CFA Level 1 Mock Exam B: Morning
Questions And Answers With Verified
Solutions 100% Correct Rated A+
According to the CFA Institute Code of Ethics and Standards of Professional
Conduct, trading on material nonpublic information is least likely to be prevented
by establishing: - ANSWER✔✔Selective Disclosure
After a firm presents a minimum required number of years of GIPS-compliant
performance, the firm must present an additional year of performance each year,
building up to a minimum of: - ANSWER✔✔10 years of GIPS-compliant
performance
After a firm presents a minimum of five years of GIPS-compliant performance, the
firm must present an additional year of performance each year, building up to a
minimum of 10 years of GIPS-compliant performance.
Disclosure of confidential CFA exam information will most likely be detected by
the Professional Conduct staff through: - ANSWER✔✔monitoring online and
social media
Which of the following is *least* likely part of the CFA Institute Standards of
Professional Conduct, Standard V(B)-Communication with Clients and
Prospective Clients? Members and candidates must: - ANSWER✔✔make
reasonable efforts to ensure that when communicating investment performance
information it is fair, accurate, and complete.
An individual wants to be able to spend €80,000 per year for an anticipated 25
years in retirement. To fund this retirement account, he will make annual deposits
of €6,608 at the end of each of his working years. He can earn 6% compounded
annually on all investments. The minimum number of deposits that are needed to
,reach his retirement goal is closest to: - ANSWER✔✔Using a financial calculator,
the funds needed at retirement (R on the timeline) are calculated: N = 25; I/Y =
6%; PMT = €80,000; Future value (FV) = €0; Mode = End. The calculated present
value (PV) is €1,022,668.
PV = A[1−1(1+r)Nr]
= 80,000[1−1(1.06)250.06]
= 1,022,688
Then, €1,022,668 is used as the FV (at R on the timeline) for the accumulation
phase annuity as per: I/Y = 6%; PV = €0; PMT = −€6,608; FV = €1,022,668;
Mode = End. The computed N is 40
A company has an unsecured line of credit and needs to maintain its EBIT-to-
interest coverage ratio greater than 2.0. Its EBIT is estimated to be between $36
million and $48 million, with all values equally likely. If the forecasted interest
charge for the year is $20 million, the probability that EBIT/interest will be more
than 2.0 is closest to: - ANSWER✔✔The EBIT-to-interest ratio is equal to 2.0
when the EBIT is $40 million. Given that the values between $36 million and $48
million are equally likely, the probability of the ratio being equal to or less than 2.0
is 33.3% (= [$40 million − $36 million]/[$48 million − $36 million]).
Consequently, the probability of the ratio being greater than 2.0 is 66.7% (i.e., 1 −
Probability of the ratio being equal to or less than 2.0).
The variance of returns of Asset A is 625. The variance of returns of Asset B is
1,225. The covariance of returns between Asset A and Asset B is 600. The
correlation of returns between Asset A and Asset B is closest to: -
ANSWER✔✔ρ(Ri,Rj) = Cov(Ri,Rj)/σ(Ri)σ(Rj)
where
, Ri and Rj = the returns of assets i and j
Cov(Ri,Rj) = the covariance of returns between assets i and j
σ(Ri) and σ(Rj) = the standard deviations of returns of assets i and j
In this problem, the correlation is 600(625√×1,225√)/=0.6857~0.69.
The central limit theorem is best described as stating that the sampling distribution
of the sample mean will be approximately normal for large-size samples: -
ANSWER✔✔for populations described by any probability distribution
Given a large random sample, which of the following types of data are least
appropriately analyzed with nonparametric tests? - ANSWER✔✔numerical values
nonparametric tests - ANSWER✔✔primarily concerned with ranks, signs, or
groups and they are used when numerical parameters are not known or do not meet
assumptions about distributiosn
A group of fund analysts have to select the first, second, and third best fund
manager of the year for 2012 based on their subjective judgment. If 10 fund
managers are candidates for the three awards, the number of ways in which each
analyst can make his ranking is closest to:
look up other counting problems as well - ANSWER✔✔This problem is a
counting one in which order does matter. For this reason, use the permutation
formula Prn=n!(n−r)!,
Questions And Answers With Verified
Solutions 100% Correct Rated A+
According to the CFA Institute Code of Ethics and Standards of Professional
Conduct, trading on material nonpublic information is least likely to be prevented
by establishing: - ANSWER✔✔Selective Disclosure
After a firm presents a minimum required number of years of GIPS-compliant
performance, the firm must present an additional year of performance each year,
building up to a minimum of: - ANSWER✔✔10 years of GIPS-compliant
performance
After a firm presents a minimum of five years of GIPS-compliant performance, the
firm must present an additional year of performance each year, building up to a
minimum of 10 years of GIPS-compliant performance.
