CFA Level 1 Exam Prep
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ECO3203 Exam 2 - True & False Pra... Review Quesitons Passing State exam
30 terms 22 terms 113 terms
Joshua_McAlees Preview ashly_tsosie3 Preview ethandoumbe5
Bill Fence, CFA, supervises a C: Refuse supervisory responsibility.
group of research analysts, none
of whom have earned the CFA According to Standard IV(C), Responsibilities of Supervisors, if
designation (nor are they CFA the member cannot discharge supervisory responsibilities
candidates). On several because of a poor or nonexistent compliance system, the
occasions he has attempted to member should decline in writing to accept supervisory
get his firm to adopt a responsibility until the firm adopts an adequate system.
compliance system to ensure
that applicable laws and
regulations are followed.
However, the firm's principals
have never adopted his
recommendations. Fence should
most appropriately:
A: Report the inadequacy by
submitting a complaint in writing
to the CFA Institute Professional
Conduct Program.
B: Take no further action,
because by encouraging his firm
to adopt a compliance system
he has fulfilled his obligations
under the Code and Standards.
C: Refuse supervisory
responsibility.
,In which of the following B: Confections.
industries are technological
factors least likely a significant Technological influences are relatively important in the
influence? pharmaceuticals and oil services industries, but they are
generally not a significant influence in the confections industry.
A: Pharmaceuticals.
B: Confections.
C: Oil services.
Which of the following is an C
assumption of capital market see the same risk/return distribution for a given stock.
theory? All investors:
Explanation:
A All investors select portfolios that lie along the efficient frontier,
have multiple‐period time based on their utility functions. All investors have the same one-
horizons. period time horizon, and have the same risk/return expectations.
B
select portfolios that lie above
the efficient frontier to optimize
the risk‐return relationship.
C
see the same risk/return
distribution for a given stock.
Which of the following is a C
component of the Code of strive to maintain and improve their competence and the
Ethics? CFA Institute members competence of others in the profession.
shall:
Explanation:
A Striving to maintain and improve their competence and the
disclose to their employer all competence of others in the profession is one of the
matters that reasonably could components of the Code of Ethics, whereas the other statements
be expected to interfere with are part of the Standards of Professional Conduct.
their duty to their employer or
ability to make unbiased and
objective recommendations.
B
make reasonable efforts to
detect and prevent violations by
those who are under their
supervision.
C
strive to maintain and improve
their competence and the
competence of others in the
profession.
, A financial instrument that has Answer: C
payoffs based on the price of an
underlying physical or financial Explanation:
asset is a(n): Options and futures are examples of types of derivative
securities.
A
future.
B
option.
C
derivative security.
Which of the following qualifies Answer: A
as a cumulative distribution
function? Explanation:
Because a cumulative probability function defines the probability
A that a random variable takes a value equal to or less than a given
F(1) = 0, F(2) = 0.25, F(3) = 0.50, number, for successively larger numbers, the cumulative
F(4) = 1. probability values must stay the same or increase.
B
F(1) = 0.5, F(2) = 0.25, F(3) = 0.25.
C
F(1) = 0, F(2) = 0.5, F(3) = 0.5, F(4)
= 0.
Use the following data to Answer: C
calculate the standard deviation
of the return: 50% chance of a Explanation:
12% return, 30% chance of a 10% The standard deviation is the positive square root of the
return, 20% chance of a 15% variance. The variance is the expected value of the squared
return deviations around the expected value, weighted by the
probability of each observation. The expected value is: (0.5) ×
A (0.12) + (0.3) × (0.1) + (0.2) × (0.15) = 0.12. The variance is: (0.5) × (0.12
3.0%. - 0.12)2 + (0.3) × (0.1 - 0.12)2 + (0.2) × (0.15 - 0.12)2
B = 0.0003. The standard deviation is the square root of 0.0003 =
2.5%. 0.017 or 1.7%.
C
1.7%.
A three‐year annual coupon Answer: A
bond has a par value of $1,000
and a coupon rate of 5.5%. The Explanation:
spot rate for year 1 is 5.2%, the You need the find the present value of each cash flow using the
spot rate for year two is 5.5%, spot rate that coincides with each cash flow.
and the spot rate for year three The present value of cash flow 1 is: FV = $55; PMT = 0; I/Y = 5.2%;
is 5.7%. The value of the coupon N = 1; CPT → PV = -$52.28. The present value of cash flow 2 is: FV
bond is closest to: = $55; PMT = 0; I/Y = 5.5%; N = 2; CPT → PV = -$49.42. The present
value of cash flow 3 is: FV = $1,055; PMT = 0; I/Y = 5.7%; N = 3;
A CPT → PV = -
$995.06. $893.36.
B The most you pay for the bond is the sum of: $52.28 + $49.42 +
$1,000.00. $893.36 = $995.06.
C
$937.66.
