100% Accurate Answers! Dec-2023 CFA-Level-I Actual Real Exam Questions
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NEW QUESTION # 827
A hedge fund charges a base fee of 1.5% and an incentive fee of 15% on returns in excess of the risk-free rate. If the fund's gross return is 8%, and the risk-free rate is 2.5%, the net return to the investor is:
- A. 4.65%
- B. 5.32%
- C. 5.68%
Answer: C
Explanation:
Total fees expressed as a percentage equal: Fees (%) = 1.5% + 0.15 (8% - 2.5%) = 2.325%
Net return = 8% - 2.325% = 5.675%, or 5.68%
NEW QUESTION # 828
Kandy Miller is undecided between purchasing the four period bond or a series of one period bonds.
Given the forward rates and spot rates provided below, what would Kandy earn on the four period spot rate bond?Spot Rates and Six Month Forward Rates (Annualized Rates on a Bond Equivalent Basis)
- A. 6.0481
- B. 3.6289
- C. 5.2592
Answer: C
Explanation:
While this looks like a "bootstrapping" problem, it is actually much easier. The spot rate is nothing more than all of the forward rates multiplied together taken to the nth root. While the calculation is simpler than the bootstrapping problem, there are still a few areas which trap some candidates. For example, each spot rate is annualized and needs to be divided by two to get the effective period rate. And, equally important, after all of the forward rates have been multiplied by each other (being sure to add "1" to each rate before multiplying) it is important to take the nth root (depending on the number of periods) and to subtract "1" afterwards. The detailed calculation is shown below:
((((1+0.047779/2) 3 x (1+0.0671/2))(1/4))-1) x 2 =0.052592. (Note: If the candidate would prefer to see the number in "percentage" form it is necessary to multiply by "200" rather than by "2")
NEW QUESTION # 829
Which technical indictor brings together momentum and trend?
- A. Stochastic oscillator.
- B. MACD
- C. Relative strength index.
Answer: B
Explanation:
By comparing EMAs of different periods, the MACD line illustrates changes in the trend of a security. Then by comparing that difference to an average, an analyst can chart subtle shifts in the stock's trend. Therefore MACD brings together momentum and trend in one indicator.
NEW QUESTION # 830
The cum-coupon transaction price is 125-3/16 for a semi-annual pay, 8-5/8% coupon bond. 2.0 months have elapsed since the last coupon payment. What is the accrued interest for $2,000,000 par value of this bond?
- A. $28,750
- B. $14,375
- C. $57,500
Answer: A
Explanation:
Accrued interest = (2/6) x (1/2) x (8-5/8%) x $2,000,000 = $28,750
NEW QUESTION # 831
Studies suggest that professional portfolio managers do not beat the market on a risk-adjusted basis because:
- A. transactions costs and research expenses offset much of the gains from timing and analysis
- B. their ability to analyze individual stocks is not superior most of the time
- C. of the restrictions placed upon them by risk-averse shareholders
Answer: A
Explanation:
The most recent studies showed that analysts appear to have superior timing and analysis ability, but they cannot compensate for the higher cost of doing the analysis. Risk aversion of the client should be irrelevant to the performance on a risk-adjusted basis.
NEW QUESTION # 832
The larger the critical value on the z-statistic,
- A. the easier it is to accept the null hypothesis.
- B. the easier it is to reject the null hypothesis.
- C. the harder it is to reject the null hypothesis.
Answer: C
Explanation:
To reject a null hypothesis, the z-statistic must be larger in magnitude than the critical value for a given level of significance.
NEW QUESTION # 833
In terms of CFA Institute's Standards of Professional Conduct when dealing with the procedures for compliance per Standard IV (A): Loyalty to Employer, which of the following ways is NOT effective methods for member compliance? Members:
- A. Acting independently of their employer need not disclose to clients the identity of the member's employer.
- B. Seeking other employment should not take any records or files to the new employer without the written permission of the employer.
- C. Seeking other employment should not contact existing clients or potential clients prior to leaving their employer.
Answer: A
Explanation:
A member should also disclose to prospective clients the identity of his employer, and clarify that he is working independently of his employer, and even state the fees that the employer would charge for a similar service.
Members seeking other employment should not contact existing clients or potential clients prior to leaving their employer. In addition they should not take any records or files to the new employer without the written permission of the employer.
NEW QUESTION # 834
In 2010, Patriot Corporation found that they overstated their inventory by $5,000 in 2008. How would this affect the company's net income in 2010 (Assume the tax rate of 40%)?
- A. it is understated by $5,000.
- B. it is overstated by $5,000.
- C. it is not affected.
Answer: C
Explanation:
The effect of the error in 2008 on net income will be counterbalanced in 2009, leaving the net income of 2010 unaffected.
NEW QUESTION # 835
Which statement is true?
- A. A company may belong to different industries.
- B. Succeeding in an industry with low barriers is easy.
- C. The construction of a peer group is an objective process.
Answer: A
Explanation:
A company may engage in more than one significant business activity. A is false: barriers to entry are not barriers to success. C is false: it is a subjective process.
NEW QUESTION # 836
Variable X is distributed normally and has a mean of 10. If the probability that an observation of X will be negative is 0.16, what is the coefficient of variation of X?
