CFA Level CFA-Level-I Dumps | Updated Oct 09, 2021 - DumpsReview
Master 2021 Latest The Questions CFA Level and Pass CFA-Level-I Real Exam!
NEW QUESTION 118
You are given the following information regarding a random variable:
P(1 x <= 5) is equal to:
- A. 0.1.
- B. 0.9
- C. 0.6.
Answer: B
Explanation:
P(1 x <= 5) is equal to 0.9: 0.2 + 0.3 + 0.3 + 0.1 = 0.9 or 1 - 0.1 = 0.9.
NEW QUESTION 119
Which of the following is/are true about a normal distribution?
I). It is a bimodal distribution.
II). It can be characterized completely by a single parameter.
III). It ranges from negative infinity to positive infinity.
IV). It is positively skewed.
- A. II and III
- B. III only
- C. III and IV
Answer: B
Explanation:
A normal distribution is completely characterized by 2 parameters, mean and variance. It ranges from negative infinity to positive infinity, has a single mode or peak (occurring at the mean), is symmetrical about the mean and has zero skewness.
NEW QUESTION 120
A call provision is
- A. the right of the underlying borrowers in a pool of loan to repay an amount in excess of the scheduled principal repayment.
- B. the right of the underlying borrowers in a pool of loan to repay an amount that represents a deficit in relation to the scheduled principal repayment.
- C. the right of the issuer to retire the issue prior to the stated maturity date.
Answer: C
Explanation:
A call provision is the right of the issuer to retire the issue prior to the stated maturity date.
NEW QUESTION 121
According to the quantity theory of money, which one of the following economic variables would change in response to an increase in the money supply?
- A. prices
- B. employment
- C. velocity
Answer: A
Explanation:
The quantity theory of money implies that the existing money stock M multiplied by velocity V equals the nominal GDP (output times the price level). In order to maintain the equality, if M increases, the price level P must also increase.
NEW QUESTION 122
Which of the following components of risk is most relevant in terms of determining required return?
- A. Systematic risk
- B. Total risk
- C. Unsystematic risk
Answer: A
Explanation:
Systematic risk: risk inherent in an investment related to movements in the market that cannot be diversified away.
NEW QUESTION 123
A firm had an asset with a carrying value of $600,000. The estimated future discounted cash flows from the use of the asset have decreased to $300,000. If the fair value of the asset is $350,000, an impairment loss should be recognized in the amount of (Under U.S. GAAP):
- A. $300,000
- B. $250,000
- C. $50,000
Answer: B
Explanation:
The loss on impairment should be recognized for the excess of the fair value of the asset over the carrying value of the asset, if the fair value is available. If the fair value is not available, the discounted future cash flows can be used.
NEW QUESTION 124
The demand curve of a monopolist is
- A. downward sloping and below the marginal revenue.
- B. downward sloping and above the marginal revenue curve.
- C. identical to the demand curve faced by individual price-taker firms.
Answer: B
Explanation:
The demand curve of a monopolist looks the same as that of any price-searcher firm, i.e. it is downward sloping. The marginal revenue curve lies below it, i.e. P > MR, because the firm must cut price on all units to sell more output.
NEW QUESTION 125
Which of the following statements is recommended with regards to personal investing?
I). Restrictions on participation in an IPO of equity or equity-related securities.
II). Preclearance of all trades.
III). Disclosure of all holdings in which the employee has a beneficial interest.
- A. I and III.
- B. I, II and III.
- C. II and III.
Answer: B
NEW QUESTION 126
An analyst has gathered the following information about Barnstabur, Inc. for the year 2001:
Reported net income of $30,000.
*
5,000 shares of common stock and 2,000 shares of 8 percent, $90 par preferred stock
*
outstanding during the whole year.
During 2000, Barnstabur issued at par, $60,000 of par, 6.0 percent convertible bonds, with each
*
of the 60 bonds convertible into 110 shares of the Barnstabur common stock.
If Barnstabur's effective tax rate is 40 percent what will Barnstabur report for 2001's diluted earnings per share (EPS)?
- A. $1.66.
- B. $2.36.
- C. $1.53.
Answer: C
Explanation:
diluted EPS = adjusted earnings after conversion (EAC) / weighted average plus potential common shares outstanding.
