试卷详情
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注册金融分析师一级-3
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[单项选择]Winthur Publishing Company invests $ 800000 in a printing press that will be depreciated on a straight-line basis over four years and will have a zero salvage value at the end of its life. Sales revenues, operating expenses, and net income for each year are shown in the table below.()
A. $18.75
B. $15.75
C. $12.75
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[单项选择]Which of the following is least likely to be an incentive for structuring a lease as an operating lease instead of a capital lease()
A. The period of use is short relative to the overall life of the asset.
B. The lessee is in a high tax bracket and the lessor is in a low tax bracket.
C. Corporate bond covenants contain specific covenants relating to financial policies that the company must follow.
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[单项选择]Mary Kim, CFA, practices in the established country of Oldasia as well as in the emerging country of Newasia. By regulation, Oldasia prohibits licensed investment advisors from trading in securities ahead of their clients. Newasia has no laws or regulations in this area. Mary Kim may:()
A. trade ahead of her clients in Newasia only.
B. trade simultaneously with her clients in Newasia only, as long as she has made full disclosure to her clients that she reserves the right to do this.
C. not trade ahead of her clients in either country.
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[单项选择]Modlin has a margin account and deposits $ 20000. Assuming the margin requirement is 25%, commissions are ignored, and The Z Corporation is selling at $ 30 per share. How many shares can Modlin purchase using the maximum allowable margin()
A. 2667 shares.
B. 667 shares.
C. 1000 shares.
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[单项选择]Which of the following is least accurate regarding obstacles to the efficient allocation of resources in a competitive market()
A. Taxes and trade restrictions impede the efficient allocation of resources.
B. Quotas result in production of less than the efficient quantity of the good.
C. Public goods, such as national defense, tend to be overproduced because they can be consumed by everyone whether they pay for the goods or not.
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[单项选择]Which of the following statements regarding capitalizing versus expensing costs is least accurate()
A. Total cash flow is higher with capitalization than expensing.
B. Capitalization results in higher profitability initially.
C. Expensing results in higher income variability than capitalization.
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[单项选择]Which of the following statements about statistical concepts is FALSE()
A. A frequency is a tabular display of data summarized into a relatively small number of intervals.
B. An interval is a set of return values within which an observation not falls.
C. A parameter is an descriptive measure of a population characteristic.
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[单项选择]Joe Robison, CFA is an investment manager with full responsibility for the Gemstone Corporation relationship. During the past 12 months Joe has used 75% of the client brokerage of Gemstone to execute the Company’s stock trades and to directly assist in the investment decision process of Gemstone: Joe has independently obtained best price and execution for all of Gemstone’s stock trades. The remaining 25% of the client brokerage has been used to purchase bookshelves and computer chairs for Joe’s investment firm’s library. Which of the following is the most accurate statement pertaining to Joe’s use of the above soft dollars ()
A. Joe has properly used Gemstone’s client brokerage since he obtained best price and execution for all of the stock trades.
B. The 75 % of the client brokerage used by Joe was in full compliance with the Soft Dollar standard. The remaining 25% use of Gemstone’s client brokerage should be disallowed since it did not directly assist Joe in the investment decision process of Gemstone.
C. Joe’s use of soft dollars for Gemstone was proper since the client brokerage is the property of the investment firm and can be allocated per the direction of the investment manager.
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[单项选择]Klaus Gerber, CFA, is a regular contributor to the Internet site WizeGuy. This past week Gerber has been incorrectly quoted as recommending that investors buy shares in Bradford, Inc. He is unaware that this message has been placed on the site as the quote was placed as a prank by an unknown source. This is the third time this has happened over the past month. Fritz Fox, CFA, maintains and updates the WizeGuy site and has learned how to determine if the quotes being attributed to Gerber are actually valid. Several days later, he observes an investment recommendation, posted on the site, to buy Gresham, Inc. The investment recommendation is purported to be from Gerber, but Fox actually knows it to be bogus. He immediately sells 1000 Gresham short and e-mails Gerber to inform him of the bogus recommendation. Gerber immediately issues a rebuttal, and Gresham fails by 14 percent. Fox’s action is:()
A. not in violation of the Code and Standards.
B. a violation of the Standard concerning use of material nonpublic information.
C. a violation of the Standard concerning duty to employer.
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[单项选择]All of the following are poor examples of supervisory responsibility EXCEPT:()
A. Proper supervision is not exercised because the supervisor’s income is partially based on unsupervised or improper trading activity.
B. Poor procedures allow a portfolio manager to designate a trade to an account or portfolio after the outcome of the trade is known.
C. Incorporating a professional conduct evaluation as part of an employee’s performance review.
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[单项选择]In securing the shares for all accounts under her management, Linda Kammel of Northwest Futures purchased three blocks of shares at three different prices. She then allocated these shares by placing shares from the first block in accounts with surnames beginning with A-G. The second was allocated over accounts H-P, and the third over Q-Z. This action is:()
A. not permissible under the Code and Standards.
B. consistent with her responsibilities under the Code and Standards.
C. permissible so long as the commissions per share are the same across all accounts.
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[单项选择]A mutual fund manager wants to create a fund based on a high-grade corporate bond index. She first distinguishers between utility binds and industrial bonds; she then, for each segment, defines maturity intervals of less than 5 years, and greater than 10 years. For each segment and maturity level, she classifies the bonds as callable or non-callable. For the manager’s sample, which of the following best describes to: sampling approach number of sampling cells()
A. simple random sample 3
B. simple random sample 12
C. stratified random sample 12
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[单项选择]Closed-end funds and exchange traded funds (ETFs) have which of the following characteristics in common()
A. Both closed-end funds and ETFs stand ready to redeem shares.
B. Shares of both closed-end funds and ETFs trade in the secondary market.
C. The structures of closed-end funds and ETFs prevent shares from trading at a significant premium or discount to NAV.
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[单项选择]For a linear demand curve, at the price where elasticity is -2.0, reducing prices will: ()
A. increase total revenue and we are at the point of maximum total revenue.
B. decrease total revenue and we are not at the point of maximum total revenue.
C. increase total revenue and we are not at the point of maximum total revenue.
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[单项选择]As a general rule, revenue is normally recognized when()
A. it is measurable.
B. it is measurable and received.
C. the earnings process is complete and cash receipt is assured.
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[单项选择]A bond portfolio consists of a AAA bond, a AA bond, and an A bond. The prices of the bonds are $1050, $1000, and $950 respectively. The durations are 8,6, and 4 respectively. What is the duration of the portfolio()
A. 6.07.
B. 6.00.
C. 6.67.
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[单项选择]Effective duration is more appropriate than modified duration as a measure of a bond’s price sensitivity to yield changes when:()
A. the bond contains embedded options.
B. yield curve changes are not parallel.
C. the bond is a floating rate security.
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[单项选择]Which of the following statements concerning coupon rate structures is FALSE ()
A. Step-up notes have coupon rates that increase over time at a pre-specified rate.
B. Accrual bonds have only one cash inflow at maturity.
C. Accrual bonds, like zero-coupon bonds, always sell at a discount to face value.
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[单项选择]Jill Marsh, CFA, works for Advisors where she manages a portfolio for a wealthy family. Marsh earns one percent of the portfolio’s value each year in the form of a commission from Advisors. The family just told her that any year the portfolio she manages earns more than a 10 percent return, the family will give her the use of the family’s vacation home for one week. Hirsh will comply with Standard Ⅳ (B), Additional Compensation Arrangements, if she:()
A. does nothing with respect to this.
B. sends an e-mail to her supervisor about the vacation home.
C. delivers a typed memo to her supervisor about the vacation home the first time she uses it.
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[单项选择]Which of the following statements regarding provisions for paying off bonds is least likely correct()
A. Nonrefundable bonds can be callable.
B. Serial bonds are an issue with several staggered maturity dates.
C. A sinking fund provision gives the company the option to retire portions of the bond issue prior to maturity.
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[单项选择]An investor plans to retire eight years from today. To maintain her standard of living through retirement, she needs to have $ 2.5 million accumulated when she retires. Her portfolio is currently valued at $1.2 million and is expected to earn 7.0 percent annually. The minimum annual amount she must save at the beginning of each of the next eight ears to achieve a retirement accumulation of $ 2.5 million is closest to:()
A. $0.
B. $31875.
C. $39914.
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[单项选择]The correlation derived from a historical analysis of bond market returns in the U.S. and in Canada is 0.72. Which of the following statements is true()
A. When the U. S. market has a below average performance, the Canadian market is likely to have a below average performance.
B. When the U. S. market rises 1%, the Canadian market rises 0.72%.
C. When the U. S. market rises, the Canadian market is more likely to decrease than increase.
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[单项选择]Which of the following would be permissible under Standard Ⅱ (C) , Misrepresentation()
A. Including a graph showing the Fed’s discount rates over the previous 12 months in a report that goes to clients.
B. Using excerpts from a report prepared by a well known outside research firm without acknowledgement.
C. Reporting statistics prepared by an outside firm, identifying the source but omitting caveats and qualifying statements.
