1
CFA Level 1 Test Questions
Allen Jabber invested $400 at the beginning of the last 12
months in the shares of a mutual fund that paid no dividends.
Which Method will he correctly choose to calculate his
average price per share from the monthly share prices?
a) Arithmetic Mean
b) Harmonic Mean
c) Geometric Mean - -Correct answer--Harmonic Mean - The
harmonic mean of the 12 purchase prices will be his average
price paid per share.
Colonia has 2 political parties, the Wigs and the Wags. If the
Wags are elected there is a 32% probability of a tax increase
over the next 4 years. If the Wigs are elected there is a 60%
probability of a tax increase. There is a 20% probability the
that the Wags will be elected. The sum of the (unconditional)
probability of a tax increase and the joint probability that the
wigs will be elected and there will be no tax increase is
closest to:
a) 55%
b) 70%
1
, 2
c) 85% - -Correct answer--86.4% = C
The unconditional probability of a tax increase is: 0.2(0.32) +
0.8(0.6) = 54.4%.
The joint probability that the Wigs will be elected and there
will be no tax increase is: 0.8(0.4) = 32%. The sum is: 54.4 +
32 = 86.4%.
An analyst who wants to display the relationship between
two variables graphically is most likely to use:
a) a histogram
b) a scatterplot
c) a frequency polygon - -Correct answer--B = Scatterplot
Scatterplots illustrate the relationship between two
variables.
Histograms and frequency polygons show the distribution of
observations for a single variable.
Ralph will retire 15 years from today and has saved $121,000
in his investment account for retirement. He believes he will
need 37,000 at the beginning of each year for 25 Years of
retirement, with the first withdrawal on the day he retires.
2
, 3
Ralph assumes his account will earn 8%. The amount he
needs to deposit at the beginning of this year and each of the
following 14 Years (15 in all) is closest to:
a) 1350
b) 1450
c) 1550 - -Correct answer--B = 1450
Step 1:
Calculate the amount needed at retirement at t = 15, with
your calculator in BGN mode.
N = 25, FV = 0, I/Y = 8, PMT = 37,000, CPT PV = -426,564
Step 2:
Calculate the required deposits at t = 0,1,....,14 to result in a
time 15 value of 426,564, with your calculator still in BGN
mode.
PV = -121,000, N = 15, I/Y = 8, FV = 426,564, CPT PMT = -
$1,457.21
The current price of Bosto shares is $50. Over the coming
year, there is a 40% probability that share returns will be
10%, 40% probability returns will be 12.5%, and a 20%
probability share returns will be 30%. Bostos expected return
and standard deviation of returns for the coming year are
closest to:
3
CFA Level 1 Test Questions
Allen Jabber invested $400 at the beginning of the last 12
months in the shares of a mutual fund that paid no dividends.
Which Method will he correctly choose to calculate his
average price per share from the monthly share prices?
a) Arithmetic Mean
b) Harmonic Mean
c) Geometric Mean - -Correct answer--Harmonic Mean - The
harmonic mean of the 12 purchase prices will be his average
price paid per share.
Colonia has 2 political parties, the Wigs and the Wags. If the
Wags are elected there is a 32% probability of a tax increase
over the next 4 years. If the Wigs are elected there is a 60%
probability of a tax increase. There is a 20% probability the
that the Wags will be elected. The sum of the (unconditional)
probability of a tax increase and the joint probability that the
wigs will be elected and there will be no tax increase is
closest to:
a) 55%
b) 70%
1
, 2
c) 85% - -Correct answer--86.4% = C
The unconditional probability of a tax increase is: 0.2(0.32) +
0.8(0.6) = 54.4%.
The joint probability that the Wigs will be elected and there
will be no tax increase is: 0.8(0.4) = 32%. The sum is: 54.4 +
32 = 86.4%.
An analyst who wants to display the relationship between
two variables graphically is most likely to use:
a) a histogram
b) a scatterplot
c) a frequency polygon - -Correct answer--B = Scatterplot
Scatterplots illustrate the relationship between two
variables.
Histograms and frequency polygons show the distribution of
observations for a single variable.
Ralph will retire 15 years from today and has saved $121,000
in his investment account for retirement. He believes he will
need 37,000 at the beginning of each year for 25 Years of
retirement, with the first withdrawal on the day he retires.
2
, 3
Ralph assumes his account will earn 8%. The amount he
needs to deposit at the beginning of this year and each of the
following 14 Years (15 in all) is closest to:
a) 1350
b) 1450
c) 1550 - -Correct answer--B = 1450
Step 1:
Calculate the amount needed at retirement at t = 15, with
your calculator in BGN mode.
N = 25, FV = 0, I/Y = 8, PMT = 37,000, CPT PV = -426,564
Step 2:
Calculate the required deposits at t = 0,1,....,14 to result in a
time 15 value of 426,564, with your calculator still in BGN
mode.
PV = -121,000, N = 15, I/Y = 8, FV = 426,564, CPT PMT = -
$1,457.21
The current price of Bosto shares is $50. Over the coming
year, there is a 40% probability that share returns will be
10%, 40% probability returns will be 12.5%, and a 20%
probability share returns will be 30%. Bostos expected return
and standard deviation of returns for the coming year are
closest to:
3
