CFA Investment Foundations with questions and complete rationales
Which of the following parties most likely acts as a custodian and as a monitor? - correct
answer-Depositories
When valuing a fixed-rate bond by using the discounted cash flow approach, the discount
rate used in the valuation is typically the: - correct answer-investor's required rate of return
for the bond
Rebalancing is most likely to be associated with an index that is - correct answer-equal
weighted.
Investment vehicles that use multiple hedge fund managers with the objective of
outperforming the market are known as: - correct answer-fund of funds
The most effective way to compare investments with the same initial outflow that have
different cash flows at different points in time is to determine each investment's - correct
answer-Present Value
Compared with a regular public offering, in a shelf registration, a company: - correct
answer-can sell shares over a longer period of time
One return measure that does not consider the risks taken or the returns achieved by
similar investments is - correct answer-holding-period return
The corporate action most likely taken to mitigate the effects of exercised warrants is: -
correct answer-Share repurchase
The movement of funds through a financial market is most likely a form of - correct answer-
direct finance
, When an investment professional is explaining her obligations as a supervisor, she should
state, "As part of my key obligations, I must: - correct answer-always identify all to whom
my duty of obligation is owed".
Sales Practice Rules may be implemented by regulators to control: - correct answer-
advertising content
The cross-price elasticity of demand for two products is -1.5%. This result indicates that
the two products are: - correct answer-Complements
The demand curve for a good has shifted to the left. The most likely explanation for this
shift is that the price of - correct answer-a substitute has fallen
Average fixed costs will continue to fall if a firm's level of production - correct answer-
following the law of diminishing returns
Which of the following is best described as a coincident economic indicator? - correct
answer-industrial production
Net present value can be used to compare competing investments - correct answer-when
outflows occur at times other than the initial outflow.
The debt securities created and issued under a securitisation are backed by - correct
answer-a pool of other debt securities
Using the discounted cash flow (DCF) approach, the current value of a fixed-rate coupon
bond most likely reflects coupon payments: - correct answer-and principal at maturity
discounted at a rate determined by investors.
Which of the following parties most likely acts as a custodian and as a monitor? - correct
answer-Depositories
When valuing a fixed-rate bond by using the discounted cash flow approach, the discount
rate used in the valuation is typically the: - correct answer-investor's required rate of return
for the bond
Rebalancing is most likely to be associated with an index that is - correct answer-equal
weighted.
Investment vehicles that use multiple hedge fund managers with the objective of
outperforming the market are known as: - correct answer-fund of funds
The most effective way to compare investments with the same initial outflow that have
different cash flows at different points in time is to determine each investment's - correct
answer-Present Value
Compared with a regular public offering, in a shelf registration, a company: - correct
answer-can sell shares over a longer period of time
One return measure that does not consider the risks taken or the returns achieved by
similar investments is - correct answer-holding-period return
The corporate action most likely taken to mitigate the effects of exercised warrants is: -
correct answer-Share repurchase
The movement of funds through a financial market is most likely a form of - correct answer-
direct finance
, When an investment professional is explaining her obligations as a supervisor, she should
state, "As part of my key obligations, I must: - correct answer-always identify all to whom
my duty of obligation is owed".
Sales Practice Rules may be implemented by regulators to control: - correct answer-
advertising content
The cross-price elasticity of demand for two products is -1.5%. This result indicates that
the two products are: - correct answer-Complements
The demand curve for a good has shifted to the left. The most likely explanation for this
shift is that the price of - correct answer-a substitute has fallen
Average fixed costs will continue to fall if a firm's level of production - correct answer-
following the law of diminishing returns
Which of the following is best described as a coincident economic indicator? - correct
answer-industrial production
Net present value can be used to compare competing investments - correct answer-when
outflows occur at times other than the initial outflow.
The debt securities created and issued under a securitisation are backed by - correct
answer-a pool of other debt securities
Using the discounted cash flow (DCF) approach, the current value of a fixed-rate coupon
bond most likely reflects coupon payments: - correct answer-and principal at maturity
discounted at a rate determined by investors.
