Mock Exam 1_ Morning Session
一、选择题
-
1.
Ross Dunder, CFA, is the CIO for Bling Trust (BT), an investment advisor.Dunder recently assigned one of his portfolio managers, Joey Chetch, to manage several accounts that primarily invest in thinly divaded micro-cap stocks.Dunder soon notices that Chetch places many stock divades for these accounts on the last day of the month, towards the market’s close.Dunder finds this divading activity unusual and speaks to Chetch who explains that the divading activity was completed at the client’s request.Dunder does not investigate further.Six months later regulatory authorities sanction BT for manipulating micro-cap stock prices at month end in order to boost account values.Did Dunder violate any CFA Institute Standards of Professional Conduct?
参考答案B
解析B is correct because the CFA Institute Standard on Responsibilities of Supervisors, Standard IV (C), requires members/candidates to take steps to detect and prevent violations of laws, rules and regulations.Dunder failed in his supervisory role when he accepted Chetch’s explanation of the unusual trading activity.Dunder should have reviewed the client’s goals and objectives, and records, to see if they in fact requested month-end trading.Regardless of the explanation provided by Chetch Dunder should have investigated further.
2.
Which of the following is not a form of plagiarism, according to code of ethics?
参考答案B
解析Factual information published by recognized financial and statistical reporting services can be used without acknowledgement.
3.
New Coal Corp.(NCC) is a small company that claims to have a proprietary formula that converts coal into a clean energy source.NCC hires Amanda Covington, CFA, to prepare a research report on the company.Amanda relies on NCC for information on the formula’s effectiveness.Anxious to issue the report, he does not confirm the information with other sources.NCC widely disdivibutes Amanda’s research report and posts it on the corporate website.NCC’s stock price rises from $7 to $35 per share in the following twelve months.Senior NCC management takes the opportunity to sell all of their company shares.According to the Standards of Practice Handbook, did Amanda violate any CFA Institute Standards of Professional Conduct?
参考答案C
解析CFA Institute’s Standard on Investment Analysis, Recommendations, and Actions requires members/candidates to have a reasonable and adequate basis for their recommendations.Amanda relied solely upon NCC for the information he used in putting together his research report.He did not have a reasonable and adequate basis for writing a research report about the company.
4.
Walter Ford, CFA, is asked to review his firm’s soft dollar practices.As part of the review, he notes that his firm has failed to disclose the practices to the firm’s clients in writing as required by law.Walter quickly prepares and disdivibutes the appropriate disclosure.He does not report the firm’s violation to the appropriate regulatory authority.According to the Standards of Practice Handbook, by not reporting the violation to the regulatory authority, has Walter violated any CFA Institute Standards of Professional Conduct?
参考答案A
解析Although disclosure may be prudent in certain circumstances and required if mandated by applicable law, the Code and Standards do not require that members report legal violations to the appropriate governmental or regulatory organizations.
5.
Miranda Grafton, CFA, purchased a large block of stock on behalf of specific accounts she managed.The stock realized a significant gain in value before the close of business, so Grafton reviewed her accounts again to determine where the block shares should be allocated.According to the Standards of Practice Handbook, Grafton’s most appropriate action is to allocate the shares to:
参考答案A
解析Members have a responsibility to deal with all clients fairly.The shares should be allocated to those accounts for which the shares were originally intended, regardless of the profitability of the trade.
6.
Zhao Wei, CFA, is a well-known and respected analyst who follows the financial software indusdivy.He learns that a small, relatively unknown company whose shares are divaded over the counter has just signed significant condivacts with some of the companies he follows.After further investigation, Zhao Wei decides to write a research report on the company and recommend purchase.While the report is being reviewed by his supervisor for factual accuracy, Zhao Wei schedules a dinner party with several of his best clients to discuss the company.At the dinner party, he mentions the purchase recommendation that is scheduled to be sent out early the following week to all the firm’s clients.According to the Standards of Practice Handbook, has Zhao Wei violated any CFA Institute Standards with respect to:
?? ??fair dealing? preservation of confidentiality?
?? ??fair dealing? preservation of confidentiality?
参考答案C
解析Because he mentions the purchase recommendation that is scheduled to be sent out early the following week to all the firm’s clients, he violates “fair dealing”.But he didn’t disclose the confidential information of the customers, so there is no violation of preservation of confidentiality.
7.
Zhang Min, CFA, a portfolio manager managing an index fund in a large asset management company.What is his most appropriate action?
参考答案B
解析When managing an index fund, the portfolio manager only need to make investment decision that is consistent with the stated objectives and constraints of the fund.
8.
Jeffery Jones is a Level II candidate in the CFA Program.She receives an e-mail from a co-worker who offers to sell her ten unpublished Level II exam questions that the co-worker assures her will be on the next exam.Jeffery does not respond and deletes the e-mail.According to the Standards of Practice Handbook, did Jeffery violate any CFA Institute Standards of Professional Conduct?
参考答案A
解析CFA Institute’s Standards do not require members/candidates to report such activity.
9.
Amy Wong, CFA, included in her firm’s marketing materials several plain-language descriptions of general investment concepts such as standard deviation and duration, which were copied from other sources without reference to the original author.According to the Standards of Practice Handbook, has Amy violated the Standard relating to misrepresentation?
