CFA 1 - 50 Questions

Which of the following statements are accurate regarding corporate governance? I. A board should have a committee of independent members who set executive compensation. II. A board should have the authority to hire third-party consultants. III. Elections should be staggered to let the board members execute long-term plans.
Which of the following statements is most likely correct? Enterprise value:
A lognormal distribution:
The four broad categories of hedge fund strategies identified by HFRI are:
An investment management firm has been in existence for eight years. To enhance the quality of reported performance, the firm's senior compliance officer decides to make the firm's presented performance compliant with the GIPS standards. To comply with the GIPS standards, the firm is required to initially present a GIPS-compliant performance track record of: 2
Of the following, which represent the most significant advantage of real estate?
Eleanor Chavez, CFA is a senior analyst at W&W Securities (W&WS) and is responsible for managing the High Beta Mutual Fund (HBMF). Curtis Fowler, aged 56 and dependent on his portfolio returns, is W&WS’s client. His portfolio will now be managed by Chavez, who has been asked to invest 20% of his portfolio funds in HBMF. Chavez fills the request forms and immediately purchases shares of HBMF for Fowler. Is Chavez in compliance with codes and standards, and if not, what should be the recommended course of action for Chavez?
In repurchase agreements, repo margin provides a margin of safety to the:
Gary Cohn, CFA, a broker at Slater Investments, works primarily with high net worth individuals. One of his clients, Claire Stafford, has adopted a very successful investment strategy and made a number of successful trades over the past year. Having observed this pattern, Cohn replicates Stafford's trades in his personal account after carrying out the instructions in his client's orders. Has Cohn most likely violated the Standards?
Assuming the correlation between an asset and market is 0.67 and the asset and market have standard deviations of 0.34 and 0.19 respectively, the market beta would be closest to:
A portfolio manager is evaluating investments in mortgage securities as part of a portfolio to fund long term liabilities. If she wants to minimize prepayment risk in her portfolio she is most likely to invest in:
Which of the following statements is most likely correct regarding verification?
Which of the following is a leading economic index?
Demand is most accurately described as:
Inturnal Systems, Inc. sells calculators. IS's calculators sell for an average of $15 apiece, and it costs IS an average of $5 to make each calculator. With $500,000 of fixed expenses and $250,000 of debt service due, IS's breakeven point considering all financial costs is closest to how many calculators?
According to Standard I-A ‘Knowledge of Law’, members and candidates are required to:
Clayton Hamner, CFA, an independent equity analyst, produces research reports and recommendations for his 25 high net worth clients, all of whom have been informed of the different levels of services available to them. Recently, Hamner distributed his latest report on Acton Pharmaceuticals (APH) in an email that was sent simultaneously to the 18 clients who either currently hold APH shares or for whom this investment is suitable. After sending that email, Hamner followed up with seven of those clients, all of whom pay for premium service, to discuss his report in greater detail. Of those calls, Hamner's first is to his sister, whose account generates a significant share of his income. Has Hamner most likely violated the Standards?
Which of the following is most likely a correct implication of stock dividends to the shareholders?
The price of a good has gone down from $100 to $45. The demand for the good has gone from 10,000 units per day to 8,000 units per day. How would you best describe elasticity in the price of the good?
Gilbert Love worked as financial analyst at Milton Securities. During his employment at Milton, Love covered Indigo Corp and developed detailed financial models, assumptions and supporting reports. When Milton switched his job, his new employer assigned him to analyze Indigo Corp. Milton developed a new model with improved assumptions and specifications and re-created the supporting records by gathering data from the covered company. Has Milton violated any CFA Institute Code and Standards?