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[单项选择]What is cash flow from financing()
A. -210.
B. -112.
C. -350.
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[单项选择]Which one of the following combinations represents an accurate classification of security owner options and security issuer options Security Owner Options Security Issuer Options( )
A. A call provision A prepayment option
B. A floor A prepayment option
C. A cap An accelerated sinking fund
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[单项选择]Which of the following statements regarding the net present value (NPV) and internal rate of return (IRR) is least accurate()
A. The NPV tells how much the value of the firm will increase if you accept the project.
B. For mutually exclusive projects, the internal rate of return IRR and the net present value NPV methods may give conflicting accept/reject decisions.
C. For mutually exclusive projects, you must accept the project with the highest NPV regardless of the sign of the NPV calculation.
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[单项选择]Acme Corp. purchased a new stamping machine for $100000, paid $10000 for shipping, and paid $ 5000 to have it installed in their plant. Based on an estimated salvage value of $ 25000 and an economic life of six years, the-difference between straight-line depreciation and double-declining balance depreciation in the second year of the asset’s life is closest to:()
A. $15000.
B. $16666.
C. $10556.
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[单项选择]If the promised yield is equal to the realized yield then:()
A. the coupon payments are reinvested at the promised yield during the life of the issue.
B. current yield is lesser than the yield to maturity.
C. promised yield is greater than current yield.
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[单项选择]What is the market value-weighted index of the following three stocks assuming the beginning index value is 100 and a base value of $150000()
A. As of December 31
B. Company
C. Stock Price
D. Shares Outstanding
E. X
F. $1
G. 5000
H. Y
I. $20
J. 2500
K. Z
L. $60
M. I000
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[单项选择]When a CFA Institute member suspects a client or a colleague of planning or engaging in ongoing illegal activities, which of the statements about the actions that the member should take is most correct According to the CFA Institute Standards of Professional Conduct, the CFA Institute member should:()
A. consult counsel to determine the legality of the activity.
B. consult counsel to determine the legality of the activity and disassociate from any illegal or unethical activity if the member has reasonable grounds to believe that the activity is illegal or unethical.
C. ignore the suspected illegal activity unless the suspected party is a CFA Institute member.
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[单项选择]An analyst wants to buy a portfolio and gathered the following information:
A. Portfolio
B. Mean Return
C. Standard Deviation of Returns
D. 1
E. 5.6%
F. 9.7%
G. 2
H. 12.3%
I. 17.4%
J. 3
K. 13.5%
L. 20.9%
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[单项选择]Bob Smith, CFA, is an outside board member of Atlantic Technologies, but is not paid by the firm for his services. An employee at Atlantic informs Smith that Atlantic has improperly timed the booking of contracts to achieve the desired quarterly financial results. The misleading financial statements would turn losses into profits. Smith confers with the firm’s legal counsel who indicates that this conduct is, in fact, illegal. Smith urges Sharon White, Atlantic’s chief operating executive, to change the financial statements, but she refuses to do so. According to CFA Institute Standards of Professional Conduct, which of the following statements best describes what Smith should do in this situation ()
A. Smith should immediately make CFA Institute aware of the situation at Atlantic.
B. Smith should wait until the next board meeting, which is scheduled in two weeks, to make other board members aware of the situation.
C. Smith should promptly disassociate himself from Atlantic’s actions by resigning as a director or by reporting the activities to the appropriate authorities.
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[单项选择]If cash at the beginning of the year was 280, what is cash at the end of the year()
A. -56.
B. 56.
C. 182.
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[单项选择]Which of the following statement concerning about the probability concepts is TRUE()
A. A joint probability is the probability that two or more events happen concurrently.
B. Subjective probability is a probability drawing on observation.
C. A random variable is a quantity whose outcomes are certain.
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[单项选择]Hanson Aluminum, Inc. is considering whether to build a mill based around a new roiling technology the company has been developing. Management views this project as being riskier than the average project the company undertakes. Based on their analysis of the projected cash flows, management determines that the project’s internal rate of return is equal to the company’s marginal cost of capital If the project goes forward, the company will finance it with newly issued debt. Should management accept or reject this project()
A. Accept, because the project returns the company’s cost of capital.
B. Accept, because the marginal cost of the new debt is less than the project’s internal rate of return.
C. Reject, because the project reduces the value of the company when its risk is taken into account.
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[单项选择]The monetary policy rule that would most likely result in the greatest increase in the price level after a productivity shock is a:()
A. fixed rule policy that focuses on file price level.
B. fixed-rule policy that focuses on GDP growth.
C. feedback-rule policy that focuses on GDP growth.
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[单项选择]There is a bond contains that coupon of $ 80, it pays at the end of each year indefinitely. The coupon payment occurs one year from now and the required rate of return is 12%. What is the bond worth today()
A. $ 625.
B. $ 666. 67.
C. $ 788.78.
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[单项选择]Arthur Harrow, CFA, is a pharmaceuticals analyst at Dominion Asset Management. His supervisor directs him to prepare separate research reports on Miracle Drug Company and Wonder Drug Company. Harrow’s former college roommate and close friend is the president of Miracle. Harrow owns 2000 shares of Wonder, which currently sells for $ 25 a share. Harrow’s supervisor is unaware of these facts. According to CFA Institute Standards of Professional Conduct, which of the following action, if any, is Harrow required to take if he writes the research reports()
A. Harrow must disclose to Dominion both his relationship with the president of Miracle and his ownership of shares in Wonder.
B. Harrow must disclose to Dominion his relationship with the president of Miracle but not his ownership of shares in Wonder.
C. Harrow must disclose to Dominion his ownership of shares in Wonder but not his relationship with the president of Miracle.
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[单项选择]Which of the following statements about the semistrong-form efficient market hypothesis (EMH) and the strong-form EMH is FALSE()
A. Small firms tend to underperform large firms on a risk-adjusted basis.
B. Tests have found that stocks with low price to earning (P/E) ratios tend to outperform stocks with high P/E ratios.
C. The strong form of the market efficiency hypothesis states that security prices fully reflect all public and private information.
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[单项选择]In accounting for long-term construction contracts, the percentage-of-completion method is preferable to the completed contract method when: ()
A. the contracts are of a relatively short duration (less than one year).
B. lack of dependable cost estimates cause forecasts to be doubtful.
C. estimates of the costs to complete and the extent of progress toward completion are reasonably dependable.
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[单项选择]Which of the following statements about unemployment is least accurate()
A. Frictional unemployment is unemployment due to changes in the economy that prevent qualified workers from being immediately matched with existing job openings.
B. The economy is said to be operating at full employment only if there is no cyclical or frictional unemployment in the economy.
C. The economy is said to be operating at full employment when cyclical unemployment is zero.
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[单项选择]Xiang Li, CFA, deputy treasurer for BBB College, manages the Student Scholarship Trust. Li issued a Request for Proposals (RFP) for domestic equity managers. Gong Cheng, CFA, a good friend of Li, introduces him to representatives from Capital Investments, who submitted a proposal. Li selected Capital as a manager based on the firba’s excellent performance record. Shortly after the selection, Cheng, who had outstanding performance as an equity manager with another firm, accepted a lucrative job with Capital. Have Li and Chen, respectively, violated any CFA Institute Standards of Professional Conduct . Li Chen()①A. No No ②B. No Yes ③C. Yes No
A. ①
B. ②
C. ③
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[单项选择]Which of the following statements concerning the effects of interest rate volatility on bonds with embedded options is FALSE()
A. As yield volatility increases, the value of callable bonds decreases.
B. A putable bond’s value is its straight bond value plus the value of the embedded put option.
C. A callable bond’s value is its straight bond value plus the value of the embedded call option.
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[单项选择]Tony Calaveccio, CFA, is the manager of the Trust-Co Small Cap Venture Fund in Toronto. He places trades for the fund with Worldwide Brokerage. Worldwide suggests to Calaveccio that they are willing to provide him with additional compensation for order flow. Is this permissible under the Code and Standards()
A. Yes, if he receives written consent from Trust-Co and discloses the arrangement to his clients and prospects.
B. Yes, if he discloses the arrangement in writing to Trust-Co.
C. Yes, if he obtains written permission from Trust-co and his clients and prospects.
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[单项选择]Which of the following items is least likely to be included in the M2 measure of the money supply()
A. Time deposits.
B. Savings deposits.
C. Governmental checking account deposits.
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[单项选择]What is total cash flow()
A. -98.
B. -224.
C. -350.
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[单项选择]Which of the following statements about the indirect method of calculating the statement of cash flows is FALSE()
A. No adjustment is needed to account for changes in accounts receivable since no cash was involved.
B. No adjustment is needed to account for extraordinary items because they are found above net income and are thus already accounted for.