参考答案A
解析Copying any material from other sources without acknowledgement, including plain-language descriptions of general concepts, is a violation of the standard relating to misrepresentation.
10.
In order to comply with the GIPS Standards, a firm must initially show GIPS-compliant history for a minimum of:
参考答案C
解析A firm must initially show GIPS-compliant history for a minimum of five years, or since inception if the firm has been in existence for less than five years.
11.
Kelly Stargate, CFA, runs a small investment management firm.Kelly’s firm subscribes to a service from a large investment research firm that provides research reports that can be repackaged as in-house research by smaller firms.Kelly’s firm disdivibutes these reports to clients with specific references as to their source and author.According to the Standards of Practice Handbook, has Kelly violated the standard relating to misrepresentation?
参考答案A
解析Members may repackage and distribute third-party research reports as long as they do not represent themselves as the author of the report.
12.
Bart Wiley, CFA, has decided to revise his firm’s written compliance manual.He checks with counsel regarding changes to applicable laws, rules, and regulations.He incorporates these changes as well as changes to the Code and Standards in the new version end disdivibutes copies to his staff along with a memorandum.The memorandum states that the updated manual includes compliance procedures designed to meet indusdivy standards, regulatory requirements, requirements of the Code and Standards, and circumstances of the firm.According to the Standards of Practice Handbook, did Wiley violate any Standard of Professional Conduct?
参考答案A
解析Wiley committed no violation.According to Standard IV (D) Duties to Employers Responsibilities of Supervisors, “adequate” procedures are those designed to meet industry standards, regulatory, requirements, the requirements of the Code and Standards, and the circumstances of the firm.The Standard requires that members with supervisory authority make reasonable efforts to prevent violations of applicable laws, rules, regulations, and the Code and Standards.
13.
According to the Standards of Practice Handbook, gifts to members from which of the following sources are least likely to create a loss of independence and objectivity?
参考答案B
解析The potential for clients to obtain influence to the detriment of other clients, although present, is not as great as in situations where no compensation arrangement exists.Therefore, members may accept gifts from clients but must disclose to their employers such benefits.
14.
Firms claiming compliance with the GIPS Standards are least likely to be required to:
参考答案A
解析Firms claiming compliance with the GIPS Standards are encouraged, but not required to undertake the verification process, which is defined as the review of a firm’s performance measurement processes and procedures by an independent third-party verifier.
15.
Zhang Li, CFA, supervises individuals working on the bond divading desk at a large investment management firm.Zhang Li has discovered that Liu Mo, a bond divader under his supervisory has been accepting lavish gifts from one of the firm’s brokers.Zhang Li has also noticed that Liu Mo has been executing more than the usual amount of divades through this particular broker, and she suspects that he has not been receiving best execution for the firm’s clients.Zhang Li immediately initiates an investigation to determine the extent of Liu Mo’s wrongdoing.According to the Standards of Practice Handbook, pending the outcome of this investigation, Zhang Li’s best course of action is to:
参考答案C
解析This is the best action.
16.
For years John Berger, a CFA charterholder and CEO of a company, relied upon a set of reasonable procedures for preventing violations of the Code and Standards of Professional Conduct in the firm.To not be liable for a violation of the Standards, Berger must:
参考答案C
解析As a CEO, Berger is responsible for implementing and maintaining appropriate compliance procedures.He must also ensure the procedures are monitored and enforced.
17.
According to the Standards of Practice Handbook, in order to fulfill the basic provision and procedure of the suitability standards, should a client’s written investment polity statement (IPS):
Take performance measurement Be reviewed at least annually?
benchmarks into consideration?
Take performance measurement Be reviewed at least annually?
benchmarks into consideration?
参考答案A
解析They are required by IPS.
18.
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 divades from the new client’s portfolio to various existing clients.He arranges the divades to be executed at a price that approximates the current market price.This action is:
参考答案A
解析There is no violation.It is in the best interest of the client to be diversified and selling via a series of cross trades will likely reduce price impact costs when compared to selling directly into the market.The analyst appears to have reasonable basis for putting the securities in the accounts of other clients.
19.
An analyst gathered the following information about the monthly returns over the same time period from two diversified investment portfolios:
The analyst stated that Portfolio X is negatively skewed and Portfolio Y is positively skewed.Is the analyst correct with respect to:
Portfolio X? Portfolio Y?
The analyst stated that Portfolio X is negatively skewed and Portfolio Y is positively skewed.Is the analyst correct with respect to:Portfolio X? Portfolio Y?
参考答案A
解析Portfolio X is positively skewed and Portfolio Y is negatively skewed.
20.
A pension fund expects to pay obligations of $5, 000, 000 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?
参考答案B
解析PV=0, N=5, FV=5,000,000, I/Y=3 → PMT= - 941,773.
21.
An analyst stated that the mean of the standard normal disdivibution always has a value of zero but that the standard deviation of the standard normal disdivibution can take on a value from 0 to 1.0.Is the analyst correct with respect to the value of the standard normal disdivibution’s:
Mean? Standard deviation?
Mean? Standard deviation?
参考答案C
解析The standard normal distribution is a normal distribution that has been “normalized” so that it has a mean of zero and a standard deviation of one.