Save
Students also studied
Flashcard sets Study guides
ECO3203 Exam 2 - True & False Pra... Review Quesitons Passing State exam
30 terms 22 terms 113 terms
Joshua_McAlees Preview ashly_tsosie3 Preview ethandoumbe5
Bill Fence, CFA, supervises a C: Refuse supervisory responsibility.
group of research analysts, none
of whom have earned the CFA According to Standard IV(C), Responsibilities of Supervisors, if
designation (nor are they CFA the member cannot discharge supervisory responsibilities
candidates). On several because of a poor or nonexistent compliance system, the
occasions he has attempted to member should decline in writing to accept supervisory
get his firm to adopt a responsibility until the firm adopts an adequate system.
compliance system to ensure
that applicable laws and
regulations are followed.
However, the firm's principals
have never adopted his
recommendations. Fence should
most appropriately:
A: Report the inadequacy by
submitting a complaint in writing
to the CFA Institute Professional
Conduct Program.
B: Take no further action,
because by encouraging his firm
to adopt a compliance system
he has fulfilled his obligations
under the Code and Standards.
C: Refuse supervisory
responsibility.
,In which of the following B: Confections.
industries are technological
factors least likely a significant Technological influences are relatively important in the
influence? pharmaceuticals and oil services industries, but they are
generally not a significant influence in the confections industry.
A: Pharmaceuticals.
B: Confections.
C: Oil services.
Which of the following is an C
assumption of capital market see the same risk/return distribution for a given stock.
theory? All investors:
Explanation:
A All investors select portfolios that lie along the efficient frontier,
have multiple‐period time based on their utility functions. All investors have the same one-
horizons. period time horizon, and have the same risk/return expectations.
B
select portfolios that lie above
the efficient frontier to optimize
the risk‐return relationship.
C
see the same risk/return
distribution for a given stock.
Which of the following is a C
component of the Code of strive to maintain and improve their competence and the
Ethics? CFA Institute members competence of others in the profession.
shall:
Explanation:
A Striving to maintain and improve their competence and the
disclose to their employer all competence of others in the profession is one of the
matters that reasonably could components of the Code of Ethics, whereas the other statements
be expected to interfere with are part of the Standards of Professional Conduct.
their duty to their employer or
ability to make unbiased and
objective recommendations.
B
make reasonable efforts to
detect and prevent violations by
those who are under their
supervision.
C
strive to maintain and improve
their competence and the
competence of others in the
profession.
, A financial instrument that has Answer: C
payoffs based on the price of an
underlying physical or financial Explanation:
asset is a(n): Options and futures are examples of types of derivative
securities.
A
future.
B
option.
C
derivative security.
Which of the following qualifies Answer: A
as a cumulative distribution
function? Explanation:
Because a cumulative probability function defines the probability
A that a random variable takes a value equal to or less than a given
F(1) = 0, F(2) = 0.25, F(3) = 0.50, number, for successively larger numbers, the cumulative
F(4) = 1. probability values must stay the same or increase.
B
F(1) = 0.5, F(2) = 0.25, F(3) = 0.25.
C
F(1) = 0, F(2) = 0.5, F(3) = 0.5, F(4)
= 0.
Use the following data to Answer: C
calculate the standard deviation
of the return: 50% chance of a Explanation:
12% return, 30% chance of a 10% The standard deviation is the positive square root of the
return, 20% chance of a 15% variance. The variance is the expected value of the squared
return deviations around the expected value, weighted by the
probability of each observation. The expected value is: (0.5) ×
A (0.12) + (0.3) × (0.1) + (0.2) × (0.15) = 0.12. The variance is: (0.5) × (0.12
3.0%. - 0.12)2 + (0.3) × (0.1 - 0.12)2 + (0.2) × (0.15 - 0.12)2
B = 0.0003. The standard deviation is the square root of 0.0003 =
2.5%. 0.017 or 1.7%.
C
1.7%.
A three‐year annual coupon Answer: A
bond has a par value of $1,000
and a coupon rate of 5.5%. The Explanation:
spot rate for year 1 is 5.2%, the You need the find the present value of each cash flow using the
spot rate for year two is 5.5%, spot rate that coincides with each cash flow.
and the spot rate for year three The present value of cash flow 1 is: FV = $55; PMT = 0; I/Y = 5.2%;
is 5.7%. The value of the coupon N = 1; CPT → PV = -$52.28. The present value of cash flow 2 is: FV
bond is closest to: = $55; PMT = 0; I/Y = 5.5%; N = 2; CPT → PV = -$49.42. The present
value of cash flow 3 is: FV = $1,055; PMT = 0; I/Y = 5.7%; N = 3;
A CPT → PV = -
$995.06. $893.36.
B The most you pay for the bond is the sum of: $52.28 + $49.42 +
$1,000.00. $893.36 = $995.06.
C
$937.66.
