insurance company providing financial planning services to clients for a fee. Barnes has developed a network of specialists, including accountants, lawyers, and brokers who contribute their expertise to the financial planning process. Each of the specialists is an independent contractor. Each contractor bills Barnes separately for the work he or she performs, providing a discount based upon the number of clients Barnes has referred. What steps should Barnes take to be consistent with the CFA Institute Standards of Professional Conduct?
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Millicent Plain has just finished taking Level II of the CFA examination. Upon leaving the examination site, she meets with four Level III candidates who also just sat for their exams. Curious about their examination experience, Plain asks the candidates how difficult the Level III exam was and how they did on it. The candidates say the essay portion of the examination was much harder than they had expected and they were not able to complete all questions as a result. The candidates go on to tell Plain about broad topic areas that were tested and complain about specific formulas they had memorized what did not appear on the exam. The Level III candidates least likely violated the CFA Institute Standards of Professional Conduct by discussing:
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On a flight to Europe, Romy Haas, CFA, strikes up a conversation with a fellow passenger, Vincent Trujillo. When Trujillo learns Haas is in the investment profession, he asks about the CFA designation. Haas tells him the following about the CFA designation:
Statement 1: Individuals who have completed the CFA Program have the right to use the CFA designation.
Statement 2: The CFA designation is globally recognized which is why I use it as part of my firm's name
Statement 3: CFA charter-holders must satisfy membership requirements to continue using the designation.
In explaining the use of the CFA designation, Haas least likely violated the CFA Institute Standards of Professional Conduct concerning which of the following statements?
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The nominal (quoted) annual interest rate on an automobile loan is 10%. The effective annual rate of the loan is 10.47%. The frequency of compounding periods per year for the loan is closest to:
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Equity return series are best described as, for the most part:
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The following 10 observations are a sample drawn from an approximately normal population:
The sample standard deviation is closest to:
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Event X and event Y are independent events. The probability of X is 0.2 [P(X) = 0.2] and the probability of Y is 0.5 [P(Y) = 0.5]. The joint probability of X and Y [P(X, Y] is closest to:
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Assume that a stock's price over the next two periods is as shown below.
The initial value of the stock is $80. The probability of an up move in any given period is 75% and the probability of a down move in any given period is 25%. Using the binomial model, the probability that the stock's price will be $79.20 at the end of two periods is closest to:
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Which of the following statements of null and alternative hypotheses requires a two-tailed test?
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A stock is declining in price and reaches a price range wherein buying activity is sufficient to stop the decline. This is best described as a:
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You are given the following discrete uniform probability distribution of gross profits from purchase of an option:
The probability of a profit greater than or equal to $1 and less than or equal to $4 is closest to:
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A sample of 240 managed portfolios has a mean annual return of 0.11 and a standard deviation of returns of 0.23. The estimate of the standard error of the sample mean is closest to:
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An analyst wants to estimate the return on the S&P 500 Index for the current year using the following data and assumptions:
·Sample size = 50 securities from the index
·Mean return for those stocks in the sample for the previous year = 0.114
·Variance = 0.0529
·The reliability factor for a 95% confidence interval with unknown population variance and sample size greater than 30 is 
If he assumes that the S&P return this year will be the same as it was last year, which of the following is the best estimate of the 95% confidence interval for this year's S&P return?
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The liquidity premium can be best described as compensation to investors for the:
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The following table shows the volatility of a series of funds that belong to the same peer group, ranked in ascending order:
The value of the first quintile is closest to:
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The most recent returns of a fund are as follow:
The mean absolute deviation of returns for the fund is closest to:
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Consider the following information in relation to a portfolio composed of Fund A and Fund B:
The portfolio standard deviation of returns is closest to:
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A college student's monthly demand for pizza is given by the equation:
The student's current monthly food budget is $500, the price of a pizza is $5 and the price of cola is $1.25/bottle. If the student's monthly food budget were to increase to $700, the slope of her demand curve for pizza would be closest to:
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Partial information on three baskets containing goods A and B is given in the table below. The marginal rate of substitution of B for A, (MRSBA), at Basket 2 is also provided.
A consumer's indifference curves are strictly convex and he claims that he is indifferent between Baskets 2 and 3. If he is also indifferent between Baskets 1 and 3, the number of units of A in basket 1 is most likely:
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Three firms operate under perfect competition, producing 900 units of the same product but using different production technologies. Each company's cost structure is indicated below:
Which of the following statements is most accurate? If the unit selling price is:
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The following data pertain to the total output in units and average selling prices in an economy that produces only two products, X and Y:
If the implicit price deflator for GDP in 2011 was 100, for 2012 it is closest to:
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Which of the following would be most useful as a leading indicator to signal the start of an economic recovery?
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The diagram to the right shows the domestic demand and supply curves for a country that imports a commodity, where PW is its world price and PT is its domestic price after the imposition of a tariff. The reduction in the net national welfare of this country as a result of the tariff is best described by the area(s):
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The International Bank for Reconstruction and Development most likely:
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An investor examines the following rate quotes for the Brazilian real and the Australian dollar:
If the investor shorts BRL500,000 he will achieve a risk-free arbitrage profit (in BRL) closest to:
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The demand and supply functions for a leading smart phone are furnished below:
Qdsp= 1,000 – 20Psp+ 2I; Qssp= –200 + 50Psp– 80W; where,
Qdsp = Quantity demanded in number of units
Qssp = Quantity supplied in number of units
Psp= Price per smart phone in $
I = Household income in $ per year
W = Wage rate in $ per hour
Currently, the firm has priced the smart phone at $250 per unit. If the wage is $10 per hour and the household income is $9,500 per year, the smart phone's equilibrium price is closest to:
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A firm in a perfectly competitive environment has its total costs equal to total revenue and marginal costs greater than marginal revenue. Given this, which of the following strategies is most appropriate? The firm should:
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The following data are for a basket of three consumption goods used to measure the rate of inflation:
Using the consumption basket for August 2011, the Paasche index is closest to:
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Which of the following is most consistent with real business cycle (RBC) models? The arguments and recommendations of RBC models suggest that:
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The current ratio for an industry is 3.2. Data for a firm in the industry is presented below:
Using the current ratio, when compared with the industry, the firm is best described as being:
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A company operating in a highly fragmented and competitive industry reported an increase in ROE over the prior year. Which of the following reasons for the increase in ROE is least likely to be sustainable? The company:
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In 2011, a software company recorded unearned revenue related to a software license that it will recognize as revenue during 2012. Ignoring income taxes, this recognition of the software revenue will most likely have which of the following effects on cash from operations in 2012?
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The following information for the current year is available for a company that prepares its financial statements in accordance with U.S. GAAP.
The company's operating profit (in $000s) is closest to:
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Which of the following activities would an analyst least likely complete as part of the processing data phase of a financial analysis?
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Which of the following reports is least likely to be filed with the SEC?
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An analyst is forecasting gross profit of the three following companies. He uses the five-year average gross margins and forecasts sales using an internal model.
·Company 1's products currently enjoy healthy margins because of its technological edge. New technologies typically replace old ones every two years in this industry.
·Company 2 has been offering the same products throughout the period, and the demand and cost structures for its products have not experienced any significant changes.
·Company 3 has recently restructured its product offerings focusing on high margin products only.
For which of the three companies will the forecast of gross profit be most reliable? Company:
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A company whose objective is to maximize income had spent $1,000,000 for a machine with two significant components as indicated below. The machine is expected to have an overall useful life of 10 years and the company uses the straight line method of depreciation.
The depreciation expense for the first year computed under IFRS compared with under U.S. GAAP will most likely be:
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Dividends received are most likely classified as which type of cash flow under both IFRS and U.S.GAAP?
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The following selected data are available for a firm:
If the firm's tax rate is 40%, the free cash flow to the firm (FCFF) is closest to:
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The following financial data is available for a company:
The company's sustainable growth rate is closest to:
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During a period of rising inventory costs, a company decides to change its inventory method from FIFO to the weighted average cost method. Which of the following financial ratios will most likely increase as a result of this change?
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Information about a company's planned capital expenditures is most likely found in the:
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The following information is available about a company:
Total liabilities at the end of the year are closest to:
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According to the International Accounting Standards Board's Conceptual Framework for Financial Reporting, the two fundamental qualitative characteristics that make financial information useful are best described as:
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Which of the following statements about balance sheets is most accurate? Under:
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A company recorded the following events in 2012:
On the 2012 statement of cash flows, the company's net cash flow from investing activities (in $‘000s) is closest to:
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Selected information for a company is provided below.
The company's cash conversion cycle (in days) is closest to:
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Select information from a company that uses the FIFO inventory method is provided below.
If the company used a perpetual system versus a periodic inventory system, the gross margin would most likely be:
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A company, which prepares its financial statements according to IFRS, owns several investment properties on which it earns rental income. It values the properties using the fair value model based on prevailing rental markets. After two years of increases the market softened in 2012 and values decreased. A summary of the properties' valuations is as follows:
·Original cost (acquired in 2010) €50.0 million
·Fair value valuation as at December 31, 2010 €50.5 million
·Fair value valuation as at December 31, 2011 €54.5 million
·Fair value valuation as at December 31, 2012 €48.0 million
Which of the following best describes the impact of the revaluation on the 2012 financial statements?
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Which of the following statements most accurately describes a valuation allowance for deferred taxes? A valuation allowance is required under:
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An analyst can most accurately identify a LIFO liquidation by observing a(n):
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Selected information about a company is as follows:
The forecasted net income (in ‘000s) for 2012 is closest to:
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If a company chooses to capitalize an expenditure related to capital assets instead of expensing it, ignoring taxes, the company will most likely report:
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Two mutually exclusive projects have the following cash flows (€) and internal rates of return (IRR):
Assuming a discount rate of 8% annually for both projects, the firm should most likely accept:
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A company's asset beta is 1.2 based on a debt-to-equity ratio of 50%. If the company's tax rate increases, the associated equity beta will most likely:
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Which date in the chronology of a dividend payment is most likely determined by Securities Exchange? The:
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A firm's price-to-earnings ratio (P/E) is 12.5. The firm has decided to repurchase shares using external funds that have an after-tax cost of 9%. After the repurchase, the earnings per share (EPS) will most likely:
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Which is most likely considered a “pull” on liquidity?
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Based on best practices in corporate governance procedures, independent board members most likely:
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The unit contribution margin for a product is $12. Assuming fixed costs of $12,000, interest costs of $3,000, and a tax rate of 40%, the operating breakeven point (in units) is closest to:
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The effective annualized cost (%) of a banker's acceptance that has an all-inclusive annual rate of 5.25% for a one-month loan of $2,000,000 is closest to:
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Which of the following is most consistent with the best practices of corporate governance?
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Which of the following is the least appropriate method for an external analyst to estimate a company's target capital structure for determining WACC? Using the:
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Which of the following statements concerning regulatory bodies is least accurate? Regulatory bodies:
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A company has initiated the process of selling unproductive land representing 5% of its total assets and using the proceeds to buy back its common shares. Holding other factors constant, these actions by the company will most likely result in a:
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Which of the following is the most appropriate reason for using a free-cash-flow-to-equity (FCFE) model to value equity of a company?
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The following information is available about a company:
The current value per share of the company's common stock according to the two-stage dividend discount model is closest to:
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A trader buys 500 shares of a stock on margin at $36 a share using an initial leverage ratio of 1.66. The maintenance margin requirement for the position is 30 percent. The stock price at which the margin call will occur is closest to:
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Which of the following financial intermediaries are most likely to provide liquidity service to their clients?
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A trader places a limit order to buy shares at a price of $49.94 with the stock trading at a market bid price of $49.49 and the bid-ask spread of 0.7%. The order will most likely be filled at:
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The financial systems that are operationally efficient are most likely characterized by:
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An investor gathers the following information for an index:
The value of the index as of January 1, 2012 is closest to:
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After the public announcement of the merger of two firms an investor makes abnormal returns by going long on the target firm and short on the acquiring firm. This most likely violates which form of market efficiency?
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An analyst gathers the following information about two companies in the same industry:
What is the most appropriate conclusion regarding investors' expectations? Compared to Company B, Company A has:
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An investor gathers the following data about a company:
The company's justified forward P/E is closest to:
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A corporation issues 5-year fixed-rate bonds. Its treasurer expects interest rates to decline for all maturities for at least the next year. She enters into a 1-year agreement with a bank to receive quarterly fixed-rate payments and to make payments based on floating rates benchmarked on 3-month LIBOR. This agreement is best described as a:
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A portfolio manager is required to sell 31,250 shares of XYZ Inc. in two months. She is concerned the price of XYZ shares will decline during the 2-month period, so she enters into a deliverable equity forward contract to sell 31,250 shares of XYZ in two months for EUR 160 per share. When the contract expires, XYZ is trading at EUR 138 per share. The portfolio manager will most likely:
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A trader takes a long position in 40 futures contracts on Day 1. The futures have a daily price limit of $5 and closes with a settlement price of $106. On Day 2, the futures trade at $111 and the bid and offer move to $113 and $115, respectively. The futures price remains at these price levels until the market closes. The marked-to-market amount the trader receives in his account at the end of Day 2 is closest to:
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An investor is long an in-the-money American call option on a dividend paying stock. Would this option most likely ever be exercised early?
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A European company issues a 5-year euro-denominated bond with a face value of EUR 50,000,000. The company then enters into a 5-year currency swap with a bank to convert the EUR exposure into USD exposure. The notional principals of the swap are EUR 50,000,000 and USD 70,000,000. The European company pays a fixed rate of 5% and the bank pays a fixed rate of 4.5%. Payments are made semiannually on a basis of 30 days per month and 360 days per year. What is the payment from the bank to the company at the end of year 4?
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An investor with $5000 to invest believes that the price of ABC Corp. stock will appreciate by $7 to $95 in two months. The two-month at-the-money put on one share of ABC stock costs $1.76, while the two-month at-the-money call costs $1.56. In order to profit from his view on ABC stock, he will most likely:
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If a bond's issuer is required to retire a specified portion of the issue each year, the bond most likely:
-
One reason why the duration of a portfolio of bonds does not properly reflect that portfolio's yield curve risk is the duration measure:
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Investor A's marginal tax rate is 45%, while Investor B's is 30%. Both investors are considering two bonds for inclusion in a taxable portfolio. One bond is tax-exempt with a yield of 4.50%, while the other is taxable with a yield of 6.30%. Which bond will each investor most likely choose?