22.
On 1 January 2009, an institutional investor’s portfolio is valued at $10,000,000.The investor wants to make a donation to charity on 31 December 2009, but does not want the year-end portfolio value to fall below $10,000,000.The expected annual return on the investor’s existing portfolio is 10 percent with a variance of 0.0144.If the investor wants a safety-first ratio of at least 0.5, the maximum amount the investor should plan to donate is closest to:
参考答案A
解析
23.
The scale-free measure of relative dispersion that is useful in making direct comparisons among different asset classes is the:
参考答案C
解析The coefficient of variation is the ratio of the standard deviation of a set of observations to their mean value.This scale-free measure permits direct comparisons of dispersion across different data sets.
24.
A U.S.Treasury Bill with a face value of $100,000 and 256 days until maturity is selling for $ 94,300.The money market yield on this security is closest to:
参考答案C
解析Money market yield: ($5,700/$94,300)*360/256=0.085, or 8.5%.
25.
Use the below div, containing average annual returns for eleven investment managers.
Which of the following is the median return for this group?
Which of the following is the median return for this group?参考答案C
解析The median return is the (N+1)/2, or the 6th, for this group of N=11 managers.
26.
Which of the following statements used to describe the Student’s t-disdivibution is least accurate? The Student’s t-disdivibution:
参考答案C
解析The Student’s t-distribution has fatter tails than the normal distribution, or for a high number of degrees of freedom, has tails that resembles the normal distribution.
27.
An investor currently holds the following portfolio of common stocks:
The expected correlation of returns between Stock 1 and Stock 2 is +0.60.The investor sells Stock 2 and uses the $60,000 proceeds to purchase another stock that has the same expected annual return and standard deviation of returns as Stock 2, but has an expected correlation of returns with Stock 1 of +0.55.Will the investor’s action increase the portfolio’s expected:
annual return? standard deviation of return?
The expected correlation of returns between Stock 1 and Stock 2 is +0.60.The investor sells Stock 2 and uses the $60,000 proceeds to purchase another stock that has the same expected annual return and standard deviation of returns as Stock 2, but has an expected correlation of returns with Stock 1 of +0.55.Will the investor’s action increase the portfolio’s expected:annual return? standard deviation of return?
参考答案A
解析Portfolio expected value: The expected value of a portfolio composed of n assets with weights,
, and expected values,
, can be determined using the following formula:
Portfolio variance:
Expected annual return is the same, while standard deviation decreases due to decreased correlation.
, and expected values,, can be determined using the following formula:Portfolio variance:
Expected annual return is the same, while standard deviation decreases due to decreased correlation.
28.
Which of the following decisions by analyst would most accurately describe a Type II error?
参考答案C
解析Failing to reject a false null hypothesis results in making a Type II error.
29.
You believe that the likelihood of bankruptcy is 30% for Rusty Roof Supply.You also believe that Home Pedot has a 20% of entering bankruptcy.You believe that the two events are independent.What is the probability that at least one of the companies will enter bankruptcy?
参考答案C
解析The probability is given by 30% +20%-30% * 20% = 44%.
30.
A 182-day U.S.Treasury bill has a face value of $100,000 and currently sells for $98,500.Which of the following yields is most likely the lowest?
参考答案B
解析The holding period yield is: (100-98.5) / 98.5 = 0.015228.This is less than the bank discount yield:
.It is also less than the money market yield: 
.It is also less than the money market yield:
31.
Which of the following is most likely used by technicians to measure inter-market relationships?
参考答案C
解析The Sharpe ratio is a relative measure that equals excess return of a portfolio (mean return less the risk free rate) divided by the standard deviation of the portfolio.
32.
Which of the following would least likely be categorized as a multivariate disdivibution?
参考答案A
解析The number of days a stock traded and did not trade describes only one random variable.All the other cases involve two or more random variables.
33.
According to the crowding-out model, persistent, large government budget deficits are most likely to be associated with a(n):
参考答案B
解析The crowding-out model suggests that budget deficits are associated with higher real interest rates, a decline in private investment, an inflow of capital from abroad, appreciation of the domestic currency, and a decline in net exports.
34.
Based on historical data and assuming less-than-full employment, periods of sharp acceleration in the growth rate of the money supply tend to be associated initially with:
参考答案C
解析At less-than-full employment, an expected increase in the growth rate of the money supply will initially reduce the real rate of interest, increasing the demand for goods and services.
35.
Allen Chen, CFA, stated that, for the typical company, accounting profit tends to be greater than economic profit because explicit costs are generally not included in calculating accounting profit.Is the analyst correct with respect to the:
Relationship between
accounting profit and economic profit? Inclusion of explicit costs?
Relationship between
accounting profit and economic profit? Inclusion of explicit costs?
参考答案C
解析Accounting profits are generally higher than economic profits since implicit costs are generally ignored in calculating accounting profit.
36.
In recently years, financial innovation and growth in real GDP increase the demand for money.Is this statement respectively correct?
Financial innovation? Growth in real GDP?
Financial innovation? Growth in real GDP?
参考答案B
解析If real GDP rises, more goods and services are bought and sold, and more money is needed to conduct these transactions.Increase in real GDP shifts the money demand curve up.Decreases in real GDP shift it down so that less money is demanded at each level of interest rates.
