CFA Level 1 Terms -Complete Exam
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An interest rate is best interpreted as:
A) a discount rate or a measure of risk.
B) a measure of risk or a required rate of return.
C) a required rate of return or the opportunity cost of consumption.
C) a required rate of return or the opportunity cost of consumption.
An interest rate from which the inflation premium has been subtracted is known as:
A) a real interest rate.
B) a risk-free interest rate.
C) a real risk-free interest rate.
A) a real interest rate.
In the card game of poker, winning hands are determined by rank (high card, pair, two pair,
etc.). The scale of poker hand rankings is:
A) a nominal scale.
B) an ordinal scale.
C) an interval scale.
B) an ordinal scale.
The intervals in a frequency distribution should always have which of the following
characteristics? The intervals should always:
A) be truncated.
B) be open ended.
C) be nonoverlapping.
C) be nonoverlapping.
,The vertical axis of a histogram shows:
A) the frequency with which observations occur.
B) the range of observations within each interval.
C) the intervals into which the observations are arranged.
A) the frequency with which observations occur.
A distribution of returns that has a greater percentage of small deviations from the mean and
a greater percentage of extremely large deviations from the mean compared to a normal
distribution:
A) is positively skewed.
B) has positive excess kurtosis.
C) has negative excess kurtosis.
B) has positive excess kurtosis.
Which of the following is most accurate regarding a distribution of returns that has a mean
greater than its median?
A) It is positively skewed.
B) It is a symmetric distribution.
C) It has positive excess kurtosis.
A) It is positively skewed.
A normal distribution has kurtosis of:
A) zero.
B) one.
C) three.
C) three.
The most appropriate measure of central tendency for forecasting an investment return in a
single future period is:
A) the harmonic mean.
B) the arithmetic mean.
C) the geometric mean.
B) the arithmetic mean.
,An event that includes all of the possible outcomes is said to be:
A) random.
B) exclusive.
C) exhaustive.
C) exhaustive.
Which of the following values cannot be the probability of an event?
A) 0.00.
B) 1.00.
C) 1.25.
C) 1.25.
The probability that the DJIA will increase tomorrow is 2/3. The probability of an increase in
the DJIA stated as odds is:
A) two-to-one.
B) one-to-three.
C) two-to-three.
A) two-to-one.
The multiplication rule of probability determines the joint probability of two events as the
product of:
A) two conditional probabilities.
B) two unconditional probabilities.
C) a conditional probability and an unconditional probability.
C) a conditional probability and an unconditional probability.
If events A and B are mutually exclusive, then:
A) P(A | B) = P(A).
B) P(AB) = P(A) × P(B).
C) P(A or B) = P(A) + P(B).
C) P(A or B) = P(A) + P(B).
, Two mutually exclusive events:
A) always occur together.
B) cannot occur together.
C) can sometimes occur together.
B) cannot occur together.
Which one of the following statements best describes the components of the required
interest rate on a security?
A)
The real risk-free rate, the expected inflation rate, the default risk premium, a liquidity
premium and a premium to reflect the risk associated with the maturity of the security.
B)
The nominal risk-free rate, the expected inflation rate, the default risk premium, a liquidity
premium and a premium to reflect the risk associated with the maturity of the security.
C)
The real risk-free rate, the default risk premium, a liquidity premium and a premium to reflect
the risk associated with the maturity of the security.
A)
The real risk-free rate, the expected inflation rate, the default risk premium, a liquidity premium
and a premium to reflect the risk associated with the maturity of the security.
T-bill yields can be thought of as:
A) real risk-free rates because they contain an inflation premium.
B) nominal risk-free rates because they do not contain an inflation premium.
C) nominal risk-free rates because they contain an inflation premium.
C) nominal risk-free rates because they contain an inflation premium.
Which of the following statements concerning skewness is least accurate? A distribution with:
A) positive skewness has a long left tail.
B) skew equal to 1 is not symmetrical.
C) negative skewness has a large number of outliers on its left side.
A) positive skewness has a long left tail.