C. Depreciation is added back to net income since it is an expense not requiring cash.
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[单项选择]Analysis of two mutual funds, a stock fund-S and a bond fund B, yields the following results: S: Expected Return=0.14 Standard deviation=0.24 B: Expected Return=0.08 Standard deviation=0.14 Covariance between rates of return for S and B=0.00672 A portfolio with equal amounts of S and B will have expected return and standard deviation of:( )
A. 0.11 and 0.0580.
B. 0.11 and 0.1393.
C. 0.19 and 0.1393.
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[单项选择]The current market price of National Tire (NT) is $ 35. Fran Wilson writes 6-month put options on NT with strike price $ 30, coveting 400 shares (i. e. 4 contracts), for which she receives a total premium of $1200. What is the expiration day value of Fran’s written put position, if NT is priced at $ 25 at expiration()
A. -$ 2000.
B. -$ 800.
C. $ 2000.
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[单项选择]Why do bond portfolio managers use the concept of duration()
A. It allows structuring a portfolio to take advantage of changes in credit quality.
B. It enables direct comparisons between bond issues with different levels of risk.
C. It assesses the time element of bonds in terms of both coupon and term to maturity.
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[单项选择]If the coupon payments are reinvested at the coupon rate during the life of the issue, then the:()
A. yield to maturity is greater than the realized yield.
B. yield to maturity is less than the realized yield.
C. yield to maturity cannot be determined from the information given.
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[单项选择]A funded investor has a short-term investment returning a 7 percent return. The borrowing costs are 20 basis points above the reference rate. If the T-bill rate is 3 percent and the LIBOR rate is 3.5 percent, what is the investor’s current profit on this investment( )
A. 3.3%.
B. 1.5%.
C. 3.8%.
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[单项选择]George, CFA, a citizen of Germany, is doing business in a neighboring country. According to AIMR Standards of Professional Conduct, which statement applies to George’ s conduct when he is conducting business in the other country()
A. He is not bound by any of the regulations because France and the other country have no jurisdiction in each other’s countries.
B. He should adhere to whichever of France’s, the other country’s or AIMR’s rules that impose the highest degree of responsibility.
C. He should only adhere to the securities laws of France even though they do not cover some of the provisions found in the laws of the other country that relate to his work.
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[单项选择]Ron’s Organic Markets has limited access to borrowed funds and must choose among several independent projects with returns greater than their cost of capital. All the projects under consideration have the same required investment of $ 2 million and Ron’s has $10 million available for capital investments this year. Which of the following selection criteria is least likely to produce the optimal five projects for investment Choose the five projects with:()
A. the greatest total NPV.
B. the largest sum of profitability indexes.
C. the highest IRRs.
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[单项选择]Which of the following statements about the various tests of the efficient market hypothesis (EMH) is INCORRECT()
A. Tests of the semi-strong form EMH give mixed results. Time-series tests such as dividend yield and default spread reject the semi-strong form EMH while event studies of stock splits and announcements of accounting changes support it.
B. The superior historical performance of exchange specialists and corporate insiders rejects the semi-strong form of the EMH.
C. The historical performance of professional money managers supports the semi-strong form of the EMH.
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[单项选择]Which-of the following statements used to describe the Student’ s t-distribution is least accurate The Student’s t-distribution:()
A. Involves two random variables.
B. Is symmetric around its mean value of zero.
C. Has thinner tails than the normal distribution.
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[单项选择]If a CFA Institute member knows that a fellow employee has violated a law, according to Standard Ⅰ (A) the member must NOT do which of the following()
A. Report the employee violating the law to the appropriate supervisor in the firm.
B. Report the employee violating the law to the SEC.
C. Disassociate from the employee violating the law.
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[单项选择]The following shows the yearly returns of aggressive equity funds for four years: 1999=+5% 2000=+2% 2001=+1% 2002=-4% Assume that this distribution can represent either the population or a sample of aggressive equity funds. Calculate the population and sample standard deviation. Population Standard Deviation Sample Standard Deviation()
A. 2.73% 3.99%
B. 3.09% 4.55%
C. 3.24% 3.74%
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[单项选择]A company had the following changes in its stock: The company had 2 million shares outstanding on December 31,2006. On March 31,2007, the company paid a 10% stock dividend. On June 30,2007, the company sold $10 million face value of 7% convertible debentures, convertible into common at $ 5 per share. On September 30,2007, the company issued and sold 100000 shares of common stock. The company should compute its 2007 basic earnings per share based on.()
A. 2225000 shares.
B. 2250000 shares.
C. 3225000 shares.
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[单项选择]Will the covariance of returns for two common stocks be negative if the actual returns on both stocks tend to be: Above their expected returns Below their expected returns at the same time at the same time ()
A. No No
B. No Yes
C. Yes No
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[单项选择]Which of the following statements about the internal rate of return (IRR) for a project with the following cash flow pattern is TRUE Year 0: -$ 2000 Year 1: $ 10000 Year 2: -$ 10000()
A. It has a single IRR of approximately 38 percent.
B. It has a single IRR of approximately 260 percent.
C. It has two IRRs of approximately 38 and 260 percent.
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[单项选择]Use the below table, containing average annual returns for eleven investment managers.()
A. 9 managers.
B. 10 managers.
C. 11 managers.
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[单项选择]The price to cash flow (P/CF) model has grown in popularity for all of the following reasons EXCEPT:()
A. CFs are more easily estimated than future dividends.
B. CFs are generally more difficult to manipulate than earnings.
C. CFs may be used for firms that have negative earnings per share or do not pay dividends.
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[单项选择]Which of the following is least likely to be considered a stated goal of the International Accounting Standards Board (IASB)()
A. Develop global accounting standards requiring transparency, comparability, and high quality in financial statements.
B. Remain neutral in the debate on the use of global accounting standards to avoid appearance of a conflict of interest.
C. Account for the needs of emerging markets and small firms when implementing global accounting standards.
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[单项选择]A fourth market transaction occurs when:()
A. a security is purchased by a dealer and then immediately resold.
B. exchange-listed shares are traded in the OTC market.
C. a buyer and seller complete a trade without the assistance of an intermediary broker.
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[单项选择]Utilitarianism, in reference to economic fairness, refers to the idea that:()
A. the greatest good occurs when wealth is equalized.
B. the greatest utility of production and consumption results from competitive markets.
C. equality of opportunity is an important measure of economic fairness.
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[单项选择]Dale Peterson plans to lease a computer from Gray Computing Services. It will be a 10-year lease with annual payments of $ 2400 plus a guarantee of a residual value of $ 4000 at the end of the lease. The asset has a 12 year useful life. The present value of the lease discounted at the appropriate interest rate of 9 percent is $ 17000. The company uses the straight-line depreciation method. In the first year, the reported lease expense is:()
A. $3230.
B. $1530.
C. $2830.
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[单项选择]Which of the following statements is most correct concerning a member’s obligation to his or her employer under the Code and Standards()
A. Consent from the employer is necessary to permit independent practice that could result in compensation or other benefits in competition with the member’s employer.
B. Members are prohibited from making arrangements or preparations to go into competitive business before terminating their relationship with their employer.
C. Members are prohibited from undertaking independent practice in competition with their employer.
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[单项选择]What is operating cash flow()
A. -70.
B. 28.
C. 56.
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[单项选择]According to Statement on Auditing Standards No. 99, Consideration of Fraud in a Financial Statement Audit, which of the following is least likely to be a risk factor related to opportunities to commit fraudulent accounting()
A. Significant related party transactions.
B. High turnover among accounting and information systems personnel.
C. Aggressive or unrealistic profitability expectations from third parties.
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[单项选择]WEB, an investment-banking firm, is the principal underwriter for MTEX’s upcoming debenture issue. Wendy Berry, CFA, an analyst with WEB, has found out from an employee in MTEX’s programming department that a serious glitch was recently discovered in the software program of their major new product line. In fact, the glitch is so bad that most of their orders have been canceled. Berry checked the debenture’s prospectus and found no mention of this development. The red herring prospectus has already been distributed. Berry’s best course of action is to:()
A. inform her immediate supervisor at WEB of her discovery.
B. keep quiet since this is material non-public inside information.
C. notify potential investors of the omission on a fair and equitable basis.
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[单项选择]One of the key differences between the decisions to add labor or capital to the production process is that the returns to labor:()
A. are relatively immediate, but those to capital may be years into the future so they must be evaluated as future values.
B. must be projected into the future and evaluated as present values, while returns to capital can be evaluated immediately based upon market interest rates.
C. are relatively immediate, but those to capital may be years into the future so they must be evaluated as present values.