The increased use of credit cards and debit cards, the availability of interest bearing checking accounts, easier transfer of funds from savings to checking, the proliferation of ATMs, and internet banking and bill paying are all financial innovations that have affected the demand for money curve.Overall, financial innovation has reduced the demand for money below what it would have been if only the increase in real GDP was at work.The increased use of credit cards and ATMs has likely been the most important innovations with respect to the demand for money.
The increased use of credit cards and debit cards, the availability of interest bearing checking accounts, easier transfer of funds from savings to checking, the proliferation of ATMs, and internet banking and bill paying are all financial innovations that have affected the demand for money curve.Overall, financial innovation has reduced the demand for money below what it would have been if only the increase in real GDP was at work.The increased use of credit cards and ATMs has likely been the most important innovations with respect to the demand for money.
37.
The following fiscal programs is likely to act as an automatic stabilizer during periods of economic recession and boom, except:
参考答案B
解析Automatic stabilizers tend to create a budget deficit during an economic recession and a budget surplus during an economic boom; a balanced federal budget, by definition, creates neither deficit nor surplus.
38.
Nominal gross domestic product (GDP) in 2008 is $3.2 billion, up from $2.6 billion in 2000.The 2000 CPI is 100 and the CPI is 116.3.What is the change in real GDP over the period in percentage terms?
参考答案A
解析100.0/116.3 × $3.2 billion = $2.7515 billion.
($2.7515 billion - $2.6 billion) / $2.6 billion = 5.83%.
($2.7515 billion - $2.6 billion) / $2.6 billion = 5.83%.
39.
In a regulated indusdivy, the indivoduction of a marginal cost pricing rule that maximizes total surplus would most likely be viewed as:
参考答案C
解析A marginal cost pricing rule sets price equal to marginal cost.It is efficient but leaves the natural monopoly incurring an economic loss.Because, with an increase in output the average total cost falls, resulting in marginal cost being less than the average cost.
40.
An analyst does research about the impact of gap between money demand and money supply.When the quantity of money supplied by the banking system exceeds the quantity of money demanded at the current interest rate, investors will most likely:
参考答案A
解析Excess money will be used to buy bonds and result in interest rate falls.
41.
If a regulatory agency intervenes to reduce prices, a monopoly will most likely expand output to the level where:
参考答案C
解析Given regulatory agency intervention, a monopoly will expand output to the level where average cost equals demand.
42.
Which of the following statements about price elasticity is most likely false?
参考答案C
解析A particular brand of toilet paper likely has elastic demand because there are many available substitutes.The existence of many substitutes indicates elastic demand.When good substitutes for a product are available, a price rise induces many consumers to switch to other products.Thus, if the price of a brand of toilet paper increases, total expenditure on that brand will likely decrease as consumers substitute cheaper brands.The most important determinant of the price elasticity of demand is the availability of substitutes.
The other statements are true.The second law of demand suggests that in general, when the price of a product increases, consumers take time to reduce their consumption.Thus, demand decreases by a larger amount in the long run than in the short run.The demand for gasoline is likely inelastic.Thus, when price increases, the percentage change in quantity demanded is less than the change in price (and total expenditures on the good increase).
The other statements are true.The second law of demand suggests that in general, when the price of a product increases, consumers take time to reduce their consumption.Thus, demand decreases by a larger amount in the long run than in the short run.The demand for gasoline is likely inelastic.Thus, when price increases, the percentage change in quantity demanded is less than the change in price (and total expenditures on the good increase).
43.
In regard to the relation between output and costs in the short-run, a decline in the marginal cost most likely occurs at what level of production?
参考答案B
解析Marginal cost, in the short-run, decreases at low level of outputs due to economies from greater specialization.However, at higher levels of production, it eventually increases because of the law of diminishing returns.
44.
The most likely objective of government regulation of a natural monopoly is to:
参考答案C
解析Ideally, price regulation of a natural monopoly would improve resource allocation if price was set equal to the firm’s average total cost per unit of output.The resulting output level would produce zero economic profits for the firm.If price was set equal to marginal cost, however, economic losses would occur and the monopolist would not undertake production.
45.
An analyst checked the financial information of a profidiv company named York Corporation.The company began offering a warranty on a new product indivoduced during the year, accruing warranty expenses of $400,000.The actual expenditures for repairs under this warranty during the year were $100,000.The company’s tax rate was 30 percent.With respect to the new product warranty only, the most likely amount and classification of deferred tax recorded was a(n):
参考答案C
解析Pretax income (financial reporting) includes an accrual for warranty expense but warranty cost is not deductible for taxable income until the firm has made actual expenditures to meet warranty claims.For tax reporting purpose, warranty expense is $100,000; while for financial reporting purpose, warranty expense is $400,000.
Tax paid greater than tax expense is a deferred tax assets equals to
($400,000-$100,000)*0.3=$90,000.
Tax paid greater than tax expense is a deferred tax assets equals to
($400,000-$100,000)*0.3=$90,000.
46.
A company reported net income of $135 million and cash flow from operations of $110 million.The most likely explanation for net income being larger than cash flow from operations is that the company:
参考答案C
解析An increase in net working capital investment because of the lower balance in accounts payable would reduce cash flow from operations relative to net income.
