CFA Mock Exam Full 89 Questions with Answers 2023
if you were fired from a previous job and fail to tell your new emmployer is that a violation and
... [Show More] if so of what? - CORRECT ANSWER yes, misconduct. this information could potentially harm your new employer and he needs to know man!
degress of price discrimination - CORRECT ANSWER 1st degree-- know price that every consumer is willing to pay. 2nd degree-- price varies according to quanity demanded. sellers aren't able to distinguish classes or consumers. third degree-- charging different prices to different consumer groups. charging kids and adults differently. peak and off peak rates for electricity.
disposition bias - CORRECT ANSWER loss aversion
if you get offered a senior position with a new department at a bank that has bad compliance procedures and/or bad marketing materials what should you do? - CORRECT ANSWER not accept the position. possibly agree to be hired as an interim consultant until proper procedures are taken.
why would a multinational financial services holding company be unlikely to be able to claim GIPS compliance? - CORRECT ANSWER GIPS standards require that firms be defined as an investment firm, subsidiary, or division held out to clients as a distinct business entity. multinational finance firm unlikely to be operating solely as an investment firm.
to claim compliance with GIPS, who do you have to make a reasonable effort to provide a compliant presentation to? - CORRECT ANSWER prospective investors only. it is reccomended to do so also for existing investors, but you don't have too.
the primary monetary goal of most major central banks is... - CORRECT ANSWER maintaining price stability. is it though??
a motor scooter rental shop charges $90 per day. owner is considering a Wed special of 75 per day. at current price, shop rents 40 scooters and expects rentals to increase to 60 at lower price. - CORRECT ANSWER $45. Change in TR/Change in quantity.
This is technically incorrect!!!!!
deadweight loss problems from price ceilings/floors - CORRECT ANSWER draw it out and think of lost surplus to identify...
how is a building owned for the purpose of leasing out to tenants treated by under IFRS - CORRECT ANSWER as an investment property, can be reported at either cost or fair value. only prior losses that are reversed are shown as profit in income statement. gains above prior value are recorded in shareholders equity.
under IFRS, how are deferred tax liabilities and warranties classified as current or non-current - CORRECT ANSWER DTL are non-current and warranties are current.
income tax expense equals... - CORRECT ANSWER income tax payable (income tax rate times by taxable income) plus increase in deferred tax liabilities. look at 174.
redo #179. repeat #237 and 238!! - CORRECT ANSWER
Elliot Wave Theory - CORRECT ANSWER wave 1 is a large gain, wave 2 gives back much of gains from Wave 1, but not all. the lost proportion is usually a percentage equal to a fibonaccci ratio, and consists of three smaller waves.
three main sources of return for a commodities future contract... - CORRECT ANSWER 1. collateral yield, roll yield, and spot price return. i think the reason why convience yield isn't factored in is that it probably doesn't change very much...
can early exercise of deep in the money american call be advantageous - CORRECT ANSWER apparently not. remember early exercise of call's can be good if it has cashflows like dividends etc.
if future prices and interest rates are negatively correlated.. - CORRECT ANSWER the forwards will be more desirable than futures (for long positions)
the voting rights of an unsponsored depository receipt belong to the... - CORRECT ANSWER depository bank.
be able to estimate value of stock using forward P/E!!!! - CORRECT ANSWER
a bond with the greatest reinvestment risk out of one selling at a premium/discount/par - CORRECT ANSWER premium.... has the highest coupon rate and therefore highest risk of not being able to reinvest at that rate...
CAPM assumes that investors plan for the same single holding period!! - CORRECT ANSWER
having a higher risk aversion coefficient means... - CORRECT ANSWER you have a lower risk tolerance!
how do you solve for the macaulay duration of a non-callable perpetual bond with a yield in perpetuity? - CORRECT ANSWER (1+r)/r
justified forward P/E ratio - CORRECT ANSWER dividend payout ratio/(r-g)
why were the GIPS standards created? - CORRECT ANSWER to help prevent misleading practices such as "representative accounts", where a firm picks a top performaing account to represent overall investmment results
Teresa Avila, CFA, is a micro-cap investment analyst at a hedge fund. The fund requires Avila to hold any securities she recommends for the fund in her own account as well. Because Avila has such a small account, whenever she trades for her own portfolio, she combines the transactions with those of the hedge fund so she is sure to have her account aligned with the fund. Has Avila most likely violated any CFA Institute Standards of Professional Conduct? - CORRECT ANSWER Standard VI(B)-Priority of Transactions requires that investment transactions for clients and employers take priority over transactions in which members have beneficial ownership. By executing her own transactions with those of the hedge fund, the analyst has violated this standard because micro-cap securities can be thinly traded and easily influenced by changes in the volume of activity. So, the analyst may benefit when she combines her transactions with the hedge funds, and she should let the fund execute its orders before she makes investments for her account.