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[单项选择]An agreement that requires the parties to exchange a certain amount of Yen for a certain amount of Euros on a specific date in the future is called a(n):()
A. exchange rate agreement.
B. currency forward contract.
C. forward rate agreement.
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[单项选择]A sample of monthly returns of aggressive growth funds contains 35,20,30,50 and 55. Find out the range, mean absolute deviation, and variance of the data set Mean Absolute Sample Range Deviation Variance()
A. 17 11.6 415
B. 17 23.2 207.5
C. 35 11.6 207.5
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[单项选择]Assume that there are no transaction costs and that securities are infinitely divisible, ff an 8 percent coupon paying bond (with semi-annual coupon payments) that has six months left to maturity trades at 97.54, and there is a zero-coupon bond with six months remaining to maturity that is correctly priced using a discount rate of 9 percent, is there an arbitrage opportunity()
A. Yes, the coupon bond price is too low.
B. Yes, the coupon bond price is too high.
C. The coupon bond is not correctly priced but no arbitrage trade can be set up using the zero-coupon bond.
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[单项选择]An exchange-for-physicals, as it pertains to futures contracts:()
A. is another term for delivering an asset to satisfy a futures contract.
B. is another term for accepting delivery of an asset to satisfy a futures contract.
C. involves an agreement off the floor of the exchange.
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[单项选择]Which of the following statements about the taxation of separate trading of registered interest and principal of securities (STRIPS) is FALSE()
A. Implicit interest taxation is a paramount issue for pension plans.
B. A 10 -year Treasury note has 20 coupons and 1 principal payment.
C. The STRIPS program began in 1985.
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[单项选择]When a regulatory agency requires a monopolist to use average cost pricing, the intent is to produce the quantity where the: ()
A. marginal revenue curve intersects the marginal cost curve.
B. marginal revenue curve intersects the demand curve.
C. the market demand curve intersects the average total cost curve.
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[单项选择]Assume the tax rate is constant, based on the following information, calculate the balance of the deferred tax account at the end of the second year The company acquired the asset for $ 8000. The asset will generate $ 5000 a year. The company’s tax rate is 40%. For tax purposes, the asset can be straight-line depreciated over 4 years. For financial accounting purposes, the asset is depreciated straight-line over 5 years.()
A. $ 0.
B. $ 240.
C. $ 480.
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[单项选择]Consider a floating rate issue that has a coupon rate that is reset on January 1 of each year. The coupon rate is defined as one-year London Inter-bank Offered Rate (LIBOR) + 125 basis points and the coupons are paid semi-annually. If the one-year LIBOR is 6.5 percent on January 1, which of the following is the semi-annual coupon payment received by the holder of the issue in that year()
A. 3.250%.
B. 6.500%.
C. 3.875%.
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[单项选择]The following shows the mean monthly returns of four securities.()
A. Security
B. Mean Monthly Return
C. Standard Deviation
D. 1
E. 0.3
F. 0.4
G. 2
H. 0.6
I. 0.6
J. 3
K. 1.3
L. 4.8
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[单项选择]John has a 10-year bond outstanding with an annual coupon of 6.5 percent. If the bond is currently priced at $1089.25, which of the following is closest to the bond-equivalent yield of the bond()
A. 5.33%.
B. 5.42%.
C. 5.26%.
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[单项选择]When the Rivers Company filed its corporate tax returns for the first quarter of the current year, it owed a total of $ 6.7 million in corporate taxes. Rivers paid $ 4.4 million of the tax bill, but still owes $ 2.3 million; it also received $ 478000 in the second quarter as a down payment towards $ 942000 in custom-built products to be delivered in the third quarter. Its financial accounts for the second quarter most likely show the $ 2.3 million and the $ 478000 as $ 2.3 million $ 478000.()
A. Income tax payable unearned revenue.
B. Income tax payable accrued revenue.
C. Deferred tax liability unearned revenue.
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[单项选择]On January 1, 2005, JME Corporation changed from the straight line method to an accelerated method of depreciation. Under the accelerated method, the accumulated depreciation through December 31,2004, was $ 600000 higher than if the straight line method had been used. JME’s income tax rate is 40 percent. What is the cumulative effect of this change in accounting principle()
A. $ 240000.
B. $ 360000.
C. $ 600000.
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[单项选择]On 1 January 2004, the value of an investor’s portfolio is $ 89000. The investor plans to donate $ 4000 to charity organization and pay $ 2000 to his insurance account on 31 December of 2004, but meanwhile he does not want the year-end portfolio value to be below $ 89000. If the expected return on the existing portfolio is 12 percent with a variance of 125, the safety-first ratio that would be used to evaluate the portfolio based on Roy’ s criterion is closest to:()
A. 0.236.
B. 0.365.
C. 0.471.
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[单项选择]All of the following are required by fiduciaries under Standard Ⅲ (A) , Loyalty, Prudence, and Care, EXCEPT:()
A. support the sponsor’s management during proxy fights.
B. act solely in the interest of the ultimate beneficiaries.
C. place the client’s interest before the employer’s interest.
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[单项选择]Which of the following packages of securities is equivalent to a three-year 8 percent coupon bond with semi-annual coupon payments and a par value of 1007 A three-year zero-coupon bond:()
A. with a par value of 150 and six 8% coupon bonds with a maturity equal to the time to each coupon payment of the above bond.
B. with a par of 100 and three zero-coupon bonds with a par value of 4 and maturities equal to the time to each coupon payment of the coupon bond.
C. with a par of 100 and six zero-coupon bonds with a par value of 4 and maturities equal to the time to each coupon payment of the coupon bond.
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[单项选择]Brenda Simone is a money manager with the pension fund of Blue Streets as one of her clients. The director of the pension fund calls Simone and asks her to use a particular broker so that the fund can obtain some research services with the soft dollars from that broker. Simone believes that the desired broker will provide the same price and execution as the normal broker that Simone uses. Simone does as the client wishes. Simone has:()
A. not violated the Standards as long as the research provided by the broker will benefit Blue Streets.
B. not violated the Standards as long as the research provided by the broker will benefit Simone’s money management practice.
C. not violated the Standards as long as the research provided by the broker will benefit the plan beneficiaries.
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[单项选择]Osborn Manufacturing uses the NPV and IRR methods as its primary tools for evaluating capital projects. Which of the following most likely describes Osborn Manufacturing with regard to firm ownership and company size Firm ownership Company size()①A. Public Small ②B. Private Large ③C. Public Large
A. ①
B. ②
C. ③
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[单项选择]The current price of XYZ Inc, is $40 per share with 1000 shares of equity outstanding. Sales are $4000 and the book value of the firm is $10000. What is the price/sales ratio of XYZ, Inc.()
A. 4.000.
B. 0.010.
C. 10.000.
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[单项选择]Samantha Gold is a young investor. She has many affluent friends who have made a lot of money by investing in hedge funds. Drawn by the significant potential returns, Gold has also decided to invest in hedge funds. A friend has suggested investing in a fund of funds, but Gold is concerned with the risks associated with such investing. Also, she is a relatively small investor compared to what she calls "the big hedge fund players." Which of the following two statements, in combination, about fund of funds investing, when compared to investing in individual hedge funds is most accurate
A.
B. Benefit of Fund of Funds
C. Drawback of Fund of Funds
D. ①
E. Provide returns that, on a risk adjusted, are superior to investing in individual funds.
F. Only open to investors with significant capital.
G. ②
H. May grant investors access to highly sought-after closed funds.
I. Returns are most likely going to be spent on additional management fees.
J. ③
K. Enable investors with limited capital to invest in a portfolio of hedge funds.
L. On a risk-adjusted basis, net-of-fees performance maybe lower than that of individual funds.
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[单项选择]If flotation costs are treated correctly in calculating the net present value of a project that will begin in the current period, the flotation costs are most likely:()
A. reflected in the discount rate used for the project.
B. included in the initial outlay.
C. to reduce NPV less if a high discount rate is used for the project.
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[单项选择]Portfolios located to the right of the market portfolio on the capital market line are:()
A. lending portfolios.
B. Low-risk portfolios.
C. Borrowing portfolios.
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[单项选择]Under which of the following conditions would a firm be most likely to issue variable-rate debt()
A. Operating cash flows are positively correlated with short-term interest rates.
B. Operating cash flows are negatively correlated with short-term interest rates.
C. The yield curve is sloping sharply downward.
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[单项选择]Juniper Corp’s stock transactions during the year 2004 were as follows: January 1 540000 shares issued and outstanding March 1 50 percent stock dividend July 1 180000 treasury shares reacquired October 1 60000 treasury shares reissued When computing for earnings per share (EPS) computation purposes, what was Juniper’s weighted average number of shares outstanding during 2004()
A. 735000.
B. 870000.
C. 766667.
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[单项选择]Which of the following is the shape of an inverted yield curve or term structure()
A. Flat.
B. Downward sloping.
C. Upward sloping.
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[单项选择]Which of the following statements about indexes is TRUE ()
A. A price-weighted index assumes an equal number of shares (one of each stock) represented in the index.
B. An unweighted index assumes a proportionate market value investment in each company in the index.
C. A value weighted index assumes an investor makes and maintains an equal dollar investment in each stock in their portfolio.
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[单项选择]Which of the following is NOT a problem associated with the internal rate of return (IRR) method for making investment decisions:()
A. IRR and NPV criteria can give conflicting decisions for mutually exclusive projects.
B. if the IRR is above the firm’ s cost of capital, the project should be rejected.
C. The IRR method assumes cash flows are reinvested at the investment’ s internal rate of return.
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[单项选择]Which reason for purchasing U. S. Treasury securities is least valid()
A. Coupon strips synthesize a zero-coupon bond.
B. Treasury-bonds are available in maturities of two years to nearly 30 years.
C. Treasury Inflation Protection Securities (TIPS) raise their principal value to adjust for inflation.
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[单项选择]An analyst meets with a new client. During the meeting, the analyst sees that the new client’s portfolio is heavily invested in one over-the-counter stock. The analyst has been following the stock and thinks it will perform well in the long run. The analyst arranges through a brokerage firm to simultaneously sell a large number of shares of the stock via a series of cross trades from the new client’s portfolio to various existing clients. He arranges the trades to be executed at a price that approximates the current market price. This action is:()
A. not in violation of the Standards.
B. a violation of Standard Ⅲ (A), Loyalty, Prudence, and Care.
C. a violation of Standard Ⅲ (B), Fair Dealing.
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[单项选择]Based on CFA Institute Standards of Professional Conduct, which of the following statements is a violation of Standard Ⅰ (C), Misrepresentation()
A. A young trainee bond trader tells a prospective client that she can assist the client in all the client’s investment needs: equity, fixed income, and derivatives and based on her years of experience as an analyst in the business that an investment looks like it has lots of potential.