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The yield on a U.S. Treasury STRIPS security is also known as the Treasury:
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Consider a 5-year option-free bond that is priced at a discount to par value. Assuming the
discount rate does not change, one year from now the value of the bond will most likely:
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The market value of an 18-year zero-coupon bond with a maturity value of $1,000 discounted at a 12% annual interest rate with semi-annual compounding is closest to:
-
All else equal, the difference between the nominal spread and the Z-spread for a non-Treasury security will most likely be larger when the:
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Assume the following six-month forward rates (presented on an annualized, bond-equivalent basis) were calculated from the yield curve.
The 3-year spot rate is closest to:
-
One advantage of the full valuation approach to measuring interest rate risk relative to the
duration/convexity approach is that the full valuation approach:
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An analyst uses a valuation model to estimate the value of an option-free bond at 92.733 to yield 11%. If the value is 94.474 for a 60 basis point decrease in yield and 91.041 for a 60 basis point increase in yield, the effective duration of the bond is closest to:
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Which of the following is least likely to be a type of embedded option in a bond issue granted to bondholders? The right to:
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The bonds issued by ALS Corp. are currently priced at 108.00 and are option free. Based on a portfolio manager's valuation model, a 10 basis points rise in interest rates will result in the bond price falling to 106.50 while a 10 basis points fall in interest rates will result in the bond price rising to 110.00. The market value of the portfolio manager's holdings of ALS bonds is $2 million. The expected change in the market value of this holding for a 100 basis point change in interest rates will be closest to:
-
An alternative investments fund that employs leverage and takes long and short positions in securities is most likely a:
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If an investor uses derivatives to make a long investment in commodities, the return earned on margin is best described as:
-
The most likely impact of adding commodities to a portfolio of equities and bonds is to:
-
The return on a commodity index is likely to be different from returns on the underlying commodities because:
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Which of the following investments most likely provides an investor with indirect, equity exposure to real estate?
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High Plains Capital is a hedge fund with a portfolio valued at $475,000,000 at the beginning of the year. One year later, the value of assets under management is $541,500,000. The hedge fund charges a 1.5% management fee based on the end-of-year portfolio value, and a 10% incentive fee. If the incentive fee and management fee are calculated independently, the effective return for a hedge fund investor is closest to:
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Which of the following institutional investors are most likely to have a low tolerance for
investment risk and relatively high liquidity needs?
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An asset management firm generated the following annual returns in their U.S. large cap equity portfolio:
The 2012 return needed to achieve a trailing five year geometric mean annualized return of 5.0% when calculated at the end of 2012 is closest to:
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Consider a portfolio with two assets. Asset A comprises 25% of the portfolio and has a standard deviation of 17.9%. Asset B comprises 75% of the portfolio and has a standard deviation of 6.2%. If the correlation of these two investments is 0.5, the portfolio standard deviation is closest to:
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An asset has an annual return of 19.9%, standard deviation of returns of 18.5%, and correlation with the market of 0.9.
If the standard deviation of returns on the market is15.9% and the risk-free rate is 1%, the beta of this asset is closest to:
-
Which of the following performance measures most likely relies on systematic risk as opposed to total risk when calculating risk-adjusted return?
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A financial advisor gathers the following information about a new client:
·The client is a successful economics professor at a major university
·The client plans to work full time for seven years and then will work part time for 3 years before retiring
·The client owns two homes and does not have any outstanding debt
·The client has accumulated retirement savings of approximately $ 2 million through their employer's retirement plan and will have anticipated retirement spending needs of $60,000 per year
·The client reads numerous financial publications and follows markets closely
·While concerned about the current health of the global economy, the client maintains that he is a long-term investor .
Based on the above information, which of the following best describes this client?
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As a condition of his employment with an investment bank, Abasi Hasina, CFA, was required to sign an employment contract, including a non-compete clause restricting him from working for a competitor for three years after leaving the employer. After one year, Hasina quits his job for a comparable position with an investment bank in a country where non-compete clauses are illegal. Lawyers with whom he consulted prior to taking the new position determined the non-compete clause was a violation of human rights and thus illegal. Did Hasina most likely violate the CFA Institute Code of Ethics?
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Benefits of compliance with the CFA Institute Global Investment Performance Standards (GIPSR)least likely include:
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Who is most likely responsible for claiming and maintaining compliance with the CFA Institute Global Investment Performance Standards (GIPSY)?
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Mariam Musa, CFA, head of compliance at Dunfield Brokers, questions her colleague Omar Kassim, a CFA candidate and a research analyst, about his purchase of shares in a company for his own account immediately before he publishes a "buy" recommendation. He defends his actions by stating he has done nothing wrong because Dunfield does not have any personal trading policies in place. The CFA Institute Code of Ethics and Standards of Professional Conduct were most likelyviolated by:
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Zhao Xuan, CFA, is a sell side investment analyst. While at a software industry conference, Zhao hears rumors that Green Run Software may have falsified its financial results. When she returns to her office, Zhao conducts a thorough analysis of Green Run. Based on her research, including discussions with some of Green Run's customers, Zhao is convinced that Green Run's reported50% increase in net income during recent quarters is completely fictitious. So far, however, Zhao is the only analyst suspicious about Green Run's reported earnings. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, the least appropriate action for Zhao is to:
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Richard Cardinal, CFA, is the founder of Volcano Capital Research, an investment management firm whose sole activity is short selling. Cardinal seeks out companies whose stocks have had large price increases. Cardinal also pays several lobbying firms to update him immediately on any legislative or regulatory changes that may impact his target companies. Cardinal sells short those target companies he estimates are near the peak of their sales and earnings and that his sources identify as facing legal or regulatory challenges. Immediately after he sells a stock, Cardinal conducts a public relations campaign to disclose all of the negative information he has gathered on the company, even if the information is not yet public. Which of Cardinal's following actions is least likely to be in violation of the CFA Institute Standards of Professional Conduct?
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Kirsten Kelso, CFA, is a research analyst at an independent research firm. Kelso is part of a team of analysts who focus on the automobile industry. Recently, Kelso disagreed with two research sell recommendations written by her team even though she felt confident the research process was properly conducted. In a webcast open to all institutional but not retail clients, Kelso states"even though my name is on the sell reports, these stocks are a buy in part because sales and share prices for both auto companies will rise significantly due to strong demand for their vehicles." Kelso's actions would least likely violate which of the following CFA Institute Standards of Professional Conduct?
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Gardner Knight, CFA, is a product development specialist at an investment bank. Knight is responsible for creating and marketing collateralized debt obligations (CDOS) consisting of residential mortgage bonds. In the marketing brochure for his most recent CDO, Knight provided a list of the mortgage bonds that the CDO was created from. The brochure also states "an independent third party, the collateral manager, had sole authority over the selection of all mortgage bonds used as collateral in the CDO." However, Knight met with the collateral manager and helped her select the bonds for the (:DO. Knight is least likely to be in violation of which of the following (:FA Institute Standards of Professional Conduct?
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Monique Gretta, CFA, is a research analyst at East West Investment Bank. Previously, Gretta worked at a mutual fund management company and has a long-standing client relationship with the managers of the funds and their institutional investors. Gretta often provides fund managers, who work for Gretta's former employer, with draft copies of her research before disseminating the information to all of the bank's clients. This practice has helped Gretta avoid several errors in her reports, and she believes it is beneficial to the bank's clients, even though they are not aware of this practice. Regarding her research, Gretta least likelyviolated the CFA Institute Code of Ethics and Standards of Professional Conduct because:
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Colin Caldwell, CFA, is the chief investment officer of Northwest Mutual Fund, whose investment objective is to invest in fixed income emerging market securities. Caldwell allocates the fund's assets primarily to bonds of commodity producers in emerging markets and invests in a combination of several different investments to ensure an acceptable level of risk. The allocation is clearly disclosed in all fund communications. High volatility in the commodities markets at the start of the year makes Caldwell pessimistic about returns, so he shifts the fund into emerging market and U.S. government securities, positions he maintains at the end of the year. This change is noted in the next annual report to fund shareholders. Caldwell's investment change least likely violated the CFA Institute Code of Ethics and Standards of Professional Conduct concerning:
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Robin Herring, CFA, is a government bond research analyst at an independent credit rating agency. A competitor credit rating agency just downgraded the bonds of a government Herring follows. Herring notes all of the information in the competitor's report was covered in his analysis published last week. In the past, Herring has been slow to downgrade bonds, so he starts to doubt his own analysis after seeing the competitor's report. Herring decides to reissue his credit rating of this government bond and match the competitor's downgrade. In his revised report, Herring states that new information has been made available to justify the downgrade. Herring posts the revision on the credit rating agency's website and provides it by e-mail to all clients who received the original. Herring's rating change least likely violated which of the following CFA Institute Code of Ethics and Standards of Professional Conduct?
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Dorian Solot, CFA, is responsible for a team of research analysts at Apac Bank, located in a country with strict laws prohibiting intellectual property transfers. Solot believes the work of one of her analysts, Blaine Paddock, CFA, is not completed as carefully and thoroughly as it should be. Solot completely reviews all of Paddock's research and confirms her suspicions. Solot then confronts Paddock about his poor quality research and tells him he can leave Apac voluntarily or be fired. Paddock chooses to leave the bank, walking out with his personal papers and research notes that were created prior to his joining Apac. Subsequently, Paddock uses this intellectual property to help establish a high-net-worth investment advisory firm. When a prospective client asks Paddock if he left Apac because of questions on the quality of his work, Paddock says it was to start his own business. Paddock least likely violated the CFA Institute Standards of Professional Conduct concerning his:
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Oliver Opdyke, CFA, works for an independent research organization that does not manage any client money. In the course of his analysis of Red Ribbon Mining he hears rumors the president of Red Ribbon, Richard Leisberg, has recently been diagnosed with late stage Alzheimer's disease, a fact not publicly known. The final stage of Alzheimer's is when individuals lose the ability to respond to their environment, the ability to speak, and, ultimately, the ability to control movement. Leisberg is the charismatic founder of Red Ribbon, and under his leadership the company grew to become one of the largest in the industry. According to the (~FA Institute Code of Ethics and Standards of Professional Conduct, the most appropriate action for Opdyke is to:
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Raymond Ortiz, CFA, provides investment advice to high-net-worth investors. Ortiz has just completed an analysis of Continental Wheat, a manufacturer of wheat-based food products. He rated the company a long-term hold for investors seeking growth and income. Ortiz's analysis included a review of the company's management team, financial data, pro forma financial positions, dividends and dividend policy, and a comparison of Continental with its competitors. Although he does not tell anyone, five years ago, Ortiz worked for and managed the commodities derivatives trading unit of Continental. As part of his compensation at Continental, he received stock, which he still owns. Based upon his research, Ortiz recommends Continental to clients who have a moderate risk tolerance. Two weeks later Continental announces its quarterly earnings are 30% less than a year ago. Consequently, shares of Continental drop by 50%. Ortiz most likely violated the CFA Institute Code of Ethics and Standards of Professional Conduct related to his stock:
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Carolina Ochoa, CFA, is the chief financial officer at Pantagonia Computing. Ochoa is currently the subject of an inquiry by Pantagonia's corporate investigations department. The inquiry is the result of an anonymous complaint accusing Ochoa of falsifying travel expenses for senior management related to a government contract. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, it is most appropriate for Ochoa to disclose the allegations:
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Belen Zapata, CFA, is the owner of Kawah Investments. Kawah promises investors returns of up to 12% per year and claims to achieve this by investing in non-investment-grade bonds and other fixed income instruments. Over the next 12 months, bond market yields reach unprecedented lows and Zapata finds it impossible to achieve the returns she expected. No investments are ever made by Kawah, and clients are completely paid back all of their original investment. Zapata most likelyviolated the CFA Institute Standards of Professional Conduct because of the:
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Jan Loots, CFA, quit his job as a portfolio manager at an investment firm with whom he had a non-solicitation agreement he signed several years ago. Loots received permission to take his investment performance history with him and also took a copy of the firm's software-trading platform. Subsequently, Loots sent out messages on social media sites announcing he was looking for clients for his new investment management firm. Access to Loots' social media sites is restricted to friends, family, and former clients. Loots least likelyviolated the CFA Institute Standards of Professional Conduct concerning his:
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Chan Liu, CFA, is the new research manager at the Pacific MicroCap Fund. Liu observed the following activities after she published a research report on a thinly traded microcap stock that included a "buy" recommendation:
·Pacific traders purchased the stock for Pacific's proprietary account and then purchased the same stock for all client accounts; and
·Pacific marketing department employees disseminated positive, but false, information about this stock in widely read Internet forums.
Liu notes the stock's price increased more than 50% within a period of two days and was then sold for Pacific's account. Which of the following steps is most appropriate for Liu to take to avoid violating the CFA Institute Code of Ethics and Standards of Professional Conduct?
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An analyst has established the following prior probabilities regarding a company's next quarter's earnings per share (EPS) exceeding, equaling, or being below the consensus estimate.
Several days before releasing its earnings statement, the company announces a cut in its dividend. Given this information, the analyst revises his opinion regarding the likelihood that the company will have EPS below the consensus estimate. He estimates the likelihoods the company will cut the dividend given that EPS exceed/meet/fall below consensus as reported below.
Bayes' formula:Updated probability of event given the new information
Using Bayes' formula (given above), the updated (posterior) probability that the company's EPS are below the consensus is closest to:
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If the distribution of the population from which the samples are drawn is positively skewed, and given that the sample size is large, the sampling distribution of the sample means is most likely:
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A project offers the following incremental after-tax cash flows:
The appropriate discount rate to use in evaluating the project is 8%. The NPV (in €) of the project is closest to:
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Given the following portfolio data, the portfolio return is closest to:
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Given the following information about three portfolios:
If the risk-free rate is 4%, which portfolio has the highestSharpe ratio?