47.
During August, a company recorded the following divansactions:
·Aug 1 Inventory 30 units @ $5.00
·Aug 8 Purchased 60 units @ $5.20
·Aug 14 Sold 45 units @ $7.00
·Aug 23 Purchased 30 units @ $ 5.40
·Aug 28 Sold 35 units @ $7.20
If periodic FIFO inventory costing method is adopted, what is gross profit for August?
·Aug 1 Inventory 30 units @ $5.00
·Aug 8 Purchased 60 units @ $5.20
·Aug 14 Sold 45 units @ $7.00
·Aug 23 Purchased 30 units @ $ 5.40
·Aug 28 Sold 35 units @ $7.20
If periodic FIFO inventory costing method is adopted, what is gross profit for August?
参考答案B
解析Under FIFO, COGS is the same under a periodic system and a perpetual system.
Revenue $567 (45 units × $7.00) + (35 units × $7.20)
COGS $410 (30 units × $5.00) + (50 units × $5.20)
Gross profit $157
Revenue $567 (45 units × $7.00) + (35 units × $7.20)
COGS $410 (30 units × $5.00) + (50 units × $5.20)
Gross profit $157
48.
At the beginning of the year 2009, a lessee company entered into a new capital lease agreement.The lease payments are $100,000 annually and are due at the end of each year for five year.The appropriate discount rate is 12 percent.Depreciation is on a sdivaight-line basis with zero salvage value.With respect to the effect of the lease on the company’s financial statements in the first year of the lease, which of the following is most accurate? The reduction in the company’s:
参考答案B
解析PMT=100,000, N=5, I/Y=12%, FV=0, CPT PV=360,447.6
Depreciation = 360,447.6/5=72,089.52
Interest expense = 360,447.6*12%=43,253.7 (INT will affect CFO)
Principal return = 100,000-INT=56,746.28 (PNT will affect CFF)
Depreciation = 360,447.6/5=72,089.52
Interest expense = 360,447.6*12%=43,253.7 (INT will affect CFO)
Principal return = 100,000-INT=56,746.28 (PNT will affect CFF)
49.
An analyst does research about the ratio impact between LIFO inventory method and FIFO inventory method.Compared with the company using the FIFO inventory method during a period of rising prices and sdiv inventory quantities, the use of LIFO by that company will most likely result in:
参考答案A
解析When price increases, COGS increase, tax become lower, inventory decrease, inventory turnover increase under LIFO.And a more probability of violating debt covenants related to minimum working capital due to lower inventory balance.
50.
Which of the following statements regarding revenue recognition is least accurate?
参考答案C
解析The cost recovery method recognizes sales when cash is received, but no gross profit is recognized until all the cost of goods sold is collected.
51.
An analyst has gathered the following data about a company:
·Average receivables collection period of 37 days
·Average payables payment period of 31 days
·Average inventory processing period of 46 days
What is their cash conversion cycle?
·Average receivables collection period of 37 days
·Average payables payment period of 31 days
·Average inventory processing period of 46 days
What is their cash conversion cycle?
参考答案C
解析Cash conversion cycle = average receivables collection period + average inventory processing period-payables payment period = 37 + 46 -31 = 52 days.
52.
An analyst has tested LIFO and FIFO inventory method’s impact to a company’s ratio and gathered the following information about FYK Manufacturing Corporation ($ million):
Using the FIFO inventory method compared with LIFO, would FYK Manufacturing Corporation’s 2009 gross profit margin and current ratio, respectively?
Gross profit margin using FIFO Current ratio using FIFO
Using the FIFO inventory method compared with LIFO, would FYK Manufacturing Corporation’s 2009 gross profit margin and current ratio, respectively?Gross profit margin using FIFO Current ratio using FIFO
参考答案C
解析
+LIFO reserve = 82.3+37.3=119.6; 
- (LIFO 
-LIFO 
=204.8-(37.3-22.7) = 190.2.
Gross profit margin under LIFO = (284.4-204.8)/284.4=28%; under FIFO =
(284.4-190.2)/284.4=33%.Current ratio under FIFO is higher than LIFO because FIFO has higher inventory level than LIFO.
+LIFO reserve = 82.3+37.3=119.6; - (LIFO -LIFO =204.8-(37.3-22.7) = 190.2.Gross profit margin under LIFO = (284.4-204.8)/284.4=28%; under FIFO =
(284.4-190.2)/284.4=33%.Current ratio under FIFO is higher than LIFO because FIFO has higher inventory level than LIFO.
53.
A firm’s financial statements reflect the following:
Which of the following is the closest estimate of the firm’s sustainable growth rate?
Which of the following is the closest estimate of the firm’s sustainable growth rate?参考答案C
解析Return on equity (ROE) = net profit margin*asset turnover*leverage =
(0.16)
(0.67) (1.364) = 0.146.The sustainable growth = (1-dividend rate) (ROE) =
(0.65)(0.146) = 9.5%
(0.16)
(0.67) (1.364) = 0.146.The sustainable growth = (1-dividend rate) (ROE) =(0.65)
(0.146) = 9.5%
54.