B. A trust officer recommends lengthening the average maturity of a bond portfolio because she believes long-term interest rates will decline over the next few months.
C. An investment manager recommends to a prospective client an investment in GNMA bonds because they are guaranteed by the federal government.
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[单项选择]What rate of return will an investor earn if they buy a 20-year, 10 percent annual coupon bond for $900 They plan on selling this bond at the end of five years for $951. Calculate the rate of return and the current yield at the end of five years. Rate of return Current yield ()①A. 12.0% 10.51% ②B. 9.4% 11.00% ③C. 12.0% 11.00%
A. ①
B. ②
C. ③
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[单项选择]A stockbroker who is a CFA Institute member is called on the telephone by the CEO of a large company. The CEO asks to buy shares of the CEO’s company for the accounts of the CEO’s children. In the course of the conversation, the CEO says this will really pay off when the upcoming takeover goes through. The stockbroker checks her sources and finds no information about the takeover. In this ease the broker should:()
A. only execute the order in compliance with Standard Ⅲ (A), Loyalty, Prudence, and Care. Since the client is buying the stock for the children, there is not a problem.
B. execute the order for all clients as required by Standard Ⅲ (B), Fair Dealing.
C. do none of the actions listed here.
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[单项选择]An independent analyst has only one client. One of the client’s largest holdings is a brokerage firm. Because of the large holding by his client, the brokerage firm recently began allowing the analyst to tap into the firm’s computer network to use the firm’s research facilities. This is allowable as long as the analyst:()
A. discloses the relationship to the client.
B. uses the resources to help manage the client’s account.
C. does all of the actions listed here.
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[单项选择]The committee charged with recommending a compensation package for members of a firm’s board of directors has recommended that in addition to compensation of $10000 for each board meeting attended, board members will be able to use one of the firm’s corporate jets up to twice each year and will receive a finder’s fee of 0. 1% if they identify an acquisition target that the firm acquires while the member is still on the board. Are these policies consistent with good corporate governance practices Use of Jet Finder’s fees()①A. Yes Yes ②B. No Yes ③C. No No
A. ①
B. ②
C. ③
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[单项选择]A security has a 30% chance of producing a 15% return and a 70% chance of producing a 4% return. The variance of the security is closest to:()
A. 0.0057.
B. 7.6.
C. 0.0077.
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[单项选择]A firm issues a 4-year semiannual-pay bond with a face value of $10 million and a coupon rate of 10%. The market interest rate is 11% when the bond is issued. The interest expense for the first semiannual period and the balance sheet liability at the end of the first semiannual period are closest to: Interest expense Balance sheet liability ()①A. $ 532580 $ 9683272 ②B. $ 532580 $ 9715852 ③C. $ 550000 $ 9683272
A. ①
B. ②
C. ③
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[单项选择]A worker is most likely to earn economic rent when the marginal revenue product (MRP) from her labor and the supply curve for her type of labor exhibit which of the following characteristics MRP Supply curve()①A. High More elastic ②B. Low Less elastic ③C. High Less elastic
A. ①
B. ②
C. ③
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[单项选择]Often central governments will announce auctions to issue new bonds when they believe prevailing market conditions appear most suitable. At the time of the auction, the amount to be auctioned and the maturity of the security to be offered are announced. This method of distributing new government securities is called:()
A. an ad hoc auction method.
B. a regular auction cycle/multiple-price method.
C. a regular auction cycle/single-price method.
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[单项选择]The symmetry principle refers to the idea that if an economy is organized under a fair set of rules:()
A. the greatest good is achieved for the greatest number of people.
B. the wealth that individuals accumulate will become equal over time.
C. individuals receive goods and services equal in value to their economic contribution.
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[单项选择]Victor Marginn, CFA, is a highly regarded portfolio manager for Atlantic Advisors (AA), a midsized mutual fund firm. He has watched the hedge fund boom and on numerous occasions pushed his firm to create such a fund. Senior management has refused to commit resources to the area. Frustrated by the inaction, and attracted by the higher fees associated with hedge funds, Victor and several other employees organize a hedge fund in the non-work hours. Victor is careful to work on the fund only on her own time. Because AA management thinks that hedge funds are a fad, he does not inform his supervisor about the hedge fund. According to the Standards of Practice Handbook, Victor least likely violated the Standard relating to:( )
A. loyalty.
B. disclosure of conflicts.
C. priority of transactions.
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[单项选择]Kira Sigard, CFA and an attorney with an investment banking firm, structures a client’s bond issue to include a "poison put". This is a provision that requires the issuer to redeem the bond at par in the case of a corporate takeover, a merger, or anti-takeover measure that would dissipate significant corporate assets. An investor who purchases this bond is protected from what type of risk()
A. Call Risk.
B. Reinvestment Risk.
C. Event Risk.
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[单项选择]Assuming market efficiency, which of the following statements regarding technical and fundamental analysis is FALSE()
A. Technical analysis that relies exclusively on historical data has no value.
B. Evidence indicates it is possible to obtain superior returns by investing in mid-cap firms since they tend to be followed by fewer analysts.
C. The only way to obtain superior results using historical data is to perform a top down analysis examining first the market, then the industry and then individual firms.
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[单项选择]Which of the following statements best explains how automatic stabilizers work Even without a change in fiscal policy, automatic stabilizers tend to promote:()
A. a budget surplus during a recession and a budget deficit during an inflationary expansion.
B. a budget deficit during a recession but do not promote a budget surplus during an inflationary expansion.
C. a budget deficit during a recession and a budget surplus during an inflationary expansion.
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[单项选择]Assume the following capital lease: Present value (PV) of lease payments at 12 percent is $25000. The leased asset is depreciated straight line over 6 years. The lease payment is $ 6000. The first payment of $ 6000 is to be paid at the end of the year. What is the second year’s interest expense and principal payment Interest Expense Principal Payout()①A. $ 0 $ 6000 ②B. $ 3000 $ 3000 ③C. $ 2640 $ 3360
A. ①
B. ②
C. ③
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[单项选择]A municipal bond carries a coupon of 6.75 percent and is traded at par. To a taxpayer in the 28 percent tax bracket, this bond provides an equivalent taxable yield of:()
A. 8.53%.
B. 7.88%.
C. 9.38%.
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[单项选择]An analyst is considering a company that has had Net Income of $ 15000000 on sales of $ 500000000. The company also has a Total Asset Turnover rate of 1.50 and a Total Assets/Equity ratio of 2.0. The company has a target payout ratio of 40%, what is the expected long-term earnings growth rate for this company()
A. 9.25%.
B. 6.00%.
C. 5.40%.
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[单项选择]A firm has $100 in equity and $ 300 in debt. The firm recently issued bonds at the market required rate of 9 percent. The firm’s beta is 1.125, the risk-free rate is 6 percent, and the expected return in the market is 14 percent. Assume the firm is at their optimal capital structure and the firm’s tax rate is 40 percent. What is the firm’s weighted average cost of capital (WACC)()
A. 7.8%.
B. 5.4%.
C. 8.6%.
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[单项选择]Rivendale Enterprises issued a 3-year, $ 20 million face, 8% semiannual coupon bond when market interest rates were at 9%. What was the initial balance sheet liability and what percent-age of the cumulative interest expense occurred through year 1 Initial liability Year 1 interest expense()①A. $ 19484213 31.84% ②B. $ 19484213 33.05% ③C. $ 20000000 33.05%
A. ①
B. ②
C. ③
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[单项选择]Harry, the Hotshot, salesman got a tip from his brother about Kansas Power Tools (KPT). He sees that his company’s research department has a sell rating on KPT, and says, "I know better." He reads the annual report, taking notes and marking it "BUY-takeover target (Analyst’s rating is sell). If the recommends the stock to his clients, Harry:()
A. has violated the code because the analyst has a sell rating.
B. has violated the code because he has not done sufficient research, including meeting management and comparing the company to others in its industry.
