CFA-LEVEL-1 Online Practice Questions and Answers

The disclosures for retroactive compliance apply to composites formulated prior to ________.

A. January, 1989

B. January, 1992

C. January, 1991

D. January, 1993

E. January, 1990

Joan, an investment counselor, states in her firm's written promotional material that she is a CFA candidate. She has indeed enrolled in the program, but failed Level I five years ago, has not taken any exams since and is not enrolled in the next exam. Which of the following statements is correct?

A. Joan is in compliance with the correct use of the CFA designation because she states she is a candidate.

B. Joan is not in compliance with the correct use of the CFA designation. To be in compliance she must state she is a Level I candidate.

C. None of these answers.

D. Joan is not in compliance with the correct use of the CFA designation. Because she is not registered for the next exam, she is not a candidate.

Three defective electric toothbrushes were accidentally shipped to a drugstore by the manufacturer along with 17 nondefective ones. What is the probability that the first two electric toothbrushes sold will be returned to the drugstore because they are defective?

A. 1/4 or 0.25

B. 3/20 or 0.15

C. None of these answers

D. 3/17 or 0.176

E. 3/190 or 0.01579

Each salesperson in a large department store chain is rated either below average, average, or above average with respect to sales ability. Each salesperson is also rated with respect to his or her potential for advancement either fair, good, or excellent. These traits are the 500 salespeople were cross classified into the following table.

Sales Ability Potential for Advancement Fair Good Excellent Below Average 161222 Average 456045 Above Average 9372135

What is the probability that a salesperson selected at random will have average sales ability and good potential for advancement?

A. 0.09

B. None of these answers

C. 0.12

D. 0.525

E. 0.30

If the Fed introduces an expansionary monetary policy:

I. real interest rates fall.

II. the U.S. dollar appreciates.

III.

the U.S. exports increase relative to imports.

A.

II and III

B.

I, II and III

C.

I and II

D.

I and III

Under an inflationary environment with stable inventories, a firm may change to FIFO from LIFO due to which of the following reason(s)?

I. To allow earnings manipulation.

II. To improve the reported working capital.

III. To reduce tax drain on cash.

IV.

Show a more accurate representation of reported assets than LIFO.

A.

II and IV

B.

III only

C.

I and IV

D.

I and III

Douglas Morin is discussing market efficiency with some college students who are visiting his firm. Morin states that market efficiency would increase if the cost of trading decreases, if the cost of information decreases, and if arbitrageurs had less capital. Morin is least likely to be correct in his opinion about:

A. the cost of trading

B. the cost of information

C. arbitrageurs

Tamber Benz, CFA, recently joined Bay Area Investment Group as a personal financial planner. Today, she has a meeting with a client interested in equity index funds, with a particular interest in learning about the source and direction of biases. In preparation for this meeting, she makes some quick notes (relying on her memory). These notes are listed below. She then finds her well-worn CFA study notes and checks her memory. After reviewing her notes, which of the following choices does she determine is INCORRECT?

A. The Dow Jones Industrial Index has a built-in downward bias.

B. An index such as the Valueline Composite Average is constructed by purchasing an equal number of shares of each stock in the index, and will have a downward bias when geometric averaging is used to compute the return.

C. One problem with an index such as the SandP 500 is that firms with greater market capitalization have more impact than other firms.

D. A market value-weighted index, such as the New York Stock Exchange Index, accurately reflects the impact of price changes on wealth.

If the earnings per share on the Dow Jones were to fall, the Dow Jones:

A. the question is based on a false premise. Dow Jones is an index and does not have an associated "earnings per share."

B. will increase in value.

C. will decrease in value.

D. may increase or decrease in value.

A block uptick-downtick ratio of 0.67 would be viewed by technical analysts as

A. a neutral sign.

B. a bearish sign.

C. a bullish sign.

D. a sign that the market is oversold.

E. a sign that the market is overbought.