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If two events, A and B, are independent and the probability of A does not equal the probability of B (i.e.,P(A)≠P(B)), then the probability of event A given that event B has occurred (i.e., P(A ∣ B)) is best described as:
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Assume that the real risk-free rate of return is 3% and that the expected inflation premium is 5%. If the risk premium incorporates default risk, liquidity risk, and any maturity premium, an observed (nominal) interest rate of 12% implies that the risk premium is closest to:
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When considering two mutually exclusive capital budgeting projects with conflicting rankings (one has the higher positive NPV, the other has a higher IRR), the most appropriate conclusion is to choose the project with the:
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A low price range in which buying activity is sufficient to stop a price decline is best described as:
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An investor purchases one share of stock for $85. Exactly one year later, the company pays a dividend of $2.00 per share. This is followed by two more annual dividends of $2.25 and $2.75 in successive years. Upon receiving the third dividend, the investor sells the share for $100. The money-weighted rate of return on this investment is closest to:
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Independent samples drawn from normally distributed populations exhibit the following characteristics:
Assuming that the variances of the underlying populations are equal, the pooled estimate of the sample variance is 2,678.05. The t-test statistic appropriate to test the hypothesis that the two population means are equal is closest to:
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Which of the following most accurately describes how to standardize a random variable X?
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For planning purposes, an individual wants to be able to spend €80,000 per year, at the end of each year, for an anticipated 25 years in retirement. In order to fund this retirement account, he will make annual deposits of €6,608 at the end of each of his working years. What is the minimum number of such deposits he will need to make to fund his desired retirement? Use 6% interest compounded annually for all calculations.
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A technical analyst has detected a price chart pattern with three segments. The left segment shows a decline followed by a reversal to the starting price level. The middle segment shows a more pronounced decline than in the first segment and again a reversal to near the starting price level. The third segment is roughly a mirror image of the first segment. This chart pattern is rnost accurately described as:
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Consumer surplus is best described as:
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The diagram illustrates a consumer's allocation of her budget between items X and Y. With an initial budget (BC1) she consumes Qa units of item Y. When the price of Y drops, she consumes Qc un its of item Y. Lines BC2 and BC3 are parallel to one another.
The income effect arising from this change in the price of Y is best described as the distance between:
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If the minimum efficient scale of a single producer is small relative to the demand for an undifferentiated good, the market structure of the producer is best described as being:
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In regard to the aggregate demand curve and an increase in one of its associated factors, which of the following relationships is least accurate?
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Holding the working-age population constant, if the labor force participation ratio declines while the number of people employed remains unchanged, the unemployment rate will most likely:
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Which of the following statements is most accurate? For a country to gain from trade it must have:
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The following equations have been developed for a company:
The profit maximizing output for this firm (in units) is closest to:
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Which of the following government interventions in market forces is most likely to cause overproduction?
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In an effort to influence the economy, a central bank conducted open market activities by selling government bonds. This implies that the central bank is most likely attempting to:
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Consider two countries, A and B. Country A is a closed country with a relative abundance of labor and holds a comparative advantage in the production of textiles. Country B has a relative abundance of capital. When the textile trade is opened between the two countries, Country A will most likely experience a favorable impact on:
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Four countries operate within a customs union. One country proposes moving to a common market structure. What additional level of economic integration between the countries would most likelyarise if this change took place? They would:
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The current spot rate for the USD/EUR is 0.7500. The forward rate for the EUR/Australian dollar (AUD) is 1.4300, which represents a 400 point forward premium to the spot rate (scaled up by four decimal places). The USD/AUD spot rate is closest to:
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Which of the following is least likely to appear in a company's proxy statement?
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At the start of the year, a company's capital contributed by owners and retained earnings accounts had balances of $10,000 and $6,000, respectively. During the year, the following events took place:
The end of year owners' equity is closest to:
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A retailer provides credit cards only to its most valued customers who pass a rigorous credit check. A credit card customer ordered an item from the retailer in May. The item was shipped and delivered in July. The item appeared on the customer's July credit card statement and was paid in full by the due date in August. The most appropriate month in which the retailer should recognize the revenue is:
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Selected information from a company's recent income statement and balance sheets is presented below,
The company operates in an industry in which suppliers offer terms of 2/10, net 30. The payables turnover for the average company in the industry is 8.5 times. Which of the following statements is most accurate? In 2011, the company on average:
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Which of the following will most likely result in an increase in a company's sustainable growth rate?
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During 2010, the following events occurred at a company. The company:
Based on those events, the amortization expense that the company should report in 2011 is closest to:
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The following items are from a company's cash flow statement.
Which of the following standards and formats did the company most likely use in the preparation of its financial statements?
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The following information is available about a manufacturing company:
If the company is using International Financial Reporting Standards (IFRS), instead of U.S. GAAP, its cost of goods sold ($ millions) is most likely:
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For which of the following assets is it most appropriate to test for impairment at least annually?
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On 1 January 2011 the market rate of interest on a company's bonds is 5% and it issues a bond with the following characteristics:
If the company uses IFRS, its interest expense (in millions) in 2011 is closest to:
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Given the following information about a company:
What is the most appropriate conclusion an analyst can make about the solvency of the company? Solvency has:
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Which of the following will most likely increase a company's operating cash flow? An increase in:
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The least likely reason that a security analyst needs to understand the accounting process is to:
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What is the most likely effect on the accounting equation when a company purchases office equipment with cash?
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Which of the following statements best describes the role of the International Organization of Securities Commissions (IOSCO)? The IOSCO:
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The following data are available for a company and its industry:
Which of the following statements about the company is most appropriate? The company:
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Which of the following is least likely a benefit of the direct method for reporting cash flow from operating activities? Compared with the indirect method, the direct method provides:
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A firm reported the following financial statement items:
The free cash flow to the firm is closest to:
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An analyst gathers the following information about a company's common stock:
·1 January 2011 200,000 shares outstanding
·1 June 2011 50,000 shares issued
·1 August 2011 2 for I stock split
·31 December 2011500,000 shares outstanding
To calculate earnings per share for 2011, the company's weighted average number of shares outstanding is closest to:
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To gain insight into what portion of the company's assets is liquid, an analyst will most likely use:
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A company's information from its first year of operation is as follows:
Using a periodic inventory system and the weighted average method, the ending inventory value is closest to:
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A company purchased equipment for $50,000 on 1 January 2009. It is depreciating the equipment over a period of 10 years on a straight-line basis for accounting purposes, but for tax purposes, it is using the declining balance method at a rate of 20%. Given a tax rate of 30%, the deferred tax liability as at the end of 2011 is closest to:
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An analyst is analyzing two companies in the same industry and believes that they have similar strategies regarding the use of property, plant, and equipment (PP&E). He also thinks that the PP&E assets of the two companies are roughly of the same age and have the same expected useful lives remaining. Company A uses the LIFO method of inventory valuation, and Company B uses the FIFO method. The following additional information is available from the companies' financial statements:
In the analyst's opinion, which of the following conclusions is most appropriate? Compared with Company A, Company B:
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An analyst has made three observations in his worksheets about a company that he is reviewing. Which of the observations most likely reduces the quality of earnings of the company? The company:
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A firm's estimated costs of debt, preferred stock, and common stock are 12%,17%, and 20%, respectively. Assuming equal funding from each source and a 40% tax rate, the weightedaverage cost of capital is closest to:
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Which of the following is most likely considered an example of matrix pricing?
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A project has the following annual cash flows:
Which discount rate most likely provides a positive net present value?
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Based on a need to borrow $2 million for one month, which of the following alternatives has the least expensive effective annual cost?
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Using the firm's income statement presented, its degree of financial leverage is closest to:
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The "per unit contribution margin" for a product is $12. Assuming fixed costs of $12,000, interest costs of $3,000, and taxes of $2,000, the operating breakeven point (in units) is closest to:
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Which of the following capital budgeting techniques is most directly related to stock price?
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A company's data are furnished below:
The weighted average cost of capital (WACC) is closest to:
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For a 90-day U.S. Treasury bill selling at a discount, which of the following methods most likely results in the highest yield?
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In a sales-driven pro forma analysis, net income grows from $1.2 million to $1.26 million. Assuming a dividend payout ratio of 40%, the increase in retained earnings is closest to (in $ millions):
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The index weighting that results in portfolio weights shifting away from securities that have increased in relative value (e,g,, decrease in book-to-market) toward securities that have fallen in relative value whenever the portfolio is rebalanced is most accurately described as:
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According to the industry life-cycle model, an industry in the shakeout stage is best characterized as experiencing:
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An investor uses the data below and Gordon's constant growth dividend discount model to evaluate a company's common stock. To estimate growth, she uses the average value of the:
1) compounded annual growth rate over the period 2006-2011 and
2) sustainable growth rate for the year 2011.
If her required return is 15%, the stock's intrinsic value is closest to:
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According to behavioral finance, observed overreaction in securities markets most likely occurs due to:
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Companies pursuing cost leadership will most likely:
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The following data pertain to a margin purchase of a stock by an investor.
If the stock is sold exactly one year after the purchase, the total return on the investor's investment is closest to:
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A trader seeking to sell a very large block of stock, or a piece of urban real estate property, for her client will most likely execute the trade in a(n):
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Accounting standards and reporting requirements that produce meaningful and timely financial disclosures are most critical for achieving which of the following efficiencies associated with a well-functioning financial system?
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Arbitrage activity will most likely be higher in securities markets:
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An analyst collects the following data on the return on equity (ROE) and the payout ratio for two companies, M and N. Using a required return of 12.4% for both companies, she computes the justified forward P/E ratios, which are also given below.
If Company M increases its dividend payout ratio to 40% and Company N decreases its dividend payout ratio to 30%, which of the following will most likely occur? The justified P/E ratio of:
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A fund manager Bathers the following data in order to assess a stock's potential for a possible addition to her portfolio:
Which of the following is the rnostappropriate decision for the fund manager?
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An observation that stocks with above average price-to-earnings ratios have consistently underperformed those with below average price-to-earnings ratios least likely contradicts which form of the market efficiency?
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When purchasing a futures contract, the initial margin requirement refers to the:
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A buyer would face the greatest risk of default with:
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Which of the following statements most closely relates to the concept of moneyness?
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The intrinsic value of an option is always zero:
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Euribor would most likely be the interest rate quoted on a large:
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The least likely way to terminate a swap is to:
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Which of these embedded options most likely benefits the investor?
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Consider two bonds that are identical except for their coupon rates. The bond that will have the highest interest rate risk most likely has the:
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Duration is most accurate as a measure of interest rate risk for a bond portfolio when the slope of the yield curve:
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An investor whose marginal tax rate is 33.5% is analyzing a tax-exempt bond offering a yield of 5.20%. The taxable-equivalent yield of the bond is closest to:
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If the yield on a 5-year U.S. corporate bond is 7.39% and the yield on a 5-year U.S. Treasury note is 4.26%, the relative yield spread of the bond is closestto:
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Consider a $100 par value bond, with an 8% coupon paid annually, maturing in 20 years. If the bond currently sells for $96.47, the yield to maturity is closestto:
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Consider two ten-year bonds, one that contains no embedded options and the other that gives its owner the right to convert the bond to a fixed number of shares of the issuer's common stock. The convertibility option in the second bond cannot be exercised for five years. The bonds are otherwise identical. Compared with the yield on the convertible bond, the yield on the option-free bond is most likely:
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Using the U.S. Treasury spot rates provided below, the arbitrage-free value of a 2-year Treasury, $100 par value bond with a 6% coupon rate is closest to:
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Consider three bonds that have the same yield to maturity and maturity. The bond with the greatest reinvestment risk is most likely the one selling at:
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Using the U.S. Treasury forward rates provided below, the value of a 21/2-year, $100 par value Treasury bond with a 5% coupon rate is closestto:
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If three bonds are otherwise identical, the one exhibiting the highest level of positive convexity is most likely the one that is:
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The table below provides information about a portfolio of three bonds.
Based on this information, the duration of the portfolio is closest to:
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Which of the following least likely describes an advantage of investing in hedge funds through a fund of funds? A fund of funds may provide investors with:
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Compared with investment in an open-ended index mutual fund, which of these is least likely a benefit to an investor in an index exchange traded fund (ETF) on the same index?
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Which of the following is least likely an aggregation vehicle for real estate ownership?
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An investor might consider investments in commodities because, historically, commodity returns have had a higher positive correlation with:
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Do base management fees most likely get paid to the manager of a hedge fund regardless of the fund's performance?
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The three main sources of return for commodities-related investments are:
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The execution step of the portfolio management process includes:
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A correlation matrix of the returns for securities A, B, and C is reported below:
Assuming that the expected return and the standard deviation of each security are the same, a portfolio consisting of an equal allocation of which two securities will be most effective for portfolio diversification? Securities:
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The slope of the security market line (SM L) represents the portion of an asset's expected return attributable to:
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Last year, a portfolio manager earned a return of 12%. The portfolio's beta was 1.5. For the same period, the market return was 7.5% and the average risk-free rate was 2.7%. Jensen's alpha for this portfolio is closest to:
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Information about three stocks is provided below:
If the expected market return is 9.5% and the average risk-free rate is 1.2%, according to the capital asset pricing model (CAPM) and the security market line (SML), which of the three stocks is most likely overvalued?
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In a strategic asset allocation, assets within a specific asset class are least likely to have:
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Which of the following least likely reflects the two primary principles of the CFA Institute Rules of Procedure for Proceedings Related to Professional Conduct?
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Fundamental Asset Managers claims compliance with the CFA Institute Global Investment Performance Standards (GIPS?) and manages both discretionary and non-discretionary accounts. When constructing a single composite for Fundamental, Juma Dzuya includes all discretionary, fee-paying accounts with both value and growth strategies. Does the composite constructed by Dzuya most likely meet GIPS criteria?
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Adira Badawi, CFA, who owns a research and consulting company, is an independent board member of a leading cement manufacturer in a small local market. Because of Badawi's expertise in the cement industry, a foreign cement manufacturer looking to enter the localmarket has hired him to undertake a feasibility study. Under what circumstances can Badawi most likely undertake the assignment without violating the CFA Institute Code of Ethics and Standards of Professional Conduct? If he:
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Noor Mawar, CFA, manages a trust fund with the beneficiary being an orphaned 18-year-old student. The investment policy dictates that trust assets are expected to provide the student with a stable low risk source of income until she reaches the age of 30 years. Based on information from an internet blog, the student asks Mawar to invest in a new business venture she expects will provide high returns over the next 5 years. Mawar ignores the request, instead securing conservative investments to provide sufficient income. Did Mawar most likely violate the CFA Institute Code of Ethics and Standards of Professional Conduct?