- A. 0.32
- B. 1.0
- C. 0.1
Answer: B
Explanation:
The probability that X lies a distance 10 below the mean is given to be 0.16. Since the normal distribution is symmetric about the mean, this implies that the probability that X will be 10 greater than the mean is also 0.16. Thus, the probability that X lies between 0 and 20 is 1-0.16-0.16 = 0.68. For a normal distribution, 68% of the observations lie within one standard deviation of the mean. Hence, the standard deviation of X equals 10. The coefficient of variation is then equal to standard deviation/mean =
1 0/10 = 1.
NEW QUESTION # 837
Suppose that in the pizza delivery market, as the number of stores increases, prices and average costs change in the following manner: 1 store; price=$12, average cost=$6, 2 stores; price=$10, average cost=$7, 3 stores; price=$8, average cost=$8, 4 stores; price=$6, average cost=$9. How many pizza delivery firms will enter this market in the long run?
- A. 0
- B. 1
- C. 2
Answer: B
Explanation:
In a competitive market, firms will continue to enter until the price equals the average cost.
NEW QUESTION # 838
Typically an RSI is considered oversold if it is:
- A. between 30 to 70.
- B. above 70.
- C. below 30.
Answer: C
Explanation:
RSI is considered overbought if it is above 70 and oversold if it is below 30.
NEW QUESTION # 839
Vickery, a trustee for the pension plan of Richardson Industries, has just received a commission schedule from XYZ Brokerage, a firm with which he is not currently trading. The fee schedule is lower than that charged by ABC Brokerage, the firm Vickery now uses for most transactions. ABC also provides research data and performance measurement for the pension plan, services which XYZ is not equipped to handle. Vickery is concerned that he may be violating his fiduciary duty of loyalty by not using the lowest cost brokerage firm. Which one of the following statements is true?
- A. Vickery will not violate his fiduciary duty unless he personally profits from his relationship with ABC
- B. Vickery will violate his fiduciary duty unless he immediately transfers his entire business to XYZ.
- C. Vickery can continue to trade through ABC if he determines, in good faith, that the value of the services are commensurate with the cost.
Answer: C
NEW QUESTION # 840
In 2001, a portfolio with 6 stocks had the following total return rates in percentages:27.98%, 44.94%,
54.53%, -52.68%, 10.21%, 0.50%. The average return rate for this portfolio was 4.92% and the standard deviation was 37.66%. How confident are you that the return rates will fall within -51.57% and 61.41%?
- A. 85%
- B. 56%
- C. 75%
Answer: B
Explanation:
-51.57% is 1.5 standard deviations below the mean and 61.41% is 1.5 standard deviations
2
above the mean. Therefore, we are confident that 1 - 1/1.5 = 56% of the return rates will fall within the specified range (Chebyshev's Inequality).
NEW QUESTION # 841
Which of the following statements is true with respect to a statistical decision and an economic decision?
I). When in conflict, a statistical decision must override an economic decision since the former is an objective test.
II). A statistical decision will always be objective whereas an economic decision may be subjective.
III). If the statistical decision is not to reject the null, it simply implies that the sample results were inconclusive.
IV). A statistical decision may easily be influenced by changing the level of significance of the test.
- A. IV only.
- B. II, III and IV.
- C. I and III.
Answer: A
Explanation:
I and II are incorrect since a statistical output could very well be manipulated by what's inputted into the test. Therefore, a decision must make both statistical and economic sense.
III is incorrect because if the statistical decision is not to reject the null, it simply implies that the sample results were not strong enough to reject the null.
NEW QUESTION # 842
The capital asset pricing model (CAPM) states that:
- A. The expected rate of return on an investment is proportional to its beta
- B. The expected risk premium on an investment is proportional to its beta
- C. The expected rate of return on an investment depends on the risk-free rate and the market rate of return
Answer: B
NEW QUESTION # 843
Which of the following would not be an example that would require a nonparametric test?
- A. The population, on which the tests are being conducted, is known for a fact not to be normally distributed.
- B. The variances between two sets of population need to be tested in order to determine if they are equal.
- C. The data being analyzed is a set of rankings as opposed to actual values for a set of occurrences.
Answer: B
Explanation:
Variance and arithmetic mean are the two most important parameters of a population. Hence, any test involving these two variables would be considered as a parametric test.
NEW QUESTION # 844
An investor wants to study movements of the interest rate. He will collect data every quarter and register whether the interest rate decreased, increased, or remained the same in each quarter. Should this investor opt to treat movements of the interest rate as a continuous or a discrete random variable?
- A. Continuous
- B. Either one
- C. Discrete
Answer: C
Explanation:
Discrete. Although the interest rate is a continuous random variable, its movement is discrete because there are only 3 possible outcomes: an increase, a decrease, or stay the same.
NEW QUESTION # 845
A current account surplus reflects:
- A. high domestic private savings and investment, and government deficit.
- B. high domestic private savings and investment, and government surplus.
- C. high domestic private savings, low domestic investment, and government surplus.
Answer: C
Explanation:
CA = Sp + Sg - I.
NEW QUESTION # 846
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