An analyst gathered the following information about the Medivon company:
·Net income equals $15,000
·5,000 shares of common stock issued on January 1, 2009
·10 percent stock dividend issued on June 1, 2009
·1000 shares of common stock were repurchased on July 1, 2009
·1000 shares of 10 percent, par $100 preferred stock each convertible into 8 shares of common were outstanding the whole year 2009
How many common shares should be used in computing the company’s basic earnings per share (EPS)?
·Net income equals $15,000
·5,000 shares of common stock issued on January 1, 2009
·10 percent stock dividend issued on June 1, 2009
·1000 shares of common stock were repurchased on July 1, 2009
·1000 shares of 10 percent, par $100 preferred stock each convertible into 8 shares of common were outstanding the whole year 2009
How many common shares should be used in computing the company’s basic earnings per share (EPS)?
参考答案B
解析1/15,500 shares issued (includes 10% stock dividend on 6/1)12 = 66,000
7/11,000 shares repurchased6 months =-6,000
66,000-6,000= 60,000 shares
60,000 shares/12 months=5,000 average shares
12 = 66,0007/11,000 shares repurchased
6 months =-6,00066,000-6,000= 60,000 shares
60,000 shares/12 months=5,000 average shares
55.
A company reported a large increase in gross profit margin compared to the prior year.The large increase in gross profit margin most likely resulted from a reduction in:
参考答案C
解析A LIFO liquidation matches old inventory costs with current revenues, and can produce an increase in the gross profit margin.
56.
An analyst gathered the following information about a company for 2009:
The bonds were issued at par and can be converted into 400,000 common shares.All securities were outstanding for the entire year.Diluted earnings per share for the company for 2009 are closest to:
The bonds were issued at par and can be converted into 400,000 common shares.All securities were outstanding for the entire year.Diluted earnings per share for the company for 2009 are closest to:参考答案A
解析Diluted EPS=
57.
The Lorry Supply Company uses LIFO inventory valuation.Lorry Supply had a cost of goods sold of $1 million for the period.The inventory at the beginning of the period was $0.5 million and the inventory at the end of the period was $0.6.Lorry Supply’s LIFO reserve was $0.1 million for the previous year and $0.2 for the current year.What is Lorry Supply’s cost of goods sold according to FIFO inventory valuation?
参考答案C
解析FIFO COGS = beginning inventory + purchases - ending inventory
Purchases = Change in inventory + COGS = ($0.6 - $0.5) + $1 = $1.1 million
FIFO COGS = ($0.5 + $0.1) + $1.1 - ($0.6 + $0.2) = $0.9 million
Check:
Beginning inventory + purchases = ending inventory + COGS
FIFO $0.6 +$1.1 = $0.8 + $0.9
LIFO $0.5 +$1.1 = $0.6+$1.0
Purchases = Change in inventory + COGS = ($0.6 - $0.5) + $1 = $1.1 million
FIFO COGS = ($0.5 + $0.1) + $1.1 - ($0.6 + $0.2) = $0.9 million
Check:
Beginning inventory + purchases = ending inventory + COGS
FIFO $0.6 +$1.1 = $0.8 + $0.9
LIFO $0.5 +$1.1 = $0.6+$1.0
58.
On December 31, 2008, Alliance, Inc.executed an eight-year lease with annual payments of $600,000 beginning December 31, 2009 for factory equipment.The economic life of the equipment was 12 years.The interest rate implicit in the lease was eight percent.Alliance may purchase the equipment at the end of the lease at the then-current fair market value of the equipment.The fair market value of the equipment on December 31, 2008 was $3,500,000.
In its Statement of Cash Flows for the year ended December 31, 2009, Alliance should include the following related to the above divansaction:
In its Statement of Cash Flows for the year ended December 31, 2009, Alliance should include the following related to the above divansaction:
参考答案C
解析Alliance lease meets the present value criterion for classifying a lease as a capital lease because the present value of the lease payments using an eight percent interest rate(which is the minimum of the lessee’s incremental borrowing rate (10 percent) or the rate implicit in the lease (eight percent) is $3,447,983, which is $3,447,983 / $3,500,000= 98.5 percent of the fair value of the asset.Because the present value computation is more than 90 percent of the fair value of the asset, the lease is a capital lease.The portion of the capital lease payment that is considered to be interest expense, $3,447,983 * 0.08 = $275,839, is a reduction in cash flow from operations, and the balance of the payment, $600,000 - $275,839 = $324,161 is a reduction in cash flow from financing activities.
59.
If a firm has a FIFO inventory of 9000 and a LIFO inventory of 6500, what is the value of the LIFO reserve, adjusted retained earnings, and deferred tax liabilities on a FIFO basis assuming a 40 percent tax rate?
参考答案C
解析LIFO reserve = FIFO inventory -LIFO inventory= 9000 -6500= 2500
Increase in retained earnings = (2500)*(1-0.4) = 1500
Increase in deferred tax liability = (2500)*(0.40) = 1000
Increase in retained earnings = (2500)*(1-0.4) = 1500
Increase in deferred tax liability = (2500)*(0.40) = 1000
60.
Selected information from SAG Corp’s financial activities in the year 2009 is as follows:
·Net income was $7,650,000.
·1,100,000 shares of common stock were outstanding on January 1.