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Vishal Chandarana, an unemployed research analyst, recently registered for the CFA Level I exam. After two months of intense interviewing, he accepts a job with a stock brokerage company in a different region of the country. Chandarana posts on a social media blog how being a CFA candidate really helped him get a job. He also notes how relieved he was when his new employer didn't ask him about being fired from his former employer. Which CFA Institute Code of Ethics or Standards of Professional Conduct did Chandarana least likely violate?
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Kam Bergeron, CFA, is an equity portfolio manager who often takes time off in the afternoon to play golf with important clients. Today, Bergeron is on the golf course when his game is interrupted by a phone call from his office. The call is from Bergeron's assistant, who notifies him of a steep and accelerating market decline. Bergeron, eager to get back to his golf game, tells his assistant to raise cash by selling 15% of all clients' holdings. Bergeron instructs his assistant to first sell the most liquid stocks in each client's portfolio and then do the same for his personal account. Bergeron is least likely to be in violation of which of the CFA Institute Standards of Professional Conduct?
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Ileana Inkster, CFA, was recently offered a senior management position within the trust department at a regional bank. The department is new, but the bank has plans to expand it significantly over the next few months. Inkster has been told she will be expected to help grow the client base of the trust department. She is informed the trust department plans to conduct educational seminars and pursue the attendees as new clients. Inkster notices recent seminar advertisements prepared by the bank's marketing department do not mention investment products will be for sale at the seminar. The ads indicate attendees can "learn how to immediately add $100,000 to their net worth." What should Inkster most likely do to avoid violating any CFA Institute Standards of Professional Conduct?
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Molly Burnett, CFA, is a portfolio manager for a fund that only invests in environmentally friendly companies. A multinational utility company recently acquired one of the fund's best performing investments, a wind power company. The wind power company's shareholders received utility company shares as part of the merger agreement. The utility has one of the worst environmental records in the industry, but its shares have been one of the top performers over the past 12 months. Because the utility pays a high dividend every three months, Burnett holds the utility shares until the remaining two dividends are paid for the year then sells the shares. Burnett most likely violated the CFA Institute Standard of Professional Conduct concerning:
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Pia Nilsson is a sole proprietor investment advisor. The economic recession has reduced the number of clients she advises and caused revenues to decline. As a result, Nilsson has not paid her CFA Institute membership dues for the past two years. When a national financial publication recently interviewed Nilsson, she indicated that up until two years ago she had been a CFA charter-holder and a CFA Institute member in good standing. In addition, she stated the completion of the CFA Program enhanced her portfolio management skills and enabled her to achieve superior returns on behalf of her clients. Which of Nilsson's following actions most likely violated the CFA Institute Standards of Professional Conduct?
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Which of the following distinct entities can least likely claim compliance with the Global Investment Performance Standards (GIPS)?
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For periods beginning on or after 1 January 2011, the aggregate fair value of total firm assets most likely includes all:
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In countries where new local laws relating to calculation and presentation of investment performance conflict with GIPS standards, firms who have claimed GIPS compliance should most likely:
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Firms claiming GIPS compliance must make every reasonable effort to provide a compliant presentation to which of the following?
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James Simone, CFA, the CFO of a publicly listed company, seeks to improve the quality of his company's communication with institutional fund managers. He holds an investor briefing with this group the evening before the company earnings are announced. The company's quarterly earnings are broadcast in a press release the next day before the market opens. The earnings information in the investor briefing is identical to that in the press release. Did Simone most likely violate the CFA Institute Standards of Professional Conduct?
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Beth Kozniak, a CFA candidate, is an independent licensed real estate broker and a well-known property investor. She is currently brokering the sale of a commercial property on behalf of a client in financial distress. If the client's building is not sold within 30 days, he will lose the building to the bank. A year earlier, another client of Kozniak's had expressed interest in purchasing this same property. However, she is unable to contact this client, nor has she discovered any other potential buyers. Given her distressed client's limited time frame, Kozniak purchases the property herself and foregoes any sales commission. Six months later, she sells the property for a nice profit to the client who had earlier expressed interest in the property. Does Kozniak most likely violate the CFA Institute Standards of Professional Conduct?
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Prudence Charmaine, a CFA charterholder, was recently accused in writing of cheating on a professional accounting exam. She denied cheating and successfully defended herself against the allegation. As part of her defense and as evidence of her character, Charmaine stated she is a CFA charter-holder and upholds the CFA Institute Code of Ethics and Standards of Professional Conduct. On her next annual Professional Conduct Statement, Charmaine does not report this allegation to CFA Institute. Did Charmaine most likely violate the CFA Institute Code of Ethics or Standards of Professional Conduct?
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Margie Germainne, CFA, is a risk management consultant who has been asked by a small investment bank to recommend policies to prevent bank employees from front running client orders. These clients generally invest in one or more of the bank's large cap equity unit trusts. To ensure compliance with the CFA Institute Standards of Professional Conduct, Germainne should least likely recommend which of the following? Employees should be restricted from trading:
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Johannes Meir, CFA, is a compliance officer for Family Estate Planning, LLC, a private-wealth consulting firm. Many of his colleagues have family members who have started their own retail businesses. Some of Meir's colleagues have been asked by relatives to serve as non-executive directors or advisors to their companies. Meir should most likely recommend which of the following policies to ensure compliance with the CFA Institute Standards?
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If the stated annual interest rate is 20% and the frequency of compounding is monthly, the effective annual rate (EAR) is closest to:
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For a positively skewed unimodal distribution, which of the following measures is most accurately described as the largest?
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A project offers the following incremental after-tax cash flows:
The IRR of the project is closest to:
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Over a four-year period, a portfolio has returns of 10%, –2%, 18%, and –12%. The geometric mean return across the period is closest to:
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The following sample of 10 items is selected from a population. The population variance is unknown.
The standard error of the sample mean is closest to:
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A subset of a population is best described as a:
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An analyst collects data relating to five commonly used measures of use of debt (leverage) and interest coverage for a randomly chosen sample of 300 firms. The data comes from those firms' fiscal year 2011 annual reports. This data is best characterized as:
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A financial contract offers to pay €1,200 per month for five years with the first payment made today. Assuming an annual discount rate of 6.5%, compounded monthly, the present value of the contract is closest to:
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A two-tailed t-test of the null hypothesis that the population mean differs from zero has a p-value of 0.0275. Using a significance level of 5%, the most appropriate conclusion is:
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An analyst collects the following data related to paired observations for Sample A and Sample B. Assume that both samples are drawn from normally distributed populations and that the population variances are not known.
The t-statistic to test the hypothesis that the mean difference is equal to zero is closest to:
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An investor deposits ￡2,000 into an account that pays continuously compounded interest of 6% (nominal annual rate). The value of the account at the end of four years is closest to:
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A graphic depiction of a continuous distribution that shows the left tail to be longer than the right tail is best described as having:
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When an analyst is unsure of the underlying population distribution, which of the following is least likely to increase the reliability of parameter estimates?
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Consider the following 20 items.
The median value of the items is:
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Demand for a good is most likely to be more elastic when:
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A local laundry and dry cleaner collects the following data on its workforce productivity. Workers always work in teams of two, and the laundry earns $3.00 of revenue for each shirt laundered.
The marginal revenue product ($ per worker) for hiring the fifth and sixth workers is closest to:
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First degree price discrimination is best described as pricing that allows producers to increase their economic profit while consumer surplus:
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Which of the following actions on the part of a central bank is most consistent with increasing the quantity of money?
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If a government increases its spending on domestically produced goods by an amount that is financed by the same increase in taxes, the aggregate demand will most likely:
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In early 2011, a New Zealand traveler returned from Singapore with SGD7,500 (Singapore dollars). A foreign exchange dealer provided the traveler with the following quotes:
The amount of New Zealand dollars (NZD) that the traveler would receive for his Singapore dollars is closest to:
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In a simple economy with no foreign sector, the following equations apply:
If the real interest rate is 3% and government spending increases to 2,000, the increase in aggregate income will be closest to:
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Which of the following measures of profit is most likely necessary for a firm to stay in business in the long run?
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A small country has a comparative advantage in the production of pencils. The government establishes an export subsidy for pencils to promote economic growth. Which of the following will be the most likely result of this policy?
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Assuming its trading partner does not retaliate, which of the following conditions must hold in order for a large country to increase its national welfare by imposing a tariff?
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A country having a current account deficit most likely will still be able to consume more output than it produces by:
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In the classification of currency regimes, a currency board system (CBS) most likely differs from a fixed-rate parity system in that:
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Which of the following statements is most accurate about the responsibilities of an auditor for a publicly traded firm in the United States? The auditor:
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In accrual accounting, if an adjusting entry results in the reduction of an asset and the recording of an expense, the originating entry recorded was most likely a(n):
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At the beginning of the year, a company had total shareholders' equity consisting of ￥200,000 in common share capital and ￥50,000 in retained earnings.
During the year, the following events occurred:
The total shareholders' equity at the end of the year is closest to:
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Selected information from a company's comparative income statements and balance sheets is presented below.
The cash collected from customers in 2011 is closest to:
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Selected information for a company and the common size data for its industry are provided below.
Which of the following is most likely a contributor to the company's inferior ROE compare to that of the industry? The company's:
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Which of the following is least likely to be a general feature underlying the preparation of financial statements within the IFRS Conceptual Framework?
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A company suffered a substantial loss when its production facility was destroyed in an earthquake against which it was not insured. Geological scientists were surprised by the earthquake as there was no evidence that one had ever occurred in that area in the past. Which of the following statements is most accurate? The company should report the loss on its income statement:
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The following information is available about a company:
The company's 2011 income tax expense (in thousands) is closest to:
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Which of the following inventory valuation methods best matches the actual historical cost of the inventory items to their physical flow?
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A company has announced that it is going to distribute a group of long-lived assets to its owners in a spin-off. The most appropriate way to account for the assets until the distribution occurs is to classify them as:
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The following information is available from a company's 2011 financial statements:
Note 6: Employee costs
Note 17: Retirement benefit obligations
Amounts recognized in the income statement for the year
The pension expense (in thousands) reported in 2011 is closest to:
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An analyst is assessing a company's quality of earnings by looking at the cash flow earnings index (operating cash flow divided by net income). Potential problems would most likely be indicated if the ratio were consistently:
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A retail company that leases the majority of its space has:
·total assets of $4,500 million,
·total long-term debt of $2,125 million, and
·average interest rate on debt of 12%.
Note 8 to the 2011 financial statements contains the following information about the company's future beginning of year lease commitments:
Note 8: Operating leases
After adjustment for the off-balance-sheet financing, the debt-to-total-assets ratio for the company is closest to:
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The financial statement that would be most helpful to an analyst in understanding the changes that have occurred in a company's retained earnings over a year is the statement of:
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Under the IASB Conceptual Framework, one of the qualitative characteristics of useful financial information is that different knowledgeable users would agree that the information is a faithful representation of the economic events that it is intended to represent. This characteristic is best described as:
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Under U.S. GAAP, interest paid is most likely included in which of the following cash flow activities?
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The following information is available:
The company's cash conversion cycle (in days) is closest to:
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An analyst has calculated the following ratios for a company:
The company's return on equity (ROE) is closest to:
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According to International Financial Reporting Standards, which of the following conditions should be satisfied in order to report revenue on the income statement?
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A company entered into a three-year construction project with a total contract price of $10.6 million and an expected total cost of $8.8 million. The following table provides cash flow information relating to the contract:
If the company uses the percentage-of-completion method, the amount of revenue recognized (in millions) in Year 2 is closest to:
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A company recently purchased a warehouse property and related equipment (shelving, forklifts, etc.) for €50 million, which were valued by an appraiser as follows: Land €10 million, building €35 million, and equipment €5 million. The company incurred the following additional costs in getting the warehouse ready to use:
·€2.0 million for repairs to the building's roof and windows
·€0.5 million to modify the interior layout to meet their needs (moving walls and doors, inserting and removing partitions, etc.)
·€0.1 million on an orientation and training session for employees to familiarize them with the facility
The cost to be capitalized to the building account (in millions) for accounting purposes is closest to:
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On 1 January 2009, a company that prepares its financial statements according to IFRS issued bonds with the following features:
The company did not elect to carry the bonds at fair value. In December 2011 the market rate on similar bonds had increased to 5% and the company decided to buy back (retire) the bonds after the coupon payment on December 31. As a result, the gain on retirement reported on the 2011 statement of income is closest to:
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Providing information about the performance of a company, its financial position, and changes in financial position that is useful to a wide range of users is most accurately described as the role of:
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Which of the following is most likely a reason that a lessor can offer attractive lease terms and lower cost financing to a lessee? Because the:
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When computing the cash flows for a capital project, which of the following is least likely to be included?
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A company has an equity beta of 1.4 and is 60% funded with debt. Assuming a tax rate of 35%, the company's asset beta is closest to:
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A company's taxable income is 17.1% of sales. Assuming taxes of 42% and a dividend payout of 50%, the net profit margin is closest to:
-
A project has the following annual cash flows:
With a discount rate of 8%, the discounted payback period (in years) is closest to:
-
Using the company's income statement presented, its degree of operating leverage is closest to:
-
Based on best practices in corporate governance procedures, it is most appropriate for a company's compensation committee to:
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The following information is available for a company:
·Bonds are priced at par and they have an annual coupon rate of 9.2%
·Preferred stock is priced at $8.18 and it pays an annual dividend of $1.35
·Common equity has a beta of 1.3
·The risk-free rate is 4% and the market premium is 11%
·Capital structure: Debt = 30%; Preferred stock = 15%; Common equity = 55%
·The tax rate is 35%
The weighted average cost of capital (WACC) for the company is closest to:
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Financial risk is most likely affected by:
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The following information is available for a firm:
A plan to repurchase $10 million worth of shares using debt will most likely cause the earnings per share to:
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A 30-day $10,000 U.S. Treasury bill sells for $9,932.40. The discount-basis yield (%) is closest to:
-
A stop-buy order is most likely placed when a trader:
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The type of voting in board elections that is most beneficial to shareholders with a small number of shares is best described as:
-
An investor gathered the following data in order to estimate the value of the company's preferred stock:
The value of the company's preferred stock is closest to:
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An investor gathers the following data.