Step 1: Calculate Adjusted EAC preferred dividends = convertible preferred dividends = (0.08)(90)(2,000)
= 14,400 convertible debt interest = (60,000)(0.06)(1 - 0.40) = 2,160 adjusted EAC = (30,000 - 14,400 +
2 ,160) = $17,760
Step 2: Calculate Weighted average plus potential common shares outstanding. Step 3: Calculate Diluted
EPS Diluted EPS = 17,760 / 11,600 = $1.53.
NEW QUESTION 127
Which of the following will give rise to a deferred tax liability?
- A. Taxes payable (owed) are more than income tax expense reported on the income statement
- B. Revenue is recognized earlier for financial purposes than for tax return purposes
- C. An expense is recognized for financial purposes before it is recognized for tax purposes
Answer: B
Explanation:
A deferred tax liability will arise when taxable income is less than financial reporting income.
NEW QUESTION 128
If a purely competitive firm seeks to maximize profit, the firm should
- A. choose the output where per-unit profit is greatest.
- B. increase output whenever marginal cost is less than average total cost.
- C. increase output whenever price exceeds marginal cost.
Answer: C
Explanation:
The purely competitive firm maximizes profit when price is equal to marginal cost. If marginal cost is below price, the firm should expand output until marginal cost rises enough to be equal to price.
NEW QUESTION 129
The quantity of real money that people plan to hold depends on these factors:
I). The price level.
II). The nominal interest rate.
III). Real GDP.
IV). Financial innovation.
- A. I and II.
- B. All of them.
- C. II, III and IV.
Answer: C
Explanation:
All of the 4 factors affect the quantity of nominal money people hold. However, the price level does not affect the real money people hold.
NEW QUESTION 130
Which statement is false based on the real business cycle theory?
- A. Real business cycle theory regards random fluctuations in productivity as the main source of economic fluctuations.
- B. A period of rapid productivity growth brings an expansion, and a decrease in productivity triggers a recession.
- C. Productivity shocks are as likely to be caused by changes in aggregate demand as by technological change.
Answer: C
Explanation:
This is actually one of the main criticisms of RBC theory.
NEW QUESTION 131
Which of the following statements is (are) true with respect to valuation impairments under the US
GAAP?
I). An asset is deemed as impaired if its book value exceeds its expected discounted cash flows.
II). The amount of the write-down is equal to the difference between the asset's book value and the present value of its expected cash flows even if the fair market value is available.
III). The amount of the write-down must appear on the income statement as part of continuing operations.
IV). Once the impairment has been eliminated, the asset's book value may be written back up again to better reflect economic reality.
- A. I and II.
- B. III and IV.
- C. III only.
Answer: C
Explanation:
I is incorrect because the rule stipulates that the book value of the asset must exceed its undiscounted cash flows.
II is incorrect because the amount of the write-down is equal to the difference between the asset's book value and its fair market value (if it is available).
IV is incorrect because once an asset is written down, it may not be written back up again, even as the circumstances turn favorable again.
NEW QUESTION 132
What is the only source in the financial statements for learning about cash generation?
- A. the balance sheet
- B. the statement of cash flows
- C. the income statement
Answer: B
Explanation:
The statement of cash flows is the only source in the financial statements for learning about cash generation. The statement of cash flows provides information about cash inflows and cash outflows during an accounting period.
NEW QUESTION 133
The _____ is the period of time between the receipt of inventory and the payment for it.
- A. accounts payable period.
- B. operating cycle.
- C. cash cycle.
Answer: A
Explanation:
The cash cycle begins once the inventory is paid for. The period of time between the receipt of inventory and payment for it is just a part of the operating cycle.
NEW QUESTION 134
Automatic stabilizers in the economy smooth business cycles by:
- A. increasing transfer payments during recessions and decreasing tax collections during inflationary periods.
- B. decreasing transfer payments during recessions and increasing tax collections during inflationary periods.
- C. increasing transfer payments during recessions and increasing tax collections during inflationary periods.
Answer: C
Explanation:
During recessions, unemployment insurance and other transfer payments increase, and thus consumption does not fall by as much. During period when income is high (and thus there are possibly inflation concerns), more taxes are collected because taxes are proportional to income. Thus consumption does not increase as much and does not put as much inflationary pressure on the economy.
NEW QUESTION 135
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