is an hour of research on a topic you don't know anything about enough to say that you made enough effort at the dillegence and reasonable basis thing? - CORRECT ANSWER no sir
Gregor Pavlov, CFA, is a fund manager working for the general partner of a new private equity fund. Pavlov includes in the fund marketing material his performance history from his previous employer. He received permission from his former employer to take his historical return figures and the supporting research reports he used to make the related investment decisions. Did Pavlov most likely violate the CFA Institute Standards of Professional Conduct? - CORRECT ANSWER Even though Pavlov had his former employer's permission to take his performance record and supporting research reports with him, he does not have the underlying performance data to support those historical return calculations and is, therefore, most likely in violation of Standard V(C)-Record Retention. Pavlov had the permission of his employer to take his historical performance record and research reports with him when he left the firm, so he is not in violation of Standard IV(A)-Loyalty
check the non fee paying accounts don't have to be included in GIPS composites.... - CORRECT ANSWER i think according to CFA it might or maybe just a really poorly worded question..
if the forward rate for USD/EUR is 1.43 and the forward premium to the spot trade is 400 points what is the spot rate? - CORRECT ANSWER 1.39
A power generation company is a monopoly that has very high barriers to entry. The quantity demand (QD) for its product is QD = 800 - 0.25 × P (where P is price). The slope of the marginal revenue curve is closest to: - CORRECT ANSWER Q = 800 - 0.25 P
P = 3200 - 4Q
TR = P × Q = 3200 Q - 4 Q2
and Marginal Revenue = ΔTR/ΔQ = 3200 - 8 Q
Therefore the slope of the curve is -8.
graph a basic D and supply graph... - CORRECT ANSWER
The 15-month holding period return for a security is 12%. Its annualized return is closest to: - CORRECT ANSWER (1 + 0.12)12/15 - 1 = 9.49%
Interest expense can be determined from the following relationship:
£ Millions
Beginning interest payable
90.4
Plus interest expense
?
Minus cash paid for interest
- 103.3
Ending interest payable
84.5
Solving for interest expense = 97.4 - CORRECT ANSWER
For investment properties, when using the fair value model of valuing assets (as opposed to the revaluation model, which is not allowed by IFRS for investment properties), all increases and decreases affect net income. - CORRECT ANSWER
if purchases aren't available, can i estimate number of days payables? - CORRECT ANSWER yes, using COGS... or use COGS + change in inventory if available!!!
under GAAP, how are intangible assets valued? - CORRECT ANSWER at historical cost
two fundamental characteristics that contribute to usefulness of financial info - CORRECT ANSWER relevance and faithful representation
cash return on assets - CORRECT ANSWER CFO/average assets
if you own 60% of a company, how much of its revenues/profits do you report - CORRECT ANSWER all of it because it's more than 50% owned.
For best coporate governance practices... - CORRECT ANSWER Appropriate controls and procedures should be in place covering management's activities in running the daily operations of the firm.
the ex-dividend date... - CORRECT ANSWER is usually determined by the security exchange.
what companies should be made of entirely independant board members? - CORRECT ANSWER Assuming appropriate corporate governance measures, the audit, remuneration/compensation, and nominations committees should be composed entirely of independent board members.
discount basis yield - CORRECT ANSWER is discount x (360/90)
corporate governance... - CORRECT ANSWER Corporate governance is the system of internal controls and procedures by which individual companies are managed.
early stage financing... - CORRECT ANSWER Early-stage financing is capital provided for companies moving toward operation but before commercial manufacturing and sales have occurred.
contango - CORRECT ANSWER when future prices are higher than spot prices...
value at risk - CORRECT ANSWER the minimum amount of loss expected over a given time period at a given probability level.
contiounious compound rate of return - CORRECT ANSWER ln(pricenew/priceold)
memorize formmula for probablity of value in a bernalli distribution!!! - CORRECT ANSWER
sample standard deviation - CORRECT ANSWER remember to divide sum of squared deviations by n-1!!
realibility factor - CORRECT ANSWER degree of confidence in a confidence interval
RSI - CORRECT ANSWER greater than 70 means overbought, lower than 30 means oversold. is a momentum oscillator
will value of implicit forwards in a swap be equal? - CORRECT ANSWER Since the cost of carrying an asset over different time periods will vary, the values of the implicit forward contracts embedded in the swap will not be equal., some maybe positive and some maybe negative. Off-market forward contracts satisfy this condition, as they can be set at any value
If a forward contract requires no cash outlay at initiation, it is most likely true that at initiation:
value exceeds price.
price is equal to value.
price exceeds value. - CORRECT ANSWER At initiation, value is equal to zero. Price is a positive number which states the amount that must be paid when the purchase takes place.
what's the most useful mefasure when comparing companeis with different capital structure? - CORRECT ANSWER The EV/EBITDA (enterprise value/earnings before interest, taxes, depreciation, and amortization) approach is most useful when comparing companies with significant differences in capital structure. EBITDA is computed prior to payment to any of the company's financial stakeholders and is not affected by the amount of debt leverage.
