CFA Mock Exam (a) Afternoon Session
Which of the subsequent is maximum probably related to negative corporate governance?
A. Reduction in publicity to regulatory movements
B. Increased control and compliance tracking of company selections
C. Management of a organization to a decrease hazard profile relative to shareholder tolerance
- ANSC is accurate.
Poor governance can bring about ineffective choice making. Management may additionally
make decisions that benefit themselves at the cost of shareholders, inclusive of taking less
hazard than is appropriate to create a greater strong environment. Managing the corporation at
a lower hazard profile than essential based on shareholders' tolerance is an instance of useless
selection making. Increased control and compliance tracking are typically the result of true
company governance. A discount in exposure to regulatory movements would be the end result
of suitable, not bad, corporate governance.
When two collectively exclusive initiatives with traditional coins flows are being ranked, the net
gift cost (NPV) and internal price of return (IRR) selection policies are maximum probably to
battle when the:
A. Projects' investments are of various scale.
B. Tasks have multiple IRRs.
C. Tasks have comparable timing of coins flows. - ANSA is correct.
Conflict between the NPV and IRR decision rules can rise up whilst comparing jointly unique
tasks with traditional cash flows due to the fact 1) the dimensions of investments may
additionally vary and/or 2) the timing of the coins flows may additionally fluctuate.
When computing the coins flows for a capital task, which of the following is least likely to be
protected?
A. Financing costs
B. Opportunity expenses
C. Tax effects - ANSA is accurate.
Financing fees aren't protected in a coins glide calculation however are considered in the
calculation of the discount rate.
Which motion is maximum probably taken into consideration a secondary supply of liquidity?
A. Increasing the efficiency of cash flow management
B. Renegotiating present day debt contracts to decrease interest bills
C. Increasing the supply of financial institution lines of credit score - ANSB is correct.
Renegotiating debt contracts is a secondary source of liquidity due to the fact it may have an
effect on the business enterprise's running and/or financial positions.
A is inaccurate. Increasing coins float control efficiency is a number one source of liquidity.
, C is wrong. Increasing financial institution lines of credit is a number one supply of liquidity.
A employer's quick-time period borrowing method is maximum in all likelihood inspired via:
A. The lender's length handiest.
B. The borrower's length best.
C each the lender's length and the borrower's size. - ANSC is correct
due to the fact a "borrower's length can dictate the options available. Larger businesses can
take advantage of economies of scale to get admission to commercial paper, banker's
acceptances, and so forth. The lender's length is also an essential criterion, due to the fact large
banks have higher residence or criminal lending limits." Therefore, both the lender's size and the
borrower's length are important elements that could impact a enterprise's short-term borrowing
strategy.
Which of the subsequent is most in all likelihood considered an example of matrix pricing whilst
determining the value of debt?
A. Debt-score method handiest.
B. Yield-to-maturity approach simplest.
C. Both the yield-to-maturity and the debt-rating strategies. - ANSA is correct.
The debt-score technique is an example of matrix pricing.
All else being identical, financing brief-time period assets with the aid of issuing long-time period
debt most likely increases:
A. Default risk handiest.
B. Rollover risk best.
C. Both default chance and rollover risk. - ANSA is correct
due to the fact "a company financing quick-term belongings with long-term financing past the
term needed faces the threat that the enterprise overpays in financing cost. Asset liability
misalignment increases the threat of default and cost of capital for agencies as capital providers
call for higher returns in compensation."
Increasing the financial leverage of a corporation most possibly results in:
A. Decreased disadvantage chance for bondholders.
B. Restrained upside capacity for shareholders.
C. A deteriorated danger-go back profile for bondholders. - ANSC is accurate
because with higher ranges of financial leverage, "for a holder of debt to maturity, the return, or
upside, stays the face fee of debt plus the coupon. However, disadvantage chance for a
debtholder will increase with better leverage and the accelerated probability that the
organization will be unable to satisfy its outstanding debt responsibilities." The threat-return
profile for bondholders deteriorates as extra debt is used.
Which of the following kinds of indexes is most appropriate as a version portfolio for a patron
items change-traded fund (ETF)?