Disclosure of confidential CFA exam information will most likely be detected by
the Professional Conduct staff through: - ANSWER✔✔monitoring online and
social media
Which of the following is *least* likely part of the CFA Institute Standards of
Professional Conduct, Standard V(B)-Communication with Clients and
Prospective Clients? Members and candidates must: - ANSWER✔✔make
reasonable efforts to ensure that when communicating investment performance
information it is fair, accurate, and complete.
An individual wants to be able to spend €80,000 per year for an anticipated 25
years in retirement. To fund this retirement account, he will make annual deposits
of €6,608 at the end of each of his working years. He can earn 6% compounded
annually on all investments. The minimum number of deposits that are needed to
,reach his retirement goal is closest to: - ANSWER✔✔Using a financial calculator,
the funds needed at retirement (R on the timeline) are calculated: N = 25; I/Y =
6%; PMT = €80,000; Future value (FV) = €0; Mode = End. The calculated present
value (PV) is €1,022,668.
PV = A[1−1(1+r)Nr]
= 80,000[1−1(1.06)250.06]
= 1,022,688
Then, €1,022,668 is used as the FV (at R on the timeline) for the accumulation
phase annuity as per: I/Y = 6%; PV = €0; PMT = −€6,608; FV = €1,022,668;
Mode = End. The computed N is 40
A company has an unsecured line of credit and needs to maintain its EBIT-to-
interest coverage ratio greater than 2.0. Its EBIT is estimated to be between $36
million and $48 million, with all values equally likely. If the forecasted interest
charge for the year is $20 million, the probability that EBIT/interest will be more
than 2.0 is closest to: - ANSWER✔✔The EBIT-to-interest ratio is equal to 2.0
when the EBIT is $40 million. Given that the values between $36 million and $48
million are equally likely, the probability of the ratio being equal to or less than 2.0
is 33.3% (= [$40 million − $36 million]/[$48 million − $36 million]).
Consequently, the probability of the ratio being greater than 2.0 is 66.7% (i.e., 1 −
Probability of the ratio being equal to or less than 2.0).
The variance of returns of Asset A is 625. The variance of returns of Asset B is
1,225. The covariance of returns between Asset A and Asset B is 600. The
correlation of returns between Asset A and Asset B is closest to: -
ANSWER✔✔ρ(Ri,Rj) = Cov(Ri,Rj)/σ(Ri)σ(Rj)
where
, Ri and Rj = the returns of assets i and j
Cov(Ri,Rj) = the covariance of returns between assets i and j
σ(Ri) and σ(Rj) = the standard deviations of returns of assets i and j
In this problem, the correlation is 600(625√×1,225√)/=0.6857~0.69.
The central limit theorem is best described as stating that the sampling distribution
of the sample mean will be approximately normal for large-size samples: -
ANSWER✔✔for populations described by any probability distribution
Given a large random sample, which of the following types of data are least
appropriately analyzed with nonparametric tests? - ANSWER✔✔numerical values
nonparametric tests - ANSWER✔✔primarily concerned with ranks, signs, or
groups and they are used when numerical parameters are not known or do not meet
assumptions about distributiosn
A group of fund analysts have to select the first, second, and third best fund
manager of the year for 2012 based on their subjective judgment. If 10 fund
managers are candidates for the three awards, the number of ways in which each
analyst can make his ranking is closest to:
look up other counting problems as well - ANSWER✔✔This problem is a
counting one in which order does matter. For this reason, use the permutation
formula Prn=n!(n−r)!,