A dealer has entered into an equity swap as the fixed-rate payer. The swap is based on the returns of the S&P500 index. On the last settlement date, the index fell by 2% due to a significant drop in the value of a few of its component stocks. On the last settlement date, the dealer would have to pay:
Howard Walton, CFA, is a member of a team working on a heating oil price forecast. There are some specific portions of the forecast with which Walton does not agree, but he is generally confident of the group’s decision-making processes. Which of the following statements is most accurate? Walton:
Convexity plays a stronger role in interest rate risk for:
Mathew Chambers manages individual accounts, including his father’s, at Harvey Securities. During a Sunday lunch at a restaurant with his friend Neil Rojas, Chambers noticed the directors of Navarro Motors sitting at the adjacent table. Rojas stated, “I believe Navarro has hired a new CEO as the firm is undertaking many positive amendments in its production process”. On Monday Chambers noticed a $1 increase in Navarro’s share price and purchased 500 shares for his father’s account. Chambers least likely violated:
Which of the following is most accurately considered a systematic risk?
Which of the following is defined as the latest sovereign bond issue for a given maturity?
How does the oil the industry most likely maintain a premium pricing strategy?
The performance of commodity indices can be quite different from their underlying commodities because
An auction in which each bidder submits a price or bid to the auctioneer simultaneously and independently is categorized as:
Which of the following elements of a financial statement is least likely to be directly related to the measurement of financial position?
Under which of the following accounting standards would a deferred tax be recognised on temporary differences arising from undistributed profits of associates (investments) when the investor controls the sharing of profit?
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:
Under U.S. GAAP at the end of year 1, EBB would recognize $0 revenue, $0 cost of construction and $0 income. The $26 million expenditure would be recorded as an increase in inventory account and decrease in cash (if EBB paid cash for all expenditures).
Anita Vizquel, CFA, is a sole practitioner providing investment advisory services. Based on extensive and ongoing research, Vizquel believes that Viatex Brokerage provides the best execution at a competitive price and she uses the firm for the majority of her clients' trades. In recognition of her loyalty, Viatex provides Vizquel with soft dollar commissions in the form of research reports that Vizquel finds very relevant for some, but not all, of her clients. Has Vizquel violated the CFA Standards?
Which of the following statements regarding market efficiency is least likely accurate?
Which of the following statements is most likely correct regarding the audit of financial statements?
The auditors were not provided with the supporting documents for the majority of the transactions (including material transactions) selected for the audit. Which type of audit opinion should most likely be issued in such case?
Reginald Fuller manages institutional portfolios on behalf of BDY Advisors. Fuller also manages an account of a trust company named SOTO Trust. The trust offered Fuller a $50,000 cash gift if he succeeded in achieving a 20% return this year. The best practice for Fuller includes:
Pension expense for employees directly related to production is reflected by an increase in:
Dan Fisher is an investment manager at Rotterdam Securities and often uses Topaz brokerage services for his clients. Corey Foster, Fisher’s client, has directed him to use the services of Luna Brokerage House for him. Fisher believes that Topaz offers best price and better research reports compared to Luna. The best course of action for Fisher is to use the services of:
A type of credit derivative in which credit protection buyer makes a series of regularly scheduled payments to credit protection seller while the seller makes no payment until a credit event occurs is categorized as a:
Samantha Bjork, CFA, has been offered an equity analyst position at a firm that has not adopted a formal code of ethics. Which of the following statements is most likely correct? Bjork:
Which of these characteristics best describe commodity goods?
Which of the following statements regarding the Markowitz efficient frontier is least likely to be correct? The optimal portfolio for:
A stock index representing U.S. manufacturing would most accurately be described as a:
Under which of the following situations would an increased return on equity (ROE) more likely be perceived negatively by shareholders?
George Mendes is considering an employment offer made by DR Associates, an investment bank. Should Mendes accept the offer, he will be responsible for supervising twenty portfolio managers. Mendes' only concern is that employees' personal trades are not being adequately monitored and many of these transactions involve front-running clients' trades. To comply with the CFA Institute Standards of Professional Conduct, Mendes should most likely:
Which of the following statements is most accurate? Unlike depreciation, amortization is only used to reduce the carrying amount of: intangible assets.
The financial leverage ratio of a firm, whose total debt ratio is 54% and debt-to- equity is 1.15, is closest to:
An investor wanting to purchase 100 shares of a publicly traded stock would most likely seek out:
CFA 1 - 50 Questions
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