C. is not in violation of the code.
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[单项选择]According to the earnings multiplier model, a stock's P/E ratio (P0/E1) is affected by all of the following EXCEPT the:()
A. expected dividend payout ratio.
B. expected stock price in one year.
C. required return on equity.
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[单项选择]Assume the following corporate yield curve. One-year rate: 5.00 percent Two-year rate: 6. 00 percent Three-year rate: 7. 00 percent If a 3-year annual-pay corporate bond has a coupon of 6 percent, its yield to maturity is closest to:()
A. 6.92%.
B. 6.08%.
C. 7.00%.
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[单项选择]Suppose that the demand curve for soybeans shifts such that the equilibrium price of soybeans decreases 58 percent. At the new equilibrium price, the quantity that soybean suppliers are willing to provide decreases by 3 percent. Which of the following most accurately describes the elasticity of supply for soybeans Elasticity of supply Relative elasticity()
A. -0.05 Elastic
B. +0.05 Inelastic
C. +19.33 Inelastic
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[单项选择]Stock K has a beta of 0.7. Which of the following statements is/are true Ⅰ. The SML required return for K should be below the expected return on the market. Ⅱ. K has above-average covariance with the market portfolio, M Ⅲ. A portfolio of 70% M and 30% risk-free asset will have the same expected return as K()
A. Ⅰ and Ⅲ.
B. Ⅱ only.
C. Ⅱ and Ⅲ.
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[单项选择]Common size balance sheets express all balance sheet items as a percentage of:()
A. assets.
B. equity.
C. industry averages.
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[单项选择]Javox, Inc. is considering leasing an asset that has an estimated economic life of ten years and a lease term of eight years. The lease will not transfer ownership to Javox at expiration, and if Javox chooses to buy the asset at the termination date, they must pay the fair market value, If Javox leases the asset, it must be considered a(n):()
A. capital lease.
B. cash flow lease.
C. operating lease.
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[单项选择]Study the following information, find out the cash conversation cycle. Receivables Turnover: 30 Inventory Turnover: 15 Payable Turnover: 20()
A. 15 days.
B. 18.25 days.
C. 25.34 days.
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[单项选择]Which of the following statements about demand and consumer choice is least likely correct()
A. The elasticity of demand for a good increases over time.
B. In the short run, if the price of gasoline increases, consumption of gasoline will decrease by a smaller percentage.
C. In the short run, if the price of a brand of flour increases, consumption of that brand of flour will decrease by a smaller percentage.
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[单项选择]The following information is calculated by using LIFO method, calculate the cost of goods sold using FIFO. 2000 2001 Beginning Inventory $ 80000 $ 70000 Ending Inventory $ 70000 $ 50000 LIFO Reserve $ 5000 $ 8000 LIFO Cost of Goods Sold $ 300000 $ 250000()
A. $ 219000.
B. $ 238000.
C. $ 247000.
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[单项选择]Other factors being equal, which of the following values for the required rate of return and dividend growth rate, respectively, would produce the highest earnings multiplier for a stock Required rate of return Dividend growth rate ()
A. 16. 3% 7.6%
B. 17.2% 8.9%
C. 19.5% 11.6%
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[单项选择]The CAPM is an:()
A. equilibrium model that predicts the expected return on a stock given the expected return on the market and the stock’s correlation coefficient.
B. equilibrium model that predicts the expected return on a stock given the expected return on the market and the stock’s covariance.
C. equilibrium model that predicts the expected return on a stock given the expected return on the market and the stock’s beta coefficient.
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[单项选择]Todd Gable, CFA, was attending a noon luncheon when he overheard two software executives talking about a common vendor, Datagen, about how wonderful they thought the company was, and about a rumor that a major brokerage firm was preparing to issue a strong buy recommendation on the stock. Gable returned to the office, checked a couple of online sources, and then placed an order to purchase Datagen in all of his discretionary portfolios. The orders were filled within an hour. Three days later, a brokerage house issued a strong buy recommendation and Datagen’s share price went up 20%. Gable then proceeded to gather data on the stock and prepared a report that he dated the day before the stock purchase. Gable has:()
A. violated the Standards by improper use of inside information.
B. violated the Standards by using the recommendation of another brokerage firm in his report.
C. violated the Standards by not having a reasonable basis for making the purchase of Datagen.
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[单项选择]There is an investment which contains an expected return and standard deviation of 10% and 5% respectively. Assume that it is normally distributed, calculate the chance of losing money.()
A. 4.5%.
B. 3.5%.
C. 2.5%.
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[单项选择]Which of the following statements about risk is TRUE()
A. Systematic risk=Total risk + Unsystematic risk.
B. Unsystematic risk is an undiversifiable risk.
C. The market portfolio consists only of systematic risk.
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[单项选择]An analyst constructs a histogram and frequency polygon of monthly returns for aggressive equity funds over a 20-year period. Which of the following statements about a histogram or a frequency polygon is FALSE()
A. Both a histogram and a frequency polygon provide a graphical display of data found in a frequency distribution on.
B. A frequency polygon is a bar chart of continuous data that have been grouped into a frequency distribution.
C. The height of each bar in a histogram represents the absolute frequency for each return interval.
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[单项选择]iron Biggs is considering a real estate investment. In the first year, the property is expected to generate revenue of $ 65000. The expense in the first year is $ 25000 and the depreciation allowance will be 2.6 percent of the $ 350000 initial investment. Assuming all cash flows occur at the end of the year and Biggs expects to be in a 35 percent marginal tax bracket, the after-tax cash flow in year 1 is closest to:()
A. $ 20085.
B. $ 29185.
C. $ 30900.
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[单项选择]Which of the following statements regarding spot rates and zero-coupon bonds is least accurate()
A. The graph of current corporate bond yields is called the spot yield curve.
B. The yield to maturity on a zero coupon bond is called the spot interest rate.
C. With zero coupon bonds, investors have no reinvestment risk.
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[单项选择]Which of the following is included in working capital()
A. Accounts payable
B. Depreciation
C. Common stock
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[单项选择]Cody Scott would like to screen potential equity investments to identify value stocks and selects firms that have low price-to-sales ratios. Unfortunately, screening stocks based only on this criterion may result in stocks that have poor profitability or high financial leverage, which are undesirable to Scott. Which of the following filters could be added to the stock screen to best control for poor profitability and high financial leverage Filter 1—Include only stocks with a debt-to-equity ratio that is above a certain benchmark value. Filter 2—Include only dividend paying stocks. Filter 3—Include only stocks with an assets-to-equity ratio that is below a certain benchmark value. Filter 4—Include only stocks with a positive return-on-equity. Poor profitability High financial leverage()①A. Filter 2 Filter 3 ②B. Filter 2 Filter 1 ③C. Filter 4 Filter 3
A. ①
B. ②
C. ③
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[单项选择]The increase in inventory required due to a new capital budgeting project implementation would be classified as a:()
A. cost (negative cash flow) at time zero.
B. benefit (positive cash flow) at time zero.
C. cost (negative cash flow) in each year the firm needs the increased inventory.
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[单项选择]Which of the following statements about monopolists is most likely correct()
A. Without government intervention, monopolists will always earn profits.
B. A monopolist maximizes price where marginal revenue equals marginal cost.
C. Monopolists have imperfect information about demand.
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[单项选择]Which of the following statements regarding the effects of unanticipated inflation on the labor market and the market for financial capital is most accurate ()
A. When the actual rate of inflation is higher than expected, employees receive less compensation for their labor and this represents a gain for employers at the expense of their employees.
B. When the actual rate of inflation is declining, real wage rates of employees are lower than employers expected to pay, and employers gain at the expense of their employees.
C. When there is unanticipated inflation, interest rates are not set high enough to compensate borrowers for the declining value of money so lenders gain at the expense of borrowers.
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[单项选择]Which of the following statements involving a plain vanilla interest rate swap is least accurate In a plain interest rate swap, the:()
A. parties generally agree to swap the notional principal.
B. parties involved in the swap agreement are called counterparties.
C. counterparty that wants variable-rate interest agrees to pay fixed-rate interest and is called the pay-fixed side of the swap.
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[单项选择]A real estate valuation approach that uses information about past transactions involving properties that are similar to the subject property is the:()
A. cost approach.
B. income approach.
C. comparative sales approach.
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[单项选择]Which of the following statements regarding the value of the firm is most accurate()
A. A company’s legal and treasury departments act to reduce the tax rate from 37.5% to 37.0% , the value of the firm will increase.
B. The government engages in a restrictive monetary policy and the expected inflation rate decreases, the P/E ratio will decrease.
C. The board of directors increases the dividend payout ratio, the value of the company will increase.
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[单项选择]Davis Company, Inc. (DCI) earned $5 a share last year and paid dividend of $2 a share. The company is expected to grow by 8 percent annually and continue its payout ratio for the foreseeable future. An investor with an 11 percent required return expects to sell the stock at $ 75 two years from now. The maximum amount that an investor should be willing to pay for DCI stock today is closest to:()
A. $58.68.
B. $64.71.
C. $66.67.
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[单项选择]Joshua Douglas, CFA, is interested in the relationship between the stock prices of two companies, Sonata Inc. and Prius Inc. After downloading a time series of stock prices for each company, Douglas concludes that Sonata Inc. has a variance equal to 25.0 percent and Prius has a variance equal to 20.0 percent. If the covariance between the two stocks is -0.10, the correlation coefficient is:()
A. negative, and indicates that a 1.0% increase in the price of Sonata would be accompanied by a 2.0% decrease in the price of Prius.
