» CFA 1 – 10 questions

Which of the following is most likely a correct implication of stock dividends to the shareholders?

Generally stock dividends are taxable.

Stock dividends positively affect the market value of shareholders’ wealth.

When stock dividends are paid shareholders’ cost per share held decreases.

Which of the following inventory valuation methods will produce the largest total balance sheet assets when prices are increasing (and quantities remain level)?

LIFO

Average cost

FIFO

Which of the following statements regarding market efficiency is least likely accurate?

There are three forms of market efficiency: weak, semi-strong and strong.

An efficient capital market reflects all of the information about its securities, including risk.

In an efficient market, prices of stocks will slowly adjust to new information.

A recently issued sovereign bond for a given maturity is also referred to as:

benchmark issue.

floating issue.

of the run issue.

Regarding the definition of the firm, the GIPS Standards require all of the following except:

a firm’s organization alters historical composite results.

total firm assets must be the aggregate of the market value of all discretionary and nondiscretionary assets under management.

firms must be defined as an investment firm.

Which of the following statements is most likely correct regarding the major sections of GIPS standards?

According to Section 4 ‘Disclosures’, firms are required to make negative assurance disclosures.

According to section 5 ‘Presentation and Reporting’, firms cannot include in GIPS-compliant presentations information not addressed by the GIPS standards.

According to Section 3’Composite Construction’, a composite return is the asset weighted average of the performance of all portfolios in the composite.

Net present value method assumes that cash flows are reinvested at the:

opportunity cost of capital.

accounting rate of return.

internal rate of return.

Two hypothetical currencies – ABC and XYZ – are trading at a spot rate of 1.60 ABC/XYZ . If the interest rate in ABC and XYZ's countries are 7% and 5%, respectively, the arbitrage-free forward rate ABC/YXZ is closest to:

1.7113.

1.6304.

1.5410.

Demand is most accurately described as:

Consumer's willingness to purchase a product

Consumer's ability to use the product

Producer's ability to provide a product

EBB Inc. entered into a three-year contract to construct a building with an estimated total cost of $32 million. Due to limitations, project costs are uncertain and the output of the project cannot be measured reliably. If at the end of year 1EBB spent $26 million, under U.S.GAAP EBB would most likely recognize:

$0 in any account until the project has completed.

$26 million as an increase in inventory account.

$26 million as cost of construction.

CFA 1 - 10 Questions