·The average market price per share was $62 in 2009.
·Dividends were paid in 2009.
·The tax rate was 40 percent.
·10,000 shares of 6 percent $1,000 par value preferred shares convertible into common shares at a rate of 20 common shares for each preferred share were outstanding for the entire year.
·70,000 options, which allow the holder to purchase 10 shares of common stock at an exercise price of $50 per common share, were outstanding the entire year.
SAG Corp’s Diluted earnings per share (Diluted EPS) was closest to:
·Net income was $7,650,000.
·1,100,000 shares of common stock were outstanding on January 1.
·The average market price per share was $62 in 2009.
·Dividends were paid in 2009.
·The tax rate was 40 percent.
·10,000 shares of 6 percent $1,000 par value preferred shares convertible into common shares at a rate of 20 common shares for each preferred share were outstanding for the entire year.
·70,000 options, which allow the holder to purchase 10 shares of common stock at an exercise price of $50 per common share, were outstanding the entire year.
SAG Corp’s Diluted earnings per share (Diluted EPS) was closest to:
参考答案A
解析SAG’s basic earnings per share (EPS) ((net income-preferred dividends) / weighted average shares outstanding) for 2008 was ($7,650,000 -($1,000 × 10,000*0.06)) /1,100,000 = $6.41.
If the convertible preferred stock was converted to common stock at January 1,2008,10,000 × 20 = 200,000 additional common shares would have been issued, dividends on the preferred stock would not have been paid, and Diluted EPS would have been $7,650,000 / (1,100,000 + 200,000) = $5.88.Because $5.88 is less than basic EPS of $6.41, the preferred shares are dilutive.
Using the treasury stock method, if the options were exercised cash inflow would be 70,000 × 10 × $50 = $35,000,000.The number of SAG shares that can be purchased with the inflow (cash inflow divided by the average share price) is $35,000,000 / $62 =564,516.
The number of shares that would have been created is 700,000 -564,516 = 135,484.Diluted EPS was $7,650.000 / (1,100,000 + 135,484) = $6.19.Because this is less than the EPS of $6.41, the options are dilutive.
Combining the calculations, Diluted EPS was $7,650,000 / (1,100,000 + 200,000 +135,484) = $5.32.
If the convertible preferred stock was converted to common stock at January 1,2008,10,000 × 20 = 200,000 additional common shares would have been issued, dividends on the preferred stock would not have been paid, and Diluted EPS would have been $7,650,000 / (1,100,000 + 200,000) = $5.88.Because $5.88 is less than basic EPS of $6.41, the preferred shares are dilutive.
Using the treasury stock method, if the options were exercised cash inflow would be 70,000 × 10 × $50 = $35,000,000.The number of SAG shares that can be purchased with the inflow (cash inflow divided by the average share price) is $35,000,000 / $62 =564,516.
The number of shares that would have been created is 700,000 -564,516 = 135,484.Diluted EPS was $7,650.000 / (1,100,000 + 135,484) = $6.19.Because this is less than the EPS of $6.41, the options are dilutive.
Combining the calculations, Diluted EPS was $7,650,000 / (1,100,000 + 200,000 +135,484) = $5.32.
61.
On 1 January 2009, a company had 1.6 million shares of common stock outstanding.Which of the following statements about the calculation of that company’s 2009 earnings per share is most accurate? Assuming no other divansactions involving common shares during 2009, the number of shares used to calculate 2009 earnings per share will be equal to:
参考答案C
解析When calculating shares of common stock outstanding, if stock split or stock dividend occurs during the fiscal year, the time-weighting effects should be taken into consideration.If the stock split or dividends occur before issuance of the 2008 financial statements, no time-weighting should be considered.
62.
A firm is purchasing a new file server for $680,000, with a 4-year expected life and a salvage value of $50,000.It is expected that the new server will generate an additional $200,000 in revenue each year.The firm will use the sdivaight line method to depreciate the server for financial reporting, but the sum-of-year’s digits (SYD) method for tax purposes.How much tax will be payable in year two, assuming a 35 percent tax rate?
参考答案A
解析Income for each year is expected to be $200,000.The second year’s depreciation will be ($680,000- $50,000) ×0.3 = $189,000, so the taxable income will be $11,000 and the tax will be $11,000 ×0.35 = $3,850.
Sum-of-the-years’ digits (an accelerated) method:
depreciati on in year x=
n= depreciable life and SYD =1+2+
+(n-1)+n
Sum-of-the-years’ digits (an accelerated) method:
depreciati on in year x=
n= depreciable life and SYD =1+2+
+(n-1)+n
63.
A company reported deferred tax liabilities of $500,000 and deferred tax assets of $350,000.If tax rates change and the company continues to grow, using the liability method of accounting for deferred taxes will most likely result in:
参考答案A
解析The company has a net deferred tax liability; a decrease in tax rates will reduce liabilities and increase equity.
64.
The Lather Corporation entered into a lease for 5 years that requires payments of $10,000 per year.If the lease is classified as a capital lease, what is the amount recorded as debt for this lease at the end of one period if the appropriate discount rate is 10 percent?