B. negative, and indicates that a 10.0% increase in the price of Sonata would be accompanied by a 4.5% decrease in the price of Prius.
C. positive, and indicates that a 1.0% increase in the price of Sonata would be accompanied by a 2.0% increase in the price of Prius.
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[单项选择]The founders of the ABCD Corporation believe their idea for a new weight-loss pill will be tremendously successful. ABCD Corporation is currently seeking venture capitalists to invest in their company so they can do further research and hopefully someday develop their idea into a marketable product. This stage of venture capital investing can best be described as:( )
A. first-stage.
B. formative-stage.
C. seed-stage.
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[单项选择]Weights to be used in calculating a company’s weighted average cost of capital are least appropriately based on:()
A. the company’s current capital structure.
B. the average capital structure weights for companies of a similar size.
C. the average capital structure weights for companies in the same industry.
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[单项选择]A company has a long-term "take or pay" commitment with its major supplier. When calculating the company’s financial ratios, a financial analyst should:()
A. ignore the arrangement.
B. add the present value of the minimum future commitment to the company’s debt only.
C. add the present value of the minimum future commitment to both the company’s debt and assets.
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[单项选择]Which of the following statements is FALSE()
A. A deferred tax asset results when pretax income exceeds taxable income.
B. Taxable income is a term used for tax reporting, while pretax income is used with financial reporting.
C. When a deferred tax liability reverses, it means that a cash outflow for taxes is occurring.
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[单项选择]U. S. Treasury securities face several risks to varying degrees. Generally speaking, rank the following risks that an investor in a 5 percent coupon, 25-year, off-the-run U. S. Treasury bond, issued after 1984, would face. Order them from left to right with the least likely risk first through the most likely risk faced by the investor last. 1=liquidity risk. 2=prepayment risk. 3=default risk. 4=interest rate risk.()
A. 1, 2, 3, 4.
B. 2, 3, 1, 4.
C. 4, 3, 1, 2.
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[单项选择]During deflation and decreasing inventory quantities, a company using LIFO rather than FIFO. What is the effect on cost of goods sold and cash flows Cost of Good Sold Cash Flow()①A. lower lower ②B. higher lower ③C. lower higher.
A. ①
B. ②
C. ③
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[单项选择]Which of the following is a limitation to fully efficient markets()
A. The gains to be earned by information trading can be less than the transaction costs the trading would entail.
B. In general, for securities with smaller transaction costs, the deviations from informationally efficient prices are greater than for securities with larger transaction costs.
C. There are no limitations to fully efficient markets because the trading actions of fundamental and technical analysts are continuously keeping prices at their intrinsic value.
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[单项选择]When a risk-free asset is unavailable, the optimal portfolio on an efficient frontier for each investor is represented by the:()
A. market portfolio.
B. utility curve that intersects the efficient frontier.
C. highest utility curve that is tangent to the efficient frontier.
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[单项选择]Which of the following is least likely an indicator of a firm's liquidity()
A. Cash as a percentage of sales.
B. Amount of credit sales.
C. Inventory turnover.
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[单项选择]During 2004 Nancy Arnold received an undergraduate business degree with a management major and completed all requirements for the CFA designation imposed by CFA Institute. She is applying for employment at several brokerage firms. Her resume states, "I was awarded the CFA degree in 2004 by CFA Institute." Her resume also states that she graduated "with honors" and majored in finance. Her grade point average was 3.48 but "with honors" requires a 3.50 grade point average. Which of the following statements about Standard Ⅶ (B), Reference to CFA Institute, the CFA Designation, and the CFA Program, and Standard Ⅰ(C) , Misrepresentation, is TRUE Arnold:()
A. did not violate either Standard Ⅶ (B) or Standard Ⅰ (C).
B. violated Standard Ⅰ(C) but she did not violate Standard Ⅶ (B).
C. violated both Standard Ⅶ (B) and Standard Ⅰ (C).
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[单项选择]Use the following data from Delta’s common size financial statement to answer the question: Earnings after taxes=18% Equity=40% Current assets=60% Current liabilities=30% Sales=$ 300 Total assets=$1400 What is Delta’s total-debt-to-equity ratio()
A. 1.0.
B. 1.5.
C. 2.0.
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[单项选择]Why is convexity a good thing for a bond holder Because when compared to a low convexity bonds a high convexity bond:()
A. has better price changes regardless of the direction of the yield change.
B. is more sensitive to interest rate changes, increasing the potential payoff.
C. has improved estimation of price changes.
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[单项选择]Monthly Gross Domestic Product (GDP) figures from 1990 -2000 are an example of:()
A. systematic data.
B. non-random data.
C. time-series data.
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[单项选择]Which of the following is NOT a reason bond market indexes are more difficult to create than stock market indexes()
A. Bond deviations tend to be relatively constant.
B. There is a lack of continuous trade data available for bonds.
C. The universe of bonds is always changing due to new issues, retired bonds, sinking funds and calls.
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[单项选择]Assuming all other factors remain unchanged, which of the following would most likely lead to a decrease in the market P/E ratio()
A. A rise in the stock risk premium.
B. A decline in the risk-free rate.
C. An increase in the dividend payout ratio.
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[单项选择]Neil Barton, CFA, and Nancy Roberts, CFA, began a joint research report on Stamp Corporation. Nancy spent several days visiting Stamp’s corporate headquarters and meeting with all company officers. Prior to the completion of the report, Nancy was reassigned to another project. Neil utilized his and Nancy’s research to write the report. According to the CFA Institute Standards of practice Handbook, did Nell Violate any CFA Institute Standards of Professional Conduct()
A. No.
B. Yes, with respect to misrepresentation.
C. Yes, with respect to independence and objectivity.
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[单项选择]All of the following practices constitute good corporate governance, EXCEPT:()
A. the firm’s financial, operating, and governance activities are reported to shareholders in a fair, accurate, and timely manner, and management acts independent of the board of directors.
B. the firm’s financial, operating, and governance activities are reported to shareholders in a fair, accurate, and timely manner, and the board of directors protects shareholder interests.
C. there are proper procedures and controls coveting management’s day-to-day operations and the firm acts lawfully in dealings with shareholders.
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[单项选择]It is April 15, and a trader is entered into a short position in two soybean meal futures contracts. The contracts expire on August 15, and call for the delivery of 100 tons of soybean meal each. Further, because this is a futures position, it requires the posting of a $ 3000 initial margin and a $1500 maintenance margin per contract. For simplicity, however, assume that the account is marked to market on a monthly basis. Assume the following represent the contract delivery prices (in dollars per ton) that prevail on each settlement date:
A. April 15 (initiation)
B. 173.00
C. May 15
D. 179.75
E. June 15
F. 189.00
G. July 15
H. 182.50
I. August 15 (delivery)
J. 174.25
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[单项选择]An analyst compared the performance of a hedge fund index with the performance of a major stock index over the past eight years. She noted that the hedge fund index (created from a database) had a higher average return, higher standard deviation, and higher Sharpe ratio than the stock index. All the successful funds that have been in the hedge fund database continued to accept new money over the eight-year period. Are the average return and the standard deviation, respectively, for the hedge fund index most likely overstated or understated Average return for the Standard deviation for the hedge fund indes hedge fund index()
A. Understated Overstated
B. Overstated Understated
C. Overstated Overstated
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[单项选择]Would an increase in net profit margin or in the firm’s dividend payout ratio increase a firm’s sustainable growth rate Net profit margin Dividend payout ratio()①A. Yes Yes ②B. No No ③C. Yes No
A. ①
B. ②
C. ③
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[单项选择]An analyst is investigating a stock index and gathered the following information:()
A. Mean total revenue for all companies in the index
B. $1.8 million
C. Standard deviation of total revenue for all companies in the index
D. $ 2.4 million
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[单项选择]An analyst is investigating the performance of four portfolio over the same time period and gathered the following information:()
A. Portfolio
B. standard Deviation
C. Sharpe Ratio
D. 1
E. 17.9%
F. 0.21
G. 2
H. 15.6%
I. 0.24
J. 3
K. 13.8%
L. 0.30
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[单项选择]Which of the following strategies is least likely to be used by a hedge fund to increase leverage()
A. Margin borrowing.
B. Using derivatives.
C. Pursuing arbitrage opportunities.
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[单项选择]In 2005, Wilson, Inc. entered into a long-term construction contract with the Gordon School District to construct an elementary school for $ 20 million. The cost to complete the contract has been reliably estimated at $15 million. During 2005, costs of $ 7.5 million were incurred under the contract. A total of $ 9 million in advance billings were made and $ 5 million of those billings were received in cash. If Wilson used the percentage-of-completion method to account for this contract, Wilson, Inc.’s balance sheet as of December 31, 2005, will show a balance of:()
A. $ 4 million in the Net Construction-in-Progress asset account.
B. $ 4 million in the Net Advance Billings liability account.
C. $ 1 million in the Net Construction-in-Progress asset account.
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[单项选择]All of the following are required for a CFA Institute member to maintain his or her active status EXCEFF:()