A. Fundamentally weighted
B. Sector
Which of the subsequent is maximum probably related to negative corporate governance?
A. Reduction in publicity to regulatory movements
B. Increased control and compliance tracking of company selections
C. Management of a organization to a decrease hazard profile relative to shareholder tolerance
- ANSC is accurate.
Poor governance can bring about ineffective choice making. Management may additionally
make decisions that benefit themselves at the cost of shareholders, inclusive of taking less
hazard than is appropriate to create a greater strong environment. Managing the corporation at
a lower hazard profile than essential based on shareholders' tolerance is an instance of useless
selection making. Increased control and compliance tracking are typically the result of true
company governance. A discount in exposure to regulatory movements would be the end result
of suitable, not bad, corporate governance.
When two collectively exclusive initiatives with traditional coins flows are being ranked, the net
gift cost (NPV) and internal price of return (IRR) selection policies are maximum probably to
battle when the:
A. Projects' investments are of various scale.
B. Tasks have multiple IRRs.
C. Tasks have comparable timing of coins flows. - ANSA is correct.
Conflict between the NPV and IRR decision rules can rise up whilst comparing jointly unique
tasks with traditional cash flows due to the fact 1) the dimensions of investments may
additionally vary and/or 2) the timing of the coins flows may additionally fluctuate.
When computing the coins flows for a capital task, which of the following is least likely to be
protected?
A. Financing costs
B. Opportunity expenses
C. Tax effects - ANSA is accurate.
Financing fees aren't protected in a coins glide calculation however are considered in the
calculation of the discount rate.
Which motion is maximum probably taken into consideration a secondary supply of liquidity?
A. Increasing the efficiency of cash flow management
B. Renegotiating present day debt contracts to decrease interest bills
C. Increasing the supply of financial institution lines of credit score - ANSB is correct.
Renegotiating debt contracts is a secondary source of liquidity due to the fact it may have an
effect on the business enterprise's running and/or financial positions.
A is inaccurate. Increasing coins float control efficiency is a number one source of liquidity.
, C is wrong. Increasing financial institution lines of credit is a number one supply of liquidity.
A employer's quick-time period borrowing method is maximum in all likelihood inspired via:
A. The lender's length handiest.
B. The borrower's length best.
C each the lender's length and the borrower's size. - ANSC is correct
due to the fact a "borrower's length can dictate the options available. Larger businesses can
take advantage of economies of scale to get admission to commercial paper, banker's
acceptances, and so forth. The lender's length is also an essential criterion, due to the fact large
banks have higher residence or criminal lending limits." Therefore, both the lender's size and the
borrower's length are important elements that could impact a enterprise's short-term borrowing
strategy.
Which of the subsequent is most in all likelihood considered an example of matrix pricing whilst
determining the value of debt?
A. Debt-score method handiest.
B. Yield-to-maturity approach simplest.
C. Both the yield-to-maturity and the debt-rating strategies. - ANSA is correct.
The debt-score technique is an example of matrix pricing.
All else being identical, financing brief-time period assets with the aid of issuing long-time period
debt most likely increases:
A. Default risk handiest.
B. Rollover risk best.
C. Both default chance and rollover risk. - ANSA is correct
due to the fact "a company financing quick-term belongings with long-term financing past the
term needed faces the threat that the enterprise overpays in financing cost. Asset liability
misalignment increases the threat of default and cost of capital for agencies as capital providers
call for higher returns in compensation."
Increasing the financial leverage of a corporation most possibly results in:
A. Decreased disadvantage chance for bondholders.
B. Restrained upside capacity for shareholders.
C. A deteriorated danger-go back profile for bondholders. - ANSC is accurate
because with higher ranges of financial leverage, "for a holder of debt to maturity, the return, or
upside, stays the face fee of debt plus the coupon. However, disadvantage chance for a
debtholder will increase with better leverage and the accelerated probability that the
organization will be unable to satisfy its outstanding debt responsibilities." The threat-return
profile for bondholders deteriorates as extra debt is used.
Which of the following kinds of indexes is most appropriate as a version portfolio for a patron
items change-traded fund (ETF)?
A. Fundamentally weighted
B. Sector
