CFA-LEVEL-1 Online Practice Questions and Answers

A study of a company's practice regarding the payment of invoices revealed that on the average an invoice was paid 20 days after it was received. The standard deviation equaled five days. Assuming that the distribution is normal, what percent of the invoices were paid within 15 days of receipt?

A. 37.91%

B. 86.74%

C. 15.87%

D. 34.13%

E. None of these answers

When comparing the riskiness of investments with different expected returns, one must use ________.

A. none of these answers

B. skewness

C. the coefficient of variation

D. the standard deviation

E. kurtosis

What monthly payment is required over the next 48 months to pay off a $10,000 debt today, if interest is charged at 14% per year, compounded monthly?

A. $366.67

B. $250.54

C. $104.54

D. $273.26

E. $116.02

If you buy a television for $650 and agree to pay for it with 24 payments of $30 (with the first payment occurring next month), what is the size of the final payment needed at month 24 to completely pay off the television? Assume the interest rate you are being charged is 16% per year, compounded monthly.

A. $47.54

B. $0.00

C. $203.98

D. $30.00

E. $51.25

If you deposit $2,500 into an account paying 6% per year, simple interest, how much is in the account in 18 months?

A. $2,651.04

B. $2,725.00

C. $2,750.19

D. $2,349.38

E. $225.00

On a certain date, the banking system had $2 billion in excess reserves. The legally required reserve ratio was 12.5 percent. Potentially, the banking system as a whole could increase its loans a maximum of

A. more than $25 billion.

B. $2 billion.

C. $12.5 billion.

D. $16 billion.

An expansionary fiscal policy causes which of the following effects?

I. The domestic currency depreciates.

II. Exports decrease.

III. Real interest rates increase.

IV.

Capital flows in from abroad.

A.

II, III and IV

B.

I, II and III

C.

I, II, III and IV

D.

I and III

The 8% McClintock bonds maturing in 10 years are currently trading at 97.55. These bonds are option-free and pay coupons semiannually. Which of the following statements is most likely to be TRUE?

A. The yield to maturity is greater than 8.0%.

B. The current yield is less than 8.0%.

C. The nominal yield is greater than 8.2%.

Capitol City Transfer Company is considering building a new terminal in Salt Lake City. If the company goes ahead with the project, it must spend $1 million immediately (at t = 0) and another $1 million at the end of Year 1 (t = 1). It will then receive net cash flows of $0.5 million at the end of Years 2 - 5, and it expects to sell the property and net $1 million at the end of Year 6. All cash inflows and outflows are after taxes. The company's cost of capital is 12 percent, and it uses the modified IRR criterion for capital budgeting decisions. What is the project's modified IRR?

A. 11.5%

B. 11.9%

C. 11.4%

D. 12.0%

E. 11.7%

________ financing is an example of expansion financing.

A. Turnaround

B. Leveraged-buyout

C. Third-stage

D. First-stage

E. Start-up