A. remit a completed Professional Conduct Statement on an annual basis.
B. Passing each exam in no more than two tries.
C. paying membership dues to CFA Institute on an annual basis.
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[单项选择]The risk that relates to the amount and timing of cash flows from a mortgage is known as:()
A. prepayment risk.
B. default risk.
C. liquidity risk.
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[单项选择]Which of the following statements regarding deadweight loss is least accurate()
A. Deadweight loss occurs when the allocation of resources is inefficient.
B. Deadweight loss from underproduction leads to a loss of producer surplus but not consumer surplus.
C. Deadweight loss occurs when the quantity supplied does not maximize the sum of consumer and producer surplus.
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[单项选择]Which of the following is NOT a type of unemployment()
A. Frictional.
B. Cyclical.
C. Temporal.
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[单项选择]The following data applies to LeVeit Company: LeVeit has a target debt-to-equity ratio of 0.5. LeVeit’s bonds are currently yielding 10%. LeVeit is a constant growth firm that just paid a dividend of $ 3.00. LeVeit’s stock sells for $ 31.50 per share. Return on Equity (ROE) is 20%. The dividend payout ratio is 75%. The company’s marginal tax rate is 40%. The company’s weighted after-tax cost of capital is()
A. 10. 5%.
B. 11.0%.
C. 12.0%.
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[单项选择]Which of the following statements about last in, first out (LIFO) versus first in, first out (FIFO) is least likely correct In periods of rising prices and stable or increasing inventory quantities, FIFO, compared to LIFO, results in:()
A. higher working capital and lower cost of goods sold.
B. higher net income and higher taxes paid out.
C. lower cost of goods sold and higher inventory balances.
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[单项选择]Which of the following statements most accurately describes why the Global Investment Performance Standards (GIPS) were created To:()
A. meet the need for a single globally accepted set of investment performance presentation standards.
B. meet the need for a single globally accepted set of regulatory guidelines among developed securities markets.
C. provide comparability of performance results among nations for which no presentation guidelines currently exist.
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[单项选择]When Peter Jiang, CFA, joined Brown Investing, Brown began using a quantitative stock selection model that Peter had developed on his own personal time prior to his employment with Brown. One year later when Peter left the firm, he found the original copy of the model that he had developed in a file at his home and presented it to his new employer, who immediately began using the model. According to the Standards of Practice Handbook, did Peter violate any CFA Institute Standards of professional Conduct()
A. No.
B. Yes, because he failed to act in Brown’s best interest.
C. Yes, because he misappropriated property that now belonged to Brown.
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[单项选择]What is investing cash flow()
A. -224.
B. -210.
C. -70.
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[单项选择]Which of the following is a common criticism of derivatives()
A. Derivatives are likened to gambling.
B. Derivatives are too illiquid.
C. Fees for derivatives transactions are relatively high.
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[单项选择]A firm is planning a $25 million expansion project. The project will be financed with $10 million in debt and $15 million in equity stock (equal to the company’s current capital structure). The before-tax required return on debt is 10 percent and 15 percent for equity. If the company is in the 35 percent tax bracket, what cost of capital should the firm use to determine the project’s net present value (NPV)()
A. 11.6%.
B. 9.6%.
C. 10.5%.
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[单项选择]Suppose that JPK, Inc., paid dividends of $ 80000 to its preferred shareholders and $ 40000 to its common shareholders during 2004. The company had 20000 shares of common stock issued and outstanding on January 1, 2004, issued 7000 more shares on June 1, 2004, and paid a 10% stock dividend on August 1, 2004. Assuming that JPK had $150000 in net income, what is the firm’s basic earnings per share (EPS) for 2004()
A. $2.64.
B. $2.71.
C. $2.91.
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[单项选择]Consider a corporate bond with a yield of 6. 8% and a municipal bond (with equivalent risk) with a 4.9% yield. Which of the following statements is TRUE()
A. An investor with a marginal tax rate of 40% prefers the corporate bond.
B. An investor with a marginal tax rate of 15% prefers the municipal bond.
C. An investor with a marginal tax rate of 28% is indifferent between the two bonds.
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[单项选择]ZhongYi Xie, CFA, a portfolio manager for PIA Investments, plans to manage the portfolios of several family members in exchange for a percentage of each portfolio’ s profits. As his family members have requested that ZhongYi Xie provide the services outside his employment with PIA, he notifies his employer in writing of his prospective outside employment. Two weeks later, ZhongYi Xie has received no response from his employer and begins managing the family members’ portfolios. By managing these portfolios, did ZhongYi Xie violate any CFA Institute Standards of Professional Conduct()
A. No.
B. Yes, because he failed to obtain written consent from his employer.
C. Yes, because he failed to disclose the outside employment to his existing clients.
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[单项选择]Two basic assumptions of technical analysis are that security prices adjust:()
A. move in trends that persist for long periods of time, and market prices are determined by the interaction of supply and demand.
B. move in trends that persist for long periods of time, and liquidity is provided by securities dealers.
C. adjust rapidly to new information, and market prices are determined by the interaction of supply and demand.
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[单项选择]All of the following violate Standard Ⅰ(C), Misrepresentation, EXCEPT:()
A. copying a proprietary computerized spreadsheet without seeking authorization from their creators.
B. presenting factual information published by recognized statistical reporting services without acknowledgment.
C. using excerpts from reports prepared by others with minor word changes without acknowledgment.
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[单项选择]Which of the following is TRUE about the consideration of depreciation in the operations section of a cash flow statement Direct Method Indirect Method()
A. Considers Considers
B. Considers Does not consider
C. Does not consider Consider
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[单项选择]Which of the following events will reduce a company's weighted average cost of capital()
A. A reduction in the market risk premium.
B. An increase in expected inflation.
C. An increase in the company's beta.
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[单项选择]Assume that one year ago you bought 500 shares of a stock at $ 20 per share using margin. The margin rate was 50% and the interest rate on the margin loan was 10%. Assume no commissions. What is your return if the current stock price is $ 25 per share()
A. 25%
B. 40%.
C. 50%.
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[单项选择]Assuming the federal government maintains a balanced budget, the most likely effects of a tax increase on government expenditures and real GDP are: Government Expenditures Real GDP( )
A. Increase Decrease
B. Increase Increase
C. Decrease Increase
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[单项选择]Given the following income statement and balance sheet for a company:()
A. 2.018
B. 4.05
C. 3.2
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[单项选择]KNA company wants to maintain a level of current assets at least equal to 30 percent greater than current liabilities (current assets/current liabilities=current ratio=1.3). At the end of last year, current assets were $ 300 and current liabilities were $ 250. If KNA sold some fixed assets to generate cash, what is the minimum amount they would need to sell to reach a current ratio of 1.3()
A. $ 25000.
B. $ 30000.
C. $ 15000.
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[单项选择]John Maginn, an investment researcher, who is a CFA charter holder, takes a trip for which his firm will pay all the expenses. Upon his return he alters some of the numbers on restaurant receipts to inflate the expenses by $ 52. Is this a violation relating to Professional Misconduct()
A. No, because the expense inflated is under $100.
B. No, if such behavior is not significant.
C. Yes, because it is a crime of moral turpitude.
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[单项选择]Roy, CFA, manages several pension accounts and directs most of his trades through the Wales Investment Limited. Roy does this because he believes that he gets good executions and Wales Investment Limited provides him with excellent research reports used in the management of these accounts. Regional, a small discount brokerage house, has just approached Roy that it will execute his trades at half the cost of Wales. Regional does not have a research department. According to AIMR Standards of Professional Conduct, if Wales does NOT switch his business to Regional, has he violated the loyalty clause in his fiduciary duties()
A. No, because he already had an established relationship with Wales before Regional’s offer.
B. No, if he can determine, in good faith, that the higher commissions are commensurate with the value of the research services he receives and discloses this practice.
C. Yes, because of the prudent expert clause.
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[单项选择]Which of the following is least likely a disadvantage of a callable bond to an investor The:()
A. investor is exposed to reinvestment rate risk.
B. cash flow pattern of a callable bond is not known with certainty.
C. issue often offers a higher coupon rate than a comparable option-free bond.
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[单项选择]Janes’ Funds based in Colorado underwent a management shake-up after two years of horrific returns. The new manager, Juan, who adhere strictly to GIPS decided to change the name on many funds in order to initiate new performance numbers.()
A. Juan is in compliance with GIPS because there will be new fund mangers.
B. Juan is in compliance because the firm will change the make up of the portfolios dramatically.
C. Juan is in violation because you cannot restate performance due to a management change.
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[单项选择]A portfolio manager is analyzing a $2000000 venture capital investment. If the project succeeds until the end of the sixth year, the net present value (NPV) of the project is $ 6587000. The project has a 32. 69 percent probability of surviving to the end of the sixth year. The expected NPV of the project is:()
A. $ 6587000.
B. $ 4587000.
C. $ 807090.
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[单项选择]A pension fund expects to pay obligations of $ 5000000 4 years from today. The fund will fund this obligation by making 5 annual, equal deposits into an account earning 3% , with the first deposit occurring today, and the last occurring at the time the obligation is due. What size must each annual deposit be()
A. $ 904874.
B. $ 941773.
C. $1125662.