margin call price... - CORRECT ANSWER stock initial price * ((1-initial margin)/(1-maintance margin))
if you're involved in distributing an IPO, do you need preclearance formm supervisor/CCO before partcipating personally? - CORRECT ANSWER no, you can participate unless the IPO is oversubscribed.
if you trade based on blurry mosiac theory do you need to checkk with CCO, etc>? - CORRECT ANSWER no, just keep detailed records to prove that you used mosiac theory...
referall fees must be mentioned too... - CORRECT ANSWER employer/supervisor and PROSPECTIVE clients
Cahart - CORRECT ANSWER adds price momentum to the 3 factor Fama-French model
validity, execution, and clearing instructions - CORRECT ANSWER validity-- indicates when an order can be filled. execution--- instructions regarding trade size and visibility. clearing--- indicates how to arrange final settlement of trade.
sponsored despository receipt vs unsponsored - CORRECT ANSWER unsponsred DR depository bank has voting rights, sponsored ones gets voting rights and dividends same as common share
repeat #106 on afternoon exam 2!!`\ - CORRECT ANSWER
expected price change with yield change in a bond taking convexity into account - CORRECT ANSWER (-Annmod*change yield) + (.5 * Convexity * (change yield squared)
linkers - CORRECT ANSWER AKA inflation linked bonds...
the convergence of global accounting standards has advanced to a degree that the Securities & Exchange Commission in the United States now mandates that foreign private issuers who use IFRS may report under - CORRECT ANSWER Historically, the Securities & Exchange Commission required reconciliation for foreign private issuers that did not prepare financial statements in accordance with U.S. GAAP. However the reconciliation requirement was eliminated as of 2008 for companies that prepared their financial statements under IFRS.
an auditor must given an opinion about the effectiveness of internal controls!! - CORRECT ANSWER
when using double declining balance, if you use 2/3 depreciation the first year, you depreciate 2/3 remmaining book value every year!!! - CORRECT ANSWER
under completed contract method, how much revenue is recognized under year 1? - CORRECT ANSWER none, only recognized when contract is "substanitally complete"
what assets is it most important to test for impairment at least annualy? - CORRECT ANSWER intangible assets with an indefinite life
are storage inventory costs expensed or capitalized? - CORRECT ANSWER expensed!
if you want to test that the returns are greater than zero, what's the null hypothesis? - CORRECT ANSWER null is that they're less than or equal to zero
in the binommial mmodel, the difference between the up factor and down factor is... - CORRECT ANSWER the vol of the underlying
convience yield - CORRECT ANSWER is the nonmentary benefit of holding the ASSET. it is used in forward pricing
do a what was the total return on margin problme... - CORRECT ANSWER
original issue discount tax provisions... - CORRECT ANSWER make it so there's no capital gains/loss with zero coupon bonds...
if i have an unsuitable investment that will make up only 10% of a port, can i allocate to it? - CORRECT ANSWER no sir
DFL - CORRECT ANSWER operation income/(operation income- interest expense)
cost of trade credit - CORRECT ANSWER [(1+(discount/(1-discount)))^(365/number of days beyond discount period)]-1
what type of indicator is unemployment? - CORRECT ANSWER leading indicator
what's the primary benefit of the direct cashflow reporting method?` - CORRECT ANSWER it provides specific info on cash receipts/payments
On 1 January, a company that prepares its financial statements according to International Financial Reporting Standards (IFRS) arranged financing for the construction of a new plant. The company
• borrowed NZ$5,000,000 at an interest rate of 8%,
• issued NZ$5,000,000 of preferred shares with a cumulative dividend rate of 6%, and
• temporarily invested NZ$2,000,000 of the loan proceeds during the first six months of construction and earned 7% on that amount.
The amount of financing costs to be capitalized to the cost of the plant in the first year is closest to: - CORRECT ANSWER The interest costs can be capitalized, but under IFRS, any amounts earned by temporarily investing the funds are deducted from the capitalized amount. The costs related to the preferred shares cannot be capitalized.
Capitalized Costs
NZ$
Interest costs
0.08 × 5,000,000
400,000
Minus interest income
0.07 × 2,000,000 × ½ year
- 70,000
Total capitalized costs
330,000
under US GAAP, restructuring charges are counted as operating items!!! - CORRECT ANSWER
IFRS does not require disclosure of the original date of acquisition for long lived assets - CORRECT ANSWER
if under a contract, a commpany expeccts to recover costs, you can recognize revenue to the extent of costs. only if cost recovery is uncertain should you not recognize rev until end. - CORRECT ANSWER
cross sectional data - CORRECT ANSWER datas on multiple characteristics at a single point in time
loginitudal data - CORRECT ANSWER
capital allocation line - CORRECT ANSWER shows the different possible portfolios using risky port and risk free asset [Show Less]