» CFA 1 – 10 questions

In the event of bankruptcy, which of the following is most accurate?

Junior subordinated loans are subordinate to senior subordinated loans.

Senior secured loans are subordinate to subordinated loans.

Senior subordinated loans are subordinate to junior subordinated loans.

Which of the following two measures are based on the total risk and provide similar rankings?

Treynor ratio and Jensen’s alpha.

Sharpe and Treynor ratios.

M2 and Sharpe ratio.

Nisha Mazhar is a risk analyst, and she has been given the task to identify the factor that helps measure her organization's risk tolerance. Which of the following factors will help Mazhar complete her task?

Market demand

Interest rates

Financial strength

Venture capital most commonly refers to:

Minority investing in mature capital

Financing for start-ups

Privatizing public firms

Flavo Inc. is reporting under IFRS and has outstanding bonds amounting to $150 million with 5 years to maturity. The company decides to redeem the bonds at the call price of $144 million. The correct accounting treatment for the loss on redemption is:

$6 million to be recorded as a deferred expenditure in the balance sheet. This will be amortized over 5 years.

$6 million to be recorded as an expense in the income statement.

$6 million to be adjusted from opening retained earnings.

When choosing one of two mutually exclusive projects, which is the preferred method?

IRR

There is no preference between NPV and IRR

NPV

When a monopolist charges each customer the highest price he/she is willing to pay, this is most accurately described as:

Second-degree price discrimination

First-degree price discrimination

Third-degree price discrimination

Flotation costs are those costs which are incurred by a company during the process of raising additional capital. The value of these flotation costs is typically related to the amount and type of capital being raised. Which of the following statements is least likely accurate regarding flotation costs? 2

Flotation costs cannot be applied to bonds issuance.

If flotation costs are 5%, issuing $20 million in stocks will result in the company receiving an amount of cash equal to $19 million.

Flotation costs should be deducted as one of the project's initial-period cash flows.

ccording to Standard II-A ‘Material Non-Public Information’, if a member or candidate determines that information is material he should make reasonable efforts to:

alter current investment recommendations for clients.

protect information from those who can possibly act on that information.

achieve public dissemination of the information.

Galactic Hyper is a chain of hypermarkets who sells most of its products for cash, which is why its days sales outstanding are as low as 22 days. Assuming that the firm's average receivables are $234,000, and the cost of goods sold (COGS) for the 1-year period is $1,245,000, the annual sales of Galactic are closest to:

$4,880,200.

$1,410,400.

$3,882,000.

CFA 1 - 10 Questions