To estimate the stock's justified forward P/E, the investor prefers to use the compounded annual earnings growth and the average of the payout ratios over the relevant period (i.e., 2008–2011). If the investor uses 11.5% as her required rate of return, the stock's justified forward P/E is closest to:
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An investor evaluating a company's common stock for investment has gathered the following data.
Using the two-stage dividend discount model, the value per share of this common stock in 2012 is closest to:
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Which of the following is least likely to be directly reflected in the returns on a commodity index?
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A trader who has bought a stock at $30 is concerned about a downside movement in the stock and would like to place an order that guarantees selling it at $25. Which of the following will most likely help the trader achieve her objective? (GTC = Good-till-cancelled)
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A trader who buys a stock priced at $64 on margin with a leverage ratio of 2.5 and a maintenance margin of 30% will most likely receive a margin call when the stock price is at or falls just below:
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Compared to its market-value-weighted counterpart, a fundamentally weighted index will least likely have a:
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A U.S. institutional money manager prefers to invest in depository instruments of non-domestic equity securities that are privately placed in the U.S. and not subject to the foreign ownership and capital flow restrictions. The type of security that is most appropriate for this investor is:
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An equity analyst follows two industries with the following characteristics.
Based on the above information, the analyst will most appropriately conclude that compared to the firms in Industry 2, those in Industry 1 would potentially have:
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The Gordon growth model is most appropriate for valuing the common stock of a dividend paying company that is:
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Which of the following is least likely one of main purposes of derivative markets?
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A futures trader takes a long position of 10 contracts. The initial margin requirement is $10 per contract and the maintenance margin requirement is $7 per contract. She deposits the required initial margin on the trade date. On Day 3, her margin account balance is $40. What is the variation margin on Day 4?
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A portfolio manager enters into an equity swap with a swap dealer. The portfolio manager agrees to pay the return on the Value index and receive the return on the Growth index. The swap's notional principal is $50 million and the payments will be made semi-annually. The levels of the equity indices are as follows:
The net amount due to the portfolio manager after 6 months is closest to:
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Epsilon Inc., a U.S. based company, must pay ￥1,000,000,000 to its Japanese component supplier in 3 months. Epsilon approaches a dealer and enters into a USD/JPY currency forward contract, containing a stipulation for physical delivery, to manage the foreign exchange risk associated with the payment to its supplier. Which of these best describes Epsilon's currency forward contract?
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The greater of either zero or the present value of the exercise price minus the underlying price is most likely the lower bound on the price of a(n):
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An investor purchases ABC stock at $71 per share and executes a protective put strategy. The put option used in the strategy has a strike price of $66, expires in two months, and is purchased for $1.45. At expiration, the protective put strategy breaks even when the price of ABC is closest to:
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The table below provides a history of a fixed income security's coupon rate and the risk free rate over a five-year period.
The security is most likely a(n):
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For a 10-year floating-rate security, if market interest rates change by 1%, the change in the value of the security will most likely be:
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When a bank creates a collateralized loan obligation (CLO) to divest of commercial loans that it owns, the process is best described as a(n):
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Which of the following is closest to the value of a 10-year, 6% coupon, $100 par value bond with semi-annual payments assuming an annual discount rate of 7%?
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Consider a $100 par value bond with a 7% coupon paid annually and 5 years to maturity. At a discount rate of 6.5%, the value of the bond today is $102.08. One day later, the discount rate rises to 7.5%. Assuming the discount rate remains at 7.5% over the remaining life of the bond, what is most likely to occur to the price of the bond between today and maturity?
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A fixed income security's current price is 101.45. You estimate that the price will rise to 103.28 if interest rates decrease 0.25% and fall to 100.81 if interest rates increase 0.25%. The security's effective duration is closest to:
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An analyst reviews a corporate bond indenture that contains these two covenants:
1) The borrower will pay interest semi-annually and principal at maturity.
2) The borrower will not incur additional debt if its debt/capital ratio is more than 50%.
What types of covenants are these?
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An investor sells a bond at the quoted price of $98.00. In addition he receives accrued interest of $4.40. The clean price of the bond is:
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An investor purchases a 5% coupon bond maturing in 15 years for par value. Immediately after purchase, the yield required by the market increases. The investor would then most likely have to sell the bond at:
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Given two otherwise identical bonds, when interest rates rise, the price of Bond A declines more than the price of Bond B. Compared to Bond B, Bond A most likely:
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A BBB-rated corporation wishes to issue debt to finance its operations at the lowest cost possible. If it decides to sell a pool of receivables into a special purpose vehicle (SPV), its primary motivation is most likely to:
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Which of the following is least likely a tool used by the U.S. Federal Reserve Bank to directly influence the level of interest rates?
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Which of the following most likely trades in the secondary markets?
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An analyst is evaluating an investment in an apartment complex based on the following annual data:
Based on the income approach, the value of the investment is closest to:
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Which of the following statements regarding biases in hedge fund performance in hedge fund databases is least likely correct?
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A project that requires an initial investment of €5 million is expected to pay €22 million at the end of five years if it is successful. The probabilities of failure for the project are provided below:
Assuming the cost of capital for the project is 16%, the project's expected net present value is closest to:
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When market participants expect the spot price of a commodity to be higher in the future, the commodity market is most likely said to be in:
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Which of the following is least likely a reason for discounting the value of stock in a closely held company?
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Which of the following types of institutions is most likely to have a long investment time horizon and a higher level of risk tolerance?
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An investor's transactions in a mutual fund and the fund's returns over a four-year period are provided in the table below:
Based on these data, the money-weighted return (or internal rate of return) for the investor is closest to:
-
Selected information about shares of two companies is provided below:
1
Correlation of returns between Cable Incorporated and GPTA Company.
The standard deviation of returns of the portfolio formed with these two stocks is closest to:
-
Risk that can be attributed to factor(s) that impact a company or industry is best described as:
-
A stock has a correlation of 0.45 with the market and a standard deviation of returns of 12.35%. If the market has a standard deviation of returns of 8.25%, then the beta of the stock is closest to:
-
Which of the following factors is least likely to impact an individual's ability to take risk?
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Tibor Figeczky, CFA, is an equity trader at Global Investment Bank (GB), Figeczky traded the bank's investment portfolio profitably for the past three years and earned significant bonuses for his efforts. Subsequently, internal auditors of GB formally accused Figeczky of exceeding his trading authority and engaging in unauthorized trades. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, Figeczky should most likely:
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Alexandra Zagoreos, CFA, is the head of a government pension plan. Whenever Zagoreos hires a money management firm to work with the pension plan, she finalizes the deal over dinner at a nice restaurant. At these meals, Zagoreos also arranges for the money manager to provide her payments equal to 10% of the management fee the manager receives from the pension plan. Zagoreos keeps half of the payments for her own use and distributes the remainder as cash incentives to a handful of her most trusted staff. Zagoreos least likely violated which of the following CFA Institute Code of Ethics and Standards of Professional Conduct?
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Christy Pasley, CFA, is the Chief Investment Officer for Risen Investment Funds (RIF) a mutual fund organization. At a meeting between Homeland Builders (HB), a publicly traded company, Pasley learns HB sales are much slower than expected. In fact, HB sales declined more than 20% in the last quarter, but this information has not yet been widely disseminated. Immediately after meeting with HB, Pasley purchases put options on HB stock. Subsequently, HB issues a press release with their most recent sales figures. Has Pasley most likely violated the CFA Institute Standards of Professional Conduct?
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Florence Zuelekha, CFA, is an equity portfolio manager at Grid Equity Management (GEM), a firm specializing in commodities. Zuelekha, who previously focused on alternative energy, recently attends her first commodity conference, sponsored in large part by GEM. Independent industry experts, argued commodities would increase in value and recommended investors hold at least 10% of their portfolio assets in commodities based on consistent increases in their values over the previous two years. Without doing any additional research, Zuelekha recommends to all her clients an immediate allocation of 5% of their portfolio into commodities. Over the next few weeks, Zuelekha moves her own portfolio to a 10% commodity allocation. Which of the CFA Standards did Zuelekha most likely violate?
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Joan Tasha, CFA, a supervisor at Olympia Advisors (OA), wrote and implemented compliance policies at her firm. A long time OA employee, Derek Longtree, recently changed the asset allocation of a client, which is inconsistent with her financial needs and objectives and with OA's policies. Until now Longtree has never violated OA's policies. Tasha discusses the issue with Longtree but takes no further action. Do Tasha's actions concerning Longtree most likely violate any CFA Institute Standards of Professional Conduct?
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Wang Dazong, CFA, is a sole proprietor investment advisor. Dazong believes in putting his money at risk along with his clients and trades the same securities as his clients. In order to ensure fair treatment of all accounts, he rotates trade allocations so that each account has an equal likelihood of receiving a fill on their orders. This allocation procedure also applies to Dazong's own account. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, the allocation procedure used by Dazong:
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Tammi Holmberg is enrolled to take the Level I CFA examination. While taking the CFA examination, the candidate on Holmberg's immediate right takes a stretch break and a piece of paper from his pocket falls onto Holmberg's desk. Holmberg glances at the paper and realizes there is information written on the paper, which includes a formula Holmberg needs for the question she is working on. Holmberg had not memorized this formula and could not complete the question without this information. Holmberg pushes the paper off her desk and uses the formula to complete the question. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, Holmberg most likely:
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Kazuya Kato, CFA, is a widely followed economist at a global investment bank. When Kato opines on economic trends, markets react by moving stock valuations considerably. When Kato receives information of a temporary oversupply of rare earth metals, he issues a forecast that price trends for rare earth metals will be down significantly on a long-term basis. Kato also secretly sells his report to a widely followed Internet site. Prior to issuing this forecast, Kato emailed all portfolio managers at his bank with a copy of his report indicating that his opinion would be reversed shortly so there will be trading opportunities. Kato least likely violated which of the following CFA Institute Code of Ethics and Standards of Professional Conduct?
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Oliver Rae, CFA, is an individual investment adviser specializing in commercial real estate. Rae recently packaged a real estate limited partnership (RELP), which he sold in a private placement to his existing advisory clients. The partnership has purchased four properties in which Rae held a 5% minority interest. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, Rae should:
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Noor Hussein, CFA, runs a financial advisory business, specializing in retirement planning and investments. One of her clients asks her to advise the firm's pension fund trustees on available investments in the market including Islamic products. On the day prior to the meeting, Hussein spends an hour familiarizing herself with Islamic investment products and getting updates on local market conditions. The next day she recommends Islamic investment products to the trustees based on her research and her expertise in retirement planning and investments. The trustees subsequently incorporate Islamic products into their investment allocation. Did Hussein's basis for the recommendation most likely comply with the CFA Code of Ethics?
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Praful Chandarana, CFA, is starting a new business to offer investment-consulting services to pension fund trustees in response to a new regulation that requires all pension fund Investment Policy Statements (IPS) to be reviewed and approved by an independent CFA Charterholder. Prior to starting the new business, he meets with the pension fund regulator to clarify if the CFA Charterholder undertaking the IPS review should be a licensed financial advisor. A separate regulatory body grants the license to those giving investment advice to clients. The regulator states they do not require the CFA Charterholder to hold a financial advisor's license, despite financial-related advice being given to the pension funds during any IPS review. Chandarana therefore, starts his new business to undertake IPS reviews without obtaining a financial advisors license. Subsequently when clients of his former employer contact him he informs them of his new company and the services he offers. Does Chandarana most likely violate the CFA Code and Standards?
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Mailaka Securities (MS) advertises the use of a "bottom up" investment style in its marketing material. Recently, MS senior management decided to switch to a "top down" approach, citing the fact that it is less labor intensive. All other aspects of the research process are to remain the same. The head of research at MS, Mara Cherogony, CFA, is instructed to supervise the implementation of the new procedures, notify clients of the changes, and revise the text of marketing materials when new material is produced. Which of the following CFA Standards pertaining to Investment Analysis, Recommendations and Actions is Cherogony least likely in danger of violating?
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Preeta Singh, a CFA Candidate, is an asset manager employed by a fund management company managing very large segregated pension funds. In her spare time outside of working hours, Singh likes to provide management-consulting services to small companies to help grow their businesses, focusing on strategic planning. Singh is paid for the consulting services and has also provided her employer information about these outside activities. Does Singh most likely violate the CFA Code of Ethics with regard to Duties to Employers?
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Yip Wai Yin, a CFA Candidate, is an independent mutual fund sales agent. For every front-end load product she promotes, Yip receives a portion of the front-end fee as commission, at the time of sale. For every back-end load fund she sells, Yip receives a smaller commission paid at the end of the year. Yip always informs her clients she is paid a commission as an agent, but does not provide details of the compensation structure. When pitching her favored front-end load product line she tells clients 20% of her commission is always invested in the same fund as proof of her confidence in the fund she recommends. Which CFA Code of Standards with regard to Conflicts of Interest does Yip least likely violate?
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David Bravoria, CFA, is an independent financial advisor for a high net worth client with whom he had not had contact in over two years. During a recent brief telephone conversation, the client states he wants to increase his risk exposure. Bravoria subsequently recommends and invests in several high-risk funds on behalf of the client. Bravoria continues, as he has done in the past, to send to his client monthly, detailed itemized investment statements. Did Bravoria most likely violate any C FA Standards?
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Sato Kashingaki, CFA, is a financial advisor who practices in multiple jurisdictions. In his resident country, Country A, he is not required by law to hold a financial advisors license but he is required to uphold a fiduciary duty to his clients. In Country 13, authorities require him to hold a financial advisors license but he is not expected to uphold a fiduciary duty to his clients. In Country C, authorities require both a financial advisors license and an asset management license in addition to upholding a fiduciary responsibility towards clients. In which of the three countries does Kashangaki have the duty to adhere to the CFA Code and Standards over local laws?
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Hezi Cohen, a CFA candidate, is a heavy user of social networking sites on the Internet. His favorite site only allows a limited number of characters for each entry so he has learned to abbreviate everything, including CFA trademarks. Cohen also enjoys professional networking sites and contributes regularly to blogs that discuss the broad topical areas covered within the CFA Exam Program. In addition, he posts to these blogs pieces he has written in his area of expertise: retirement planning. By claiming to be an expert on retirement planning, he believes his stature within the investment community increases and he can gain more clients. Which Internet activity can Cohen most likely continue to be in compliance with the CFA Standards of Professional Conduct?