Study Guide with Verified Answers |
Guaranteed A+
An interest rate is best interpreted as:
A) a discount rate or a measure of risk.
B) a measure of risk or a required rate of return.
C) a required rate of return or the opportunity cost of consumption.
C) a required rate of return or the opportunity cost of consumption.
An interest rate from which the inflation premium has been subtracted is known as:
A) a real interest rate.
B) a risk-free interest rate.
C) a real risk-free interest rate.
A) a real interest rate.
In the card game of poker, winning hands are determined by rank (high card, pair, two pair,
etc.). The scale of poker hand rankings is:
A) a nominal scale.
B) an ordinal scale.
C) an interval scale.
B) an ordinal scale.
The intervals in a frequency distribution should always have which of the following
characteristics? The intervals should always:
A) be truncated.
B) be open ended.
C) be nonoverlapping.
C) be nonoverlapping.
,The vertical axis of a histogram shows:
A) the frequency with which observations occur.
B) the range of observations within each interval.
C) the intervals into which the observations are arranged.
A) the frequency with which observations occur.
A distribution of returns that has a greater percentage of small deviations from the mean and
a greater percentage of extremely large deviations from the mean compared to a normal
distribution:
A) is positively skewed.
B) has positive excess kurtosis.
C) has negative excess kurtosis.
B) has positive excess kurtosis.
Which of the following is most accurate regarding a distribution of returns that has a mean
greater than its median?
A) It is positively skewed.
B) It is a symmetric distribution.
C) It has positive excess kurtosis.
A) It is positively skewed.
A normal distribution has kurtosis of:
A) zero.
B) one.
C) three.
C) three.
The most appropriate measure of central tendency for forecasting an investment return in a
single future period is:
A) the harmonic mean.
B) the arithmetic mean.
C) the geometric mean.
B) the arithmetic mean.
,An event that includes all of the possible outcomes is said to be:
A) random.
B) exclusive.
C) exhaustive.
C) exhaustive.
Which of the following values cannot be the probability of an event?
A) 0.00.
B) 1.00.
C) 1.25.
C) 1.25.
The probability that the DJIA will increase tomorrow is 2/3. The probability of an increase in
the DJIA stated as odds is:
A) two-to-one.
B) one-to-three.
C) two-to-three.
A) two-to-one.
The multiplication rule of probability determines the joint probability of two events as the
product of:
A) two conditional probabilities.
B) two unconditional probabilities.
C) a conditional probability and an unconditional probability.
C) a conditional probability and an unconditional probability.
If events A and B are mutually exclusive, then:
A) P(A | B) = P(A).
B) P(AB) = P(A) × P(B).
C) P(A or B) = P(A) + P(B).
C) P(A or B) = P(A) + P(B).
, Two mutually exclusive events:
A) always occur together.
B) cannot occur together.
C) can sometimes occur together.
B) cannot occur together.
Which one of the following statements best describes the components of the required
interest rate on a security?
A)
The real risk-free rate, the expected inflation rate, the default risk premium, a liquidity
premium and a premium to reflect the risk associated with the maturity of the security.
B)
The nominal risk-free rate, the expected inflation rate, the default risk premium, a liquidity
premium and a premium to reflect the risk associated with the maturity of the security.
C)
The real risk-free rate, the default risk premium, a liquidity premium and a premium to reflect
the risk associated with the maturity of the security.
A)
The real risk-free rate, the expected inflation rate, the default risk premium, a liquidity premium
and a premium to reflect the risk associated with the maturity of the security.
T-bill yields can be thought of as:
A) real risk-free rates because they contain an inflation premium.
B) nominal risk-free rates because they do not contain an inflation premium.
C) nominal risk-free rates because they contain an inflation premium.
C) nominal risk-free rates because they contain an inflation premium.
Which of the following statements concerning skewness is least accurate? A distribution with:
A) positive skewness has a long left tail.
B) skew equal to 1 is not symmetrical.
C) negative skewness has a large number of outliers on its left side.
A) positive skewness has a long left tail.