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Meshack Bradovic, CFA, was recently hired as a credit analyst at a credit rating agency whose major clients include publicly listed companies on the local stock exchange. One of the clients is currently preparing to issue a new bond to finance a major factory project. Analysts are speculating that without the new factory the company will not survive the onslaught of competition from increasing imports; therefore, the company is counting on an upgraded credit rating to enhance the subscription level of the issue. Bradovic's research suggests the creditworthiness of the company has severely deteriorated over the last year due to negative operating cash flows. Without conducting extensive research, Bradovic's boss puts pressure on him to upgrade the credit rating to an investment grade rating. What course of action is most appropriate for Bradovic to prevent any violation of the CFA Code or Standards?
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Using the sample results given below, drawn as 25 paired observations from their underlying distributions, test if the mean returns of the two portfolios differ from each other at the 1% level of statistical significance. Assume the underlying distributions of returns for each portfolio are normal and that their population variances are not known.
Based on the paired comparisons test of the two portfolios, the most appropriate conclusion is:
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The following ten observations are a sample drawn from a normal population: 25,20,18, -5,35, 21, -11,8,20, and 9. The fourth quintile (80th percentile) of the sample is closest to:
-
When calculated for the same data and provided there is variability in the observations, the geometric mean will most likely be:
-
The Central Limit Theorem is best described as stating that the sampling distribution of the sample mean will be approximately normal for large-size samples:
-
If the stated annual interest rate is 9% and the frequency of compounding is daily, the effective annual rate is closest to:
-
All else held constant, the width of a confidence interval is most likely to be smaller if the sample size is:
-
The belief that trends and patterns tend to repeat themselves and are, therefore, somewhat predictable best describes:
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An investor purchases 100 shares of stock at a price of $40 per share. The investor holds the stock for exactly one year and then sells the 100 shares at a price of $41.50 per share. On the date of sale, the investor receives dividends totaling $200. The holding period return on the investment is closest to:
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The number of ways we can choose r objects from a total of n objects, when the order in which the r objects are listed does matter is given by the permutation formula:
How many permutations are possible when choosing 4 objects from a total of 10 objects?
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A discrete uniform distribution consists of the following twelve values:
On a single draw from the distribution, the probability of drawing a value between -2.0 and 2.0 from the distribution is closest to:
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A sample of 100 observations drawn from a normally distributed population has a sample mean of 12 and a sample standard deviation of 4. Using the extract from the z-distribution given below, find the 95% confidence interval for the population mean.
The 95% confidence interval is closest to:
-
A test statistic is best defined as the difference between the sample statistic and the value of the population parameter under H0 divided by the:
-
In generating an estimate of a population parameter, a larger sample size is most likely to improve the estimator's:
-
Using a discount rate of 5%, compounded monthly, the present value of $5,000 to be received three years from today is closest to:
-
If the quantity demanded of pears falls by 4% when the price of apples decreases by 3%, then apples and pears are best described as:
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Assume that at current production and consumption levels, a product exhibits price elasticity of demand equal to 1.20 and elasticity of supply equal to 1.45. The true economic consequences of taxes imposed on the seller of such a product are most likely borne:
-
Assume that a monopoly is charging a price higher than the price that would exist in pure competition. If the monopoly decides to increase the price even more, the deadweight loss to society will most likely:
-
Assume the U.S. Federal Reserve system (the Fed) has decided to lower interest rates in the economy. To carry out this policy, the Fed will most likely:
-
Government policies to stimulate an economy suffering a recession and designed to reduce unemployment in the short run are most likely directed towards reducing which type of unemployment?
-
Which of the following statements concerning market structure and HerfindahI-Hirschman Index (HHI) is most accurate?
-
The primary monetary policy goal of most major central banks is best characterized as:
-
Externalities, in reference to a particular good, are most likely to impact:
-
Generational accounting indicates the United States, as well as other developed nations, faces severe generational imbalances regarding government programs such as Social Security. Which of the following is most Iikely a possible outcome?
-
The consumer price index (CPI) this year is 252. The CPI last year was 246. The inflation rate this year is closest to:
-
Land is best characterized as:
-
Which of the following is least likely to be a valid function/characteristic of money? Money:
-
At the start of a month, a retailer paid $5,000 in cash for different types of candies. He sold candies costing $2,000 for $3,000 during the month. The most likely effect of these transactions on the retailer's accounting equation for the month is that assets will:
-
Which of the following statements best describes a trial balance? A trial balance is a document or computer file that:
-
Under IFRS, which of the following financial statement elements most accurately represents inflows of economic resources to a company?
-
According to the IFRS framework, which of the following is the least likely qualitative characteristic that makes financial information useful?
-
Which of the following statements is most accurate?
-
The following information is available on a company for the current year.
The company's diluted EPS is closest to:
-
During 2010, Company A sold a piece of land with a cost of $6 million to Company B for $10 million. Company B made a $2 million down payment with the remaining balance to be paid over the next 5 years. It has been determined that there is significant doubt about the ability and commitment of the buyer to complete all payments. Company A would most likely report a profit in 2010 of:
-
A company's balance sheet shows the following:
The company's quick ratio is closest to:
-
The following information is from a company's investment portfolio:
If the investment is reclassified as Available-for-sale as of 31 December 2010, the balance sheet carrying value of the company's investment portfolio would most likely:
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A company reports its interest payments on long-term debt as a financing activity under IFRS. If the company reports under U.S. GAAP, the most likely effect would be:
-
The following information (in millions) on a company is available:
The amount of cash (in millions) that the company paid to its suppliers is closest to:
-
Which of the following statements is most accurate regarding cash flow ratios?
-
Which of the following is the least appropriate accounting treatment for marketable securities under IAS No.39?
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A U.S. pulp brokerage firm which prepares its financial statements according to U.S. GAAP and uses a periodic inventory system had the following transactions during the year:
The cost of sales (in '000s) is closest to:
-
A review of a company's inventory records for the year indicates that the following costs were incurred:
If the company operated at full capacity during the year, the total capitalized inventory cost is closest to:
-
In a period of rising prices, when compared to a company that uses weighted average cost for inventory, a company using FIFO will most likely report higher values for its:
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A company, which prepares its financial statements in accordance with IFRS is in the process of developing a more efficient production process for one of its primary products. The most appropriate accounting treatment for those costs incurred in the project is to:
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A Canadian printing company which prepares its financial statements according to IFRS has experienced a decline in the demand for its products. The following information relates to the company's printing equipment as of 31 December 2010.
The impairment loss (in C$) is closest to:
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A company which prepares its financial statements in accordance with IFRS incurred and capitalized €2 million of development costs during the year. These costs were fully deductible immediately for tax purposes, but the company is depreciating them over two years for financial reporting purposes. The company has a long history of profitability which is expected to continue. Which is the most appropriate way for an analyst to incorporate the differential tax treatment in his analysis? He should include it in:
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A company issued $2,000,000 of bonds with a 20 year maturity at 96. Seven years later, the company called the bonds at 103 when the unamortized discount was $9,000. The company would most likely report a loss of:
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A company has recently revalued one of its depreciable properties and estimated that its remaining useful life would be another 20 years. The applicable tax rate for all years is 30% and he revaluation of the property is not recognized for tax purposes. Details related to this asset are provided in the table below, with all f-values in millions.
The deferred tax liability (in millions) as at the end of 2010 is closest to:
-
Which of the following is least likely to be a warning sign of low quality earnings?
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If a nonfinancial company securitizes its accounts receivables for less than their book value, the most likely effect on the financial statements is to increase:
-
An analyst uses a stock screener and selects the following metrics: a global equity index, P/E ratio lower than the median P/E ratio, and a price-book value ratio lower than the median price- book value ratio. The stocks so selected would be most appropriate for portfolios of which type of investors?
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A company's optimal capital budget most likely occurs at the intersection of the:
-
Which of the following is most likely a sign of a good corporate governance structure?
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A company's $100 par value preferred stock with a dividend rate of 9.5% per year is currently priced at $103.26 per share. The company's earnings are expected to grow at an annual rate of 5% for the foreseeable future. The cost of the company's preferred stock is closest to:
-
Which is most likely considered a secondary source of liquidity?
-
Using the debt-rating approach to find the cost of debt is most appropriate when market prices for a company's debt are:
-
A twenty-year $1,000 fixed rate non-callable bond with 8% annual coupons currently sells for $1,105.94. Assuming a 30% marginal tax rate and an additional risk premium for equity relative to debt of 5%, the cost of equity using the bond-yield-plus-risk-premium approach is closest to:
-
Business risk most likely incorporates operating risk and:
-
If the degree of financial leverage (DFL) is 1.00, the operating breakeven point compared to the breakeven point, is most likely:
-
A company decides to repurchase 5 million of its outstanding 20 million shares with debt funding. After the repurchase, the company's after-tax earnings decline by 20%. The new earnings per share (EPS) is most likely:
-
In a sales-driven pro forma analysis, retained earnings is most accurately forecasted as:
-
An investor buys a stock on margin. Assume that the interest on the loan and the dividend are both paid at the end of the holding period. The data related to the transaction are as follows:
The investor's total return on this investment over the margin holding period is closest to:
-
In futures markets, contract performance is most likelyguaranteed by:
-
An equity fund manager is considering a market index as benchmark for his portfolio and he has the following preferences:
·the index should have a contrarian "effect";
·shares held by controlling shareholders should not be excluded;
·dividends should be included in the weighting of constituent securities; and
·the weights of constituent securities should not be arbitrarily determined by the index provider.
Which of the following weightings of indices best meets the fund manager's preferences?
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Which of the following is the most accurate characterization of momentum anomalies?
Momentum anomalies:
-
The advantages to an investor owning convertible preference shares of a company most likely include:
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A company has issued only one class of common shares and it does not pay dividends on them. It has also issued two types of preference shares - one that is putable and the other callable -and both have a non-cumulative feature. Which of these securities will most likely offer the lowest expected return to the investor?
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An industry experiencing slow growth, high prices, and volumes insufficient to achieve economies of scale is most likely in the:
-
Which of the following industries is most likely characterized by low barriers to entry, fierce competition, fragmented structure, and weak pricing power?
-
A fund manager compiles the following data on two companies:
Based on the information provided, the most accurate conclusion is that Company A's stock is more attractive relative to that of Company B's because of its:
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An investor wants to determine the intrinsic value of the common stock for a company with the following characteristics:
·The firm maintains a constant dividend payout ratio
·Goodwill and patents account for 40% of the firm's assets
·The firm's revenues and earnings are highly correlated with the business cycle
Further, the investor focuses on the firm's capacity to pay dividends rather than expected dividends. Considering the above, the investor will most likely use which of the following valuation models?
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An investor considering the enterprise value approach to valuation gathers the following data:
The value per share of the company's common stock is closest to:
-
An analyst attempting to value the shares of a company has gathered the following data:
Using the Gordon growth model, the intrinsic value per share is closest to:
-
In contrast to over-the-counter options, futures contracts:
-
An investor purchases 10 futures contracts priced at $100 each. The initial margin is $20 per contract and the maintenance margin requirement is $10 per contract. The investor will most likely be required to post variation margin if the end-of-day prices over the next three days are:
-
Based on put-call parity for European options, a synthetic put is most likely equivalent to a:
-
Which of these statements is most likely correct for an option?
-
Which statement best describes option price sensitivities? The value of a:
-
A company and its bank have entered into a currency swap in which the company pays USD to the bank. The currency swap details are provided below:
Which of these interest payments will most likely be made by one of the parties in the transaction?
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An investment banking firm offers a corporation a binding bid to purchase an amount of new debt securities to be issued by the corporation with a specified coupon rate and maturity. The corporation can accept or reject this bid. This type of security distribution is best described as:
-
A bond market analyst states, "The current term structure of interest rates is upward sloping which implies the market believes short-term interest rates will rise in the future." Which theory of the term structure of interest rates does the analyst most likely believe?
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An investor who has a 42% marginal tax rate is analyzing a tax-exempt bond that offers a yield of 3.74%. The taxable-equivalent yield of the bond is closest to:
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A bond portfolio manager is considering three Bonds - A, B, and C - for his portfolio. Bond A allows the issuer to call the bond before stated maturity, Bond B allows the investor to put the bond back to the issuer before stated maturity, and Bond C contains no embedded options. The bonds are otherwise identical. The manager tells his assistant, "Bond A and Bond B should have larger nominal yield spreads to a U.S. Treasury than Bond C to compensate for their embedded options." Is the manager most likely correct?
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If the appropriate annual discount rate is 6%, the value of a 3-year bond that has a 7% coupon rate, has a maturity (par) value of $1,000, and pays interest annually is closest to:
-
If the price of a U.S. Treasury security is higher than its arbitrage-free value, a dealer can generate an arbitrage profit by:
-
The bond-equivalent yield (BEY) spot rates for U.S. Treasury yields are provided below.
On a BEY basis, the 6-month forward rate one year from now is closest to:
-
Holding all other characteristics the same, the bond exposed to the greatest level of reinvestment risk is most likely the one selling at:
-
A 6% 25-year bond with semiannual payments has a market price of $850.00. The yield to maturity of this bond is closest to:
-
Which of these definitions of duration is most relevant to a bond investor? A bond's duration is its:
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A bond has duration of 4.50 and convexity of -39.20. If interest rates increase by 0.5%, the percentage change in the bond's price will be closest to:
-
A portfolio consists of four bonds with the following characteristics:
The duration of the portfolio is closest to:
-
An office building with net operating income of $75,000 recently sold for $937,500.Financial data for a comparable building that is currently on the market for sale is presented in the table below.
The estimated value for the building being sold using the income approach is closest to?
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An initial investment of $1 million in a venture capital project is expected to pay $10 million at the end of 5 years if it is successful. The probabilities of failure for the project are provided in the table below:
If the cost of capital for the project is 18%, the project's expected NPV is closest to:
-
An investor in exchange traded funds (ETFs) is most likely to benefit from its:
-
Which of the following statements is least likely an advantage of investing in hedge funds through a fund of funds? Funds of funds provide:
-
In estimating the value of inactively traded securities of a closely held corporation, which of the following is applied to the market value of a publicly traded comparable company?
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An index provider has created a new investable index that tracks the hedge fund industry. Any fund that follows a long/short equity strategy can enter the index. The index provider places new constituents in the index at the end of each year and incorporates the new funds' track record in the database. Which of the following is least likely a bias that might distort the historical performance of the index?
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With respect to the portfolio management process, asset allocation decisions are made in the:
-
A key difference between a wrap account and a mutual fund is that wrap accounts:
-
An analyst observes that the historic geometric returns are 9% for equities,3% for treasury bills, and 2% for inflation. The real rate of return and risk premium for equities are closest to:
-
If Investor A has a lower risk aversion coefficient than Investor B, on the capital allocation line, will Investor B's optimal portfolio have a higher expected return?
-
Information for Stock A and the market appear below:
The beta of Stock A is closest to:
-
A portfolio manager decides to temporarily invest more of a portfolio in equities than the investment policy statement prescribes, because he expects equities will generate a higher return than other asset classes. This decision is most likely an example of:
-
Gabrielle Gabbe, CFA has been accused of professional misconduct by one of her competitors. The allegations concern Gabbe's personal bankruptcy filing ten years ago when she was a college student and had a large amount of medical bills she could not pay. By not disclosing the bankruptcy filing to her clients, did Gabbe most likely violate any CFA Institute Standards of Professional Conduct?
-
Bryan Barrett, CFA has an investment advisory service providing advice on gold and other commodities to several large retail banks. Barrett advertises his services in widely read publications to broaden his business to include retail clients. Because the client base for the institutions that Barrett serves is large, he is comfortable stating in the ads that thousands of his clients have benefited from his advice. Does Barrett's advertisement most likely violate any CFA Institute Standards of Professional Conduct?
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While at a bar in the financial district after work, Ellen Miffitt, CFA overhears several employees of a competitor discuss how they will manipulate down the price of a thinly traded micro cap stock's price over the next few days. Miffitt's clients have large positions of this stock so when she arrives at work the next day she immediately sells all of these holdings. Because she has determined that the micro cap stock was suitable for all of her accounts at its previously higher price, Miffitt buys back her client's original exposure at the end of the week at the new, lower price. Which CFA Institute Standards of Professional Conduct did Miffitt least likely violate?
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Diana Fairbanks, CFA is married to an auditor who is employed at a large accounting firm. When her husband mentions a computer firm he audits will receive a qualified opinion she thinks nothing of it. Later that week when she reviews a new client account she notices there are substantial holdings of this computer firm. When she does a thorough Internet search for news on the company, she does not find anything about its most recent audit or any other adverse information. Which of the following actions concerning the computer stock should Fairbanks most likely take to avoid violating the CFA Institute Standards of Professional Conduct?
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Sherry Buckner, CFA manages equity accounts for government entities whose portfolios are conservative and risk averse. Since the objective of her clients is to maximize returns with the lowest possible risk, Buckner considers adding to their holdings a new, thinly traded, leveraged derivative product which she believes has the potential for high returns. To make her investment decision, Buckner relies upon comprehensive research from an investment bank that has a solid reputation for top quality research. After her review of that research, Buckner positions her accounts so that each has a 10% allocation to the derivative product. Did Buckner most likely violate any CFA Institute Standards of Professional Conduct by purchasing the derivative for her clients?
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Teresa Staal, CFA is an investment officer in a bank trust department. She manages money for celebrities and public figures, including an influential local politician. She receives a request from the politician's political party headquarters to disclose his stock holdings. The request indicates local law requires the disclosure. What steps should Staal most likely take to ensure she does not violate any CFA Institute Standards of Professional Conduct?
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Sergio Morales, CFA believes he has found evidence his supervisor is engaged in fraudulent activity concerning a client's account. When Morales confronts his supervisor, he is told the client is fully aware of the issue. Later that day, Morales contacts the client and upon disclosing his evidence, is told he should mind his own business. Concerned his job is at risk, Morales provides his evidence, along with copies of the client's most recent account statements, to a government whistle blower program. Morales is least likely to have violated which of the following CFA Institute Standards of Professional Conduct?
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Leng Bo, CFA is a bond portfolio manager for individual investors. Last year, a client whose portfolio is limited to investment-grade bonds approved Bo's purchase of a below investment grade bond. Because yields in the high grade fixed income markets declined, Bo subsequently decides to enhance this client's portfolio by investing in several additional bonds with ratings one or two notches below investment grade. The investment strategy implemented by Bo most likely violated which of the following CFA Institute Standards of Professional Conduct?
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Sisse Brimberg, CFA is responsible for performance presentations at her investment firm. The presentation that Sisse uses states her firm:
1) deducts all fees and taxes;
2) uses actual and simulated performance results;
3) bases the performance on a representative individual account.
Based on the above information, which of the following is the most appropriate recommendation to help Brimberg meet the CFA Institute Standards of Professional Conduct in her performance presentations? She should present performance based on:
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Eileen Fisher, CFA has been a supervisory analyst at SL Advisors for the past ten years. Recently, one of her analysts was found to be in violation of the CFA Institute Standards of Professional Conduct. Fisher has placed limits on the analyst's activities and is now monitoring all of his investment activities. Although SL did not have any compliance procedures up to this point, to avoid future violations, Fischer has put in place procedures exceeding industry standards. Did Fisher most likely violate any CFA Institute Standards of Professional Conduct?
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Joyce La Valle, CFA is a portfolio manager at a global bank. La Valle has been told she should use a specific vendor for equity investment research that has been approved by the bank's headquarters. Because La Valle is located in a different country than the bank's headquarters, she is uncomfortable with the validity of the research provided by this vendor when it applies to her country and would like to use a local vendor on whom she has already conducted due diligence. Which of the following actions concerning the research vendor should La Valle most likely take to avoid violating the CFA Institute Standards of Professional Conduct?
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Colin Gifford, CFA is finalizing a monthly newsletter to his clients, who are primarily individual investors. Many of the clients' accounts hold the common stock of Capricorn Technologies. In the newsletter, Gifford writes, “Based upon the next six months earnings of $1.50 per share and a 10% increase in the dividend, the price of Capricorn's stock will be $22 per share by the end of the year.” Regarding his stock analysis, the least appropriate action Gifford should take to avoid violating any CFA Institute Standards of Professional Conduct would be to:
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Yao Tsang, CFA has a large percentage of his net worth invested in the Australian mining company, Outback Mines, which he has held for many years. Tsang is in the process of moving to a new employer where he is responsible for initiating research on mining companies. Shortly after his move, Tsang is asked to complete a research report on Outback. In order to meet the CFA Institute Standards of Professional Conduct concerning his stock holding, which of the following actions is most appropriate for Tsang to take?
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Teresa Avila, CFA is a micro cap investment analyst at a hedge fund. The fund requires Avila to hold any securities she recommends for the fund in her own account as well. Because Avila has such a small account, whenever she trades for her own portfolio she combines the transactions with those of the hedge fund so she is sure to have her account aligned with the fund. Has Avila most likely violated any CFA Institute Standards of Professional Conduct?
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Ken Kawasaki, CFA shares a building with a number of other professionals who are also involved in the investment management business. Kawasaki makes arrangements with several of these professionals, including accountants and lawyers, to refer clients to each other. There is an expectation that an informal score is kept so that the referrals will equal out over time, so there are no cash payments. Kawasaki never mentions this arrangement to clients or prospective clients. Does Kawasaki's agreement with the other building occupants most likely violate any CFA Institute Standards of Professional Conduct?
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Stian Klun, CFA is preparing a brochure to advertise his firm. The brochure includes the following disclosures:
"I am a CFA so I am a member of the CFA Institute which I believe constitutes the most elite group of professionals within the investment management business. In order to become a CFA charter-holder I had to complete a comprehensive program of study in the investment management field.” Klun is least likely to have violated the CFA Institute Standards of Professional Conduct related to referencing the:
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Holly Baker, CFA is explaining the CFA Institute Code of Ethics to a client. Which of the following statements could Baker make to most likely reflect disciplinary sanctions the CFA Institute may impose? Sanctions include:
-
Which of the following least likely forms the basic structure for enforcement of the CFA Institute Professional Conduct Program?
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Assume that a stock's price over the next two periods is as shown below.
The initial value of the stock is $100. The probability of an up move in any given period is 40% and the probability of a down move in any given period is 60%. Using the binomial model, the probability that the stock's price will be $101.20 at the end of two periods is closest to:
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Use the following values from Student's t-distribution to establish a 95% confidence interval for the population mean given a sample size of 10, a sample mean of 6.25, and a sample standard deviation of 12. Assume that the population from which the sample is drawn is normally distributed and the population variance is not known.
The 95% confidence interval is closest to:
-
A sample of 438 observations is randomly selected from a population. The mean of the sample is 382 and the standard deviation is 14. Based on Chebyshev's inequality, the endpoints of the interval that must contain at least 88.89% of the observations are closest to:
-
The following ten observations are a sample drawn from a normal population: 25, 20, 18, -5, 35, 21, -11, 8, 20, and 9. The mean of the sample is closest to:
-
Over the past four years, a portfolio experienced returns of -8%, 4% 17% and -12%. The geometric mean return of the portfolio over the four year period is closest to:
-
A sample of 25 observations has a mean of 8 and a standard deviation of 15. The standard error of the sample mean is closest to:
-
The probability of event A is 40%. The probability of event B is 60%. The joint probability of AB is 40%. The probability that A or B occurs or both occur is closest to:
-
A consumer purchases an automobile using a loan. The amount borrowed is €30,000 and the terms of the loan call for the loan to be repaid over five years using equal monthly payments with an annual nominal interest rate of 8% and monthly compounding. The monthly payment is closest to:
-
The dollar discount on a U.S. Treasury bill with 91 days until maturity is $2,100. The face value of the bill is $100,000. The bank discount yield of the bill is closest to:
-
One is most likely to reject the null hypothesis when the p-value of the test statistic:
-
When an investigator wants to test whether a particular parameter is larger than a specific value, the null and alternative hypothesis are best defined as:
-
A hypothesis test fails to reject a false null hypothesis. This is best described as a:
-
Which of the following statements is most accurate?
-
Assuming no short selling, diversification benefit is most likely to occur when the correlations among the securities contained in the portfolio are:
-
Over a given period, the price of a commodity falls by 5.0% and the quantity demanded rises by 7.5%. The price elasticity of demand for the commodity is best described as:
-
Regarding a company's production function, both labor costs and capital costs are best described as:
-
Consider the following data for a firm operating in perfect competition.
The firm's profit-maximizing output (in units) is most likely:
-
Assume that two firms in a duopoly enter into a collusive agreement in an attempt to form a cartel and restrict output, raise prices, and increase profits. Given this, the most likely outcome according to the Nash equilibrium is that:
-
The tools used by the U.S. Federal Reserve system (the Fed) to implement monetary policy most likely include:
-
Suppose inflation increases due to increases in government spending and a reduction in taxes. Such inflation is best described as:
-
The price of a good falls from $15 to $13. Given this decline in price, the quantity demanded of the good rises from 100 units to 120 units. The price elasticity of demand for the good is closest to:
-
The supply curve for a particular factor of production with total income consisting solely of economic rent is most likely:
-
In competitive markets, when the efficient quantity is produced, the least likely result is to:
-
A minimum wage above the equilibrium wage is best characterized as a:
-
The crowding-out effect is most likely associated with:
-
Successful product development, advertising, and the creation of brand names are most likely to have a positive impact on the economic profits of the producer under:
-
Common-size financial statements are most likely an output of which step in the financial analysis framework?
-
Which of the following statements is most accurate?
-
Under IFRS, which of the following is most likely one of the fundamental principles underlying the preparation of financial statements?
-
To be recognized as a financial statement element under the IFRS Framework for the Preparation and Presentation of Financial Statements an element most appropriately needs to:
-
A company uses the percentage-of-completion method to recognize revenue from its long term construction contracts and estimates percent completion based on expenditures incurred as a percentage of total estimated expenditures. A three-year contract for €10million was undertaken with a 30% gross profit anticipated. The project is now at the end of its second year, and the following end-of-year information is available:
The gross profit recognized in year 2 is closest to:
-
The following financial information is available at the end of the year.
The diluted EPS is closest to:
-
At the start of the year, a company acquired new equipment at a cost of €50,000, estimated to have a 3 year life and a residual value of €5,000. If the company depreciates the asset using the double declining balance method, the depreciation expense that the company will report for the third year is closest to:
-
Assume a company has the following portfolio of marketable securities which was acquired at the end of 2009:
If the company reports under IFRS instead of U.S. GAAP, its net income will most likely be:
-
The use of financial ratio analysis is most likely limited in which of the following situations? When:
-
Which of the following statements is most accurate regarding cash flow statements prepared under IFRS and U.S. GAAP?
-
The following is selected data from a company's operations:
The cash flow from operations is closest to:
-
An equity analyst is forecasting the next year's net profit margin of a heavy equipment manufacturing firm, by using the average net profit margin over the past three years. In making his profit projection, he is concerned about the following three items:
Which of the following statements about the preparation of the forecast is most accurate?
The analyst would:
-
An analyst gathered the following data for two companies in the same industry:
Which of the following is the most appropriate conclusion the analyst can make?
Compared to Company B, Company A:
-
A company incurs the followings costs related to its inventory during the year:
The amount charged to inventory cost (in millions) is closest to:
-
Compared with using the FIFO method to account for inventory, during a period of rising prices, which of the following ratios is most likely higher for a company using LIFO?
-
A company which prepares its financial statements using IFRS wrote down its inventory value by €20,000 in 2009. In 2010, prices increased and the same inventory was worth €30,000 more than its value at the end of 2009. Which of the following statements is most accurate? In 2010, the company's cost of sales:
-
A Mexican corporation is computing the depreciation expense of a piece of manufacturing equipment for the fiscal year ended December 31, 2010 using the information below. The company takes a full year's depreciation in the year of acquisition.
The depreciation expense (in MXN) will most likely be:
-
A company, which prepares its financial statements in accordance with IFRS uses the revaluation model to value land. At the end of the current year the land value of the land has increased and will be adjusted on the balance sheet. Which of the following statements is most accurate? In the current period the revaluation of the land will:
-
At the beginning of the year a company purchased a fixed asset for $500,000 with no expected residual value. The company depreciates similar assets on a straight-line basis over 10 years, while the tax authorities allow declining balance depreciation at the rate of 15% per year. In both cases the company takes a full year's depreciation in the first year and the tax rate is 40%. Which of the following statements concerning this asset at the end of the year is most accurate?
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A company, which prepares its financial statements in accordance with IFRS issues ￡5,000,000 face value ten year bonds on January 1, 2010 when interest rates are 5.50%. The bonds carry a coupon of 6.50%, with interest paid annually on December 31. The carrying value of the bonds as of December 31, 2011 will be closest to:
-
Compared to classifying a lease as a financing lease, if a lessee reports the lease as an operating lease it will most likely result in a:
-
A company reports that to maintain good relations with its suppliers, it has entered into a financing arrangement with a bank whereby it will periodically have the bank pay its suppliers the amounts owed and it will then repay the bank in the following period. The motivation for the company's behavior is most likely to:
-
An equity manager conducted a stock screen on 5,000 U.S. stocks that comprise her investment universe. The results of the screen are presented in the table below.
If all the criteria were completely independent of each other, the number of stocks meeting all four criteria would be closest to:
-
When analyzing a company that prepares its financial statements according to U.S. GAAP, calculating the price/tangible book value ratio instead of the price/book value ratio is most appropriate if it:
-
A project has the following annual cash flows:
Which of the following discount rates most likely produces the highest net present value(NPV)?
-
The cost of which source of capital most likely requires adjustment for taxes in the calculation of a firm's weighted average cost of capital?
-
Other factors held constant, the reduction of a company's average accounts payables due to suppliers offering less trade credit will most likely:
-
Which method of calculating the firm's cost of equity is most likely to incorporate the long-run return relationship between the firm's stock and the market portfolio?
-
An inventory system that reduces average inventory without affecting sales will most likely reduce the:
-
A company currently has sales of €1,200 thousand and it makes the following forecasts for the next year:
The expected gross profit for next year (in thousands) is closest to:
-
The following information is available for a firm.
The firm's unlevered beta is closest to:
-
The following information is available for a firm:
The firm's degree of total leverage (DTL) is closest to:
-
A share repurchase method that requires existing shareholders to indicate the number of shares they will tender over a range of prices is most likely an example of a:
-
The annual cost of trade credit assuming a 365-day year for terms 3/10 net 40 is closest to:
-
The type of efficiency that exists in an economy that uses resources in such a way that they are most valuable is best described as:
-
A market has the following limit orders standing on its book for a particular stock:
If a trader submits an immediate-or-cancel limit buy order for 700 shares at a price of $20.50, the most likely average price the trader would pay is:
-
Which of the following statements is most accurate with respect to rebalancing and reconstitution of security market indices?
-
The data for four stocks in an index are as follows:
Assuming the beginning value of the float-adjusted market-capitalization-weighted equity index is 100, the ending value is closest to:
-
If a securities market is efficient, it is most likely that:
-
A financial analyst utilizing his analytical expertise and up-to-date information buys a company's stock. His close friends, who lack information or expertise, imitate the financial analyst's action and buy the stock. Which of the following statements concerning this behavioral bias is most accurate?
-
Returns from a depository receipt are least likely impacted by which of the following factors?
-
Firms with which of the following characteristics are most likely candidates for a management buyout (MBO)?
-
An industry experiencing intense competitive rivalry among incumbent companies is best characterized by:
-
Industry analysis is least useful to those who are engaged in:
-
An analyst gathers the following information about a company:
Using asset-based valuation approach, the estimated value per share is closest to:
-
A stock selling at $50 has a P/E multiple of 20 on the basis of the current year's earnings. An analyst estimates that next's earnings per share will be 10% higher and that the stock should be valued on a forward looking basis at the industry average P/E of 18. Based on the analyst's assessment, it is most likely that the stock is currently:
-
Two parties agree to a forward contract on a non-dividend paying stock at a price of $103.00. At contract expiration the stock trades at $105.00. In a cash-settled forward contract, the:
-
A combination of interest rate calls is referred to as an interest rate:
-
A European call option on a non-dividend paying stock with a strike price of $25.00 expires in 3 months. The underlying stock currently trades at $29.00. The risk-free rate is 5.00%. The lower bound for the European call is closest to:
-
If the volatility of returns of an underlying security increases, then:
-
Prices of a futures contract for five consecutive trading-days are provided in the table below. The initial margin requirement is set at $6.00 per contract and the maintenance margin is $3.60 per contract.
On day 0, a trader enters into a short position for 15 contracts. The ending balance for the margin account on day 5 is closest to:
-
A dealer quotes a forward rate agreement (FRA) expiring in 30 days, for which the underlying is 90-day LIBOR, at 4.5%. An investor shorts the contract and the dealer goes long for a notional principal of $15 million. At the expiration of the FRA the rate on 90-day LIBOR is 4.0%. The investor is most likely to:
-
A 10-year bond is issued on January 1, 2010. Its contract requires that its coupon rate change over time as shown in the following table:
This security is best described as an example of a:
-
A 5-year floating-rate security was issued on January 1, 2006. The coupon rate formula was 1-year LIBOR + 300 bps with a cap of 10% and a floor of 5% and annual reset. The 1-year LIBOR rate on January 1st of each year of the security's life is provided in the following table:
During 2010, the payments owed by the issuer were based on a coupon rate closest to:
-
Which of these is the best example of an embedded option granted to bondholders?
-
A bond has a 10-year maturity, a $1,000 face value, and a 7% coupon rate. If the market requires a yield of 8% on the bond, it will most likely trade at a:
-
When interest rates fall, the price of a callable bond will:
-
A bond is selling for 98.2. It is estimated that the price will fall to 96.6 if yields rise 30 bps and that the price will rise to 100.1 if yields fall 30 bps. Based on these estimates, the duration of the bond is closest to:
-
The most direct disadvantage of investing in a callable security relative to an otherwise identical option-free security is:
-
An investor fears that economic conditions will worsen and the market prices of her portfolio of investment-grade corporate bonds will decrease more than her portfolio of government bonds. The investor's fear is best described as a fear of:
-
What type of risk does the bid-ask spread most closely measure?
-
On January 1st of the year, an investor purchases $100,000 in par value of a new Treasury Inflation Protection Security (TIPS) issue that has a 2.5% coupon rate. The annual rate of inflation over the first six months of the year is 4.0% and the annual rate of inflation for the second six months of the year is 3.0%. The amount of coupon interest paid to the investor after the second six months of the year is closest to:
-
A level payment, fixed-rate, fully amortizing mortgage loan for $220,000 is obtained with a term of 15 years, a mortgage rate of 6.0% with monthly compounding, and a monthly payment of $1,856.49. Assuming that the borrower does not prepay or default, the principal that is repaid during the first 3 months is closest to:
-
The primary motivation for creating a collateralized mortgage obligation (CMO) is best described as the desire to redistribute which risk of investment in residential mortgages?
-
One advantage of exchange traded funds relative to open-end mutual funds is:
-
A fund manager is compensated with a base management fee plus an incentive fee proportional to the fund's return above a benchmark. This best describes the fee structure of:
-
The real estate valuation approach that uses a perpetuity discount type model is the:
-
Capital provided for companies beginning operation but before commercial manufacturing and sales have occurred best describes which stage in venture capital investing?
-
A fund that calculates net asset value by subtracting liabilities from assets and dividing the result by a fixed number of shares is most likely:
-
A commodity market is in contango when futures prices are:
-
In general, which of the following institutions will most likely have a high need for liquidity and a short investment time horizon?
-
Which of the following is most likely a part of the feedback step in the portfolio management process?
-
The following table presents historical information for two stocks, RTF and KIU:
The covariance between RTF and KIU is closest to:
-
Relative to an investor with a steeper indifference curve, the optimal portfolio for an investor with a flatter indifference curve will most likely have:
-
The following table shows data for the stock of JKU and a market-index.
Based on the capital asset pricing model (CAPM), JKU is most likely:
-
A portfolio with equal parts invested in a risk-free asset and a risky portfolio will most likely lie on:
-
At the initiation of the swap, which of the following statements is most likely correct?
-
At the end of year 2:
-
At the termination of the swap, FF gives USF which of the following notional amounts?
-
At the end of year 3, FF will pay which o f the following total amounts?
-
The first swap payment is:
-
The second net swap payment is:
-
The fifth net quarterly payment on the swap is:
-
As a result of the drop, the price of this bond:
-
Prior to the change in the required yield, what was the price of the bond?
-
The percentage change in the price of this bond when the rate decreased is closest to:
-
What is the bond's current yield?
-
What is the bond's yield to maturity?
-
What is the bond's yield to call?
-
What is the bond's yield to put?
-
The value of a 4-year, 10% annual-pay, $1,000 par value bond would be closest to:
-
Using annual compounding, the value of a 3-year, zero-coupon, $1,000 par value bond would be:
-
Using only the preceding information, Gould should conclude that:
-
Which of the following statements about the sinking fund provisions for these bonds is most accurate?
-
The 1-year return on a price-weighted index of these three stocks is closest to:
-
The 1-year return on an equal-weighted index of these three stocks is closest to:
-
The 1-year return on a market capitalization-weighted index of these stocks is closest to:
-
If the correlation coefficient is 0.75, what is the portfolio's standard deviation?
-
If the correlation coefficient is －0.75, what is the portfolio's standard deviation?
-
What is the project's payback period?
-
The project's discounted payback period is closest to:
-
What is the project's NPV?
-
The project's IRR is closest to:
-
What is the project's profitability index (PI)?
-
If the Projects are independent, the company should:
-
If the Projects are mutually exclusive, the company should:
-
The company's after-tax cost of debt is:
-
The company's cost of equity using the capital asset pricing model (CAPM) approach is:
-
The company's cost of equity using the dividend discount model is:
-
The company's weighted average cost of capital (using the cost of equity from CAPM) is closest to:
-
Jayco' s degree of operating leverage (DOL) and degree of financial leverage (DFL) are closest to:
-
Jayco's degree of total leverage (DTL) is closest to:
-
The bond can be classified as a:
-
The annual coupon payments will each be:
-
Total of all cash payments to the bondholders is:
-
The initial book value of the bonds is:
-
For the first period the interest expense is:
-
If the market rate changes to 8% and the bonds are carried at amortized cost, the book value of the bonds at the end of the first year will be:
-
The total interest expense reported by the issuer over the life of the bond will be:
-
For analytical purposes, what is the impact on the debt-to-equity ratio if the market rate of interest increases after the bond is issued?
-
Taxable income in year 1 is:
-
Taxes payable in year 1 are:
-
Pretax income in year 4 is:
-
Income tax expense in year 4 is:
-
Taxes payable in year 4 are:
-
At the end of year 2, the firm's balance sheet will report a deferred tax:
-
Suppose tax rates rise during year 2 to 50%. At the end of year 2, the firm's balance sheet will show a deferred tax liability of:
-
What amount should Company P report on its balance sheet at year-end if the investment in Company S is considered a trading security, and what amount should be reported if the investment is considered an available-for-sale security?
Trading Available-for-sale
-
What amount of investment income should Company P recognize in its income statement if the investment in Company S is considered trading, and what amount should be recognized if the investment is considered available-for-sale?
Trading Available-for-sale
-
Cash flow from operations is:
-
Cash flow from investing activities is:
-
Cash flow from financing activities is:
-
The probability that X = 3 is:
-
The cdf of 5, or F (5) is:
-
The probability that X is greater than 3 is:
-
What is P (2 ≤X ≤ 5)?
-
The expected value of the random variable X is:
-
The percent of hedge fund investors that have incomes less than $100,000 is closest to:
-
The percent of hedge fund investors that have incomes greater than $225,000 is closest to:
-
The percent of hedge fired investors that have incomes greater than $150,000 is closest to:
-
Given a threshold level of return of 4%, use Roy's safety-first criterion to choose the optimal portfolio. Portfolio:
-
Given a threshold level of return of 0%, use Roy's safety-first criterion to choose the optimal portfolio. Portfolio:
-
The appropriate alternative hypothesis is:
-
The value of the calculated test statistic is closest to:
-
Which of the following most accurately describes the appropriate test structure?
-
The critical value of the z-statistic is:
-
At a 1% level of significance, Roberts should:
-
The appropriate null hypothesis for the described test is:
-
This is a:
-
The calculated z-statistic is:
-
The critical z-value(s) of the test statistic is (are):
-
The 95% confidence interval for the population mean is:
-
The analyst should most appropriately:
-
Consider the hypotheses structured as H0: μ1 = $48 versus Ha: μ1 ≠ $48. At a 1% level of significance, the null hypothesis:
-
Using a 5% level of significance and a hypothesis test structure of H0:
≤ 24 versus Ha: > 24, the null hypothesis:
-
Consider the hypotheses structured as H0: μ1 ≤ $48 versus Ha: μ1 > $48. At a 5% level of significance, the null hypothesis:
-
Using a 5% level of significance for a test of the null of H0:=
versus the alternative of Ha:≠, the null hypothesis:
-
The money-weighted rate of return on the investment is:
-
The time-weighted rate of return on the investment is:
-
The number of intervals in this frequency table is:
-
The sample size is:
-
The relative frequency of the second interval is:
-
What is the arithmetic mean return for XYZ stock?
-
What is the median return for XYZ stock?
-
What is the mode of the returns for XYZ stock?
-
What is the range for XYZ stock returns?
-
What is the mean absolute deviation for XYZ stock returns?
-
Assuming that the distribution of XYZ stock returns is a population, what is the population variance?
-
Assuming that the distribution of XYZ stock returns is a population, what is the population standard deviation?
-
Assuming that the distribution of XYZ stock returns is a sample, the sample variance is closest to:
-
What is the arithmetic mean return for FJW's common stock?
-
What is the geometric mean return for FJW's common stock?
-
Given the joint probability table, the expected return of Stock A is closest to:
-
Given the joint probability table, the standard deviation o f Stock B is closestto:
-
Given the joint probability table, the variance of Stock A is closest to:
-
Given the joint probability table, the covariance between A and B is closest to:
-
Given the joint probability table, the correlation between RA and RB is closest to:
-
What is the conditional probability of having good stock performance in a poor economic environment?
-
What is the joint probability of having a good economy and a neutral stock performance?.
-
What is the total probability of having a good performance in the stock?
-
Given that the stock had good performance, the probability the state of the economy was good is closest to:
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