参考答案C
解析Capital lease obligation = PV of lease-first period’s loan amortization
(37,908) × (0.1) = 3,791 to interest
10,000 payment - 3,791 interest = 6,209 to principal
Capital lease obligation after the first year = $37,908- $6,209 = $31,699
(37,908) × (0.1) = 3,791 to interest
10,000 payment - 3,791 interest = 6,209 to principal
Capital lease obligation after the first year = $37,908- $6,209 = $31,699
65.
An analyst gathered the following information about a company:
If the company’s net income for the year is $2.8 million, diluted earnings per share is closest to:
If the company’s net income for the year is $2.8 million, diluted earnings per share is closest to:参考答案C
解析Dilutive stock options and/or warrants increase the number of common shares outstanding in the denominator for diluted EPS.There is no adjustment to net income in the numerator.
Stock options and warrants are dilutive only when their exercise price is less than the average market price of the stock over the year.
Use the treasury stock method to calculate the adjustment to the number of shares in the denominator.
If there are restrictions on the proceeds received when warrants are exercised (e.g., must be used to retire debt), then dilutive EPS calculations must reflect the results of those agreements.
50,000*(50-40)/50=10,000
2,800,000/ (500,000+10,000) =5.49
Stock options and warrants are dilutive only when their exercise price is less than the average market price of the stock over the year.
Use the treasury stock method to calculate the adjustment to the number of shares in the denominator.
If there are restrictions on the proceeds received when warrants are exercised (e.g., must be used to retire debt), then dilutive EPS calculations must reflect the results of those agreements.
50,000*(50-40)/50=10,000
2,800,000/ (500,000+10,000) =5.49
66.
ADREN Company purchased a deliver divuck for $77,500 in 2009.ADREN expected to use the divuck for 8 years, and estimated the salvage value to be $5,600.Additionally, ADREN estimated driving the divuck 400,000 kilometers while they owned it.If in 2010 ADREN drives the delivery divuck 44,000 kilometers, the depreciation expense under sdivaight-line and units-of-production methods, respectively, would be closest to:
Sdivaight-line method Units-of-production method
Sdivaight-line method Units-of-production method
参考答案B
解析Straight-line depreciation (77,500-5,600)/8 = $8987.5,
units-of-production ((77,500-5,600)/400,000) × 44,000 = $7,909
units-of-production ((77,500-5,600)/400,000) × 44,000 = $7,909
67.
Coats Corporation generates $10,000,000 in sales.Its variable costs equal 85 percent of sales, and its fixed costs are $500,000.Therefore, the company’s earnings before taxes (EBIT) equal $1,000,000.The company estimates that if its sales were to increase 10 percent, its net income and EPS would increase 17.5 percent.What is the company’s interest expense? (Assume that the change in sales would have no effect on the company’s tax rate.)
参考答案C
解析If sales increase 10% then sales = 11,000,000
Fixed costs = (500,000)
Variable costs = (0.85) × (11,000,000)=(9,350,000)
EBIT = 1,150,000
% △ in EBIT = (1,150,000 - 1,000,000) / 1,000,000=150,000/1,000,000=0.15 or 15%
DFL =△EPS / %△EBIT =17.5/15= 1.16667
DFL = EBIT/EBIT- I
1.16667=1,000,000 / (1,000,000-I)
→ 142,860 = I
Fixed costs = (500,000)
Variable costs = (0.85) × (11,000,000)=(9,350,000)
EBIT = 1,150,000
% △ in EBIT = (1,150,000 - 1,000,000) / 1,000,000=150,000/1,000,000=0.15 or 15%
DFL =△EPS / %△EBIT =17.5/15= 1.16667
DFL = EBIT/EBIT- I
1.16667=1,000,000 / (1,000,000-I)
→ 142,860 = I
68.
Are unrealized gains and losses on available-for-sale securities reported in the:
Statement of comprehensive income? Statement of stockholders’ Equity?
Statement of comprehensive income? Statement of stockholders’ Equity?
参考答案C
解析Comprehensive income includes unrealized gains and losses on available-for-sale securities and comprehensive income is included in the statement of stockholder’s equity.
69.
Williams Warehousing currently has a warehouse lease that calls for annual payments of $120,000 over the next 5 years.The warehouse owner, who needs cash, is offering Williams a deal wherein Williams will pay $200,000 during the current year and then pay only $80,000 over the remaining 4 years.(Assume that all lease payments are made at the beginning of the year.) Should Williams Warehousing accept the offer if its required rate of return is 9 percent, and why?
参考答案C
解析The present value of the current lease is $508,766, while the present value of the lease being offered is $459,178; a savings of 49,588.If the payments were at the end of the year, the present value of the current lease would be $466,758, while the present value of the lease being offered would be $421,264; a savings of 45,494.One cannot simply take the difference in the cash flows into account, reaching an answer of $80,000, because money has a time value.Nor should one simply look at the additional costs in any single year.
70.
According to capital budgeting, which of the following statements is accurate?
参考答案C
解析The change in net working capital for a project is the difference between the required increase in current assets and the increase in current liabilities and can be positive or negative.The replacement decision involves an analysis of mutually exclusive projects where new equipment is considered to replace old equipment.Expansion projects are investments in new assets to increase current earnings.
71.
An analyst does research about corporate governance.The interests of a company’s shareowners are least likely to be served if that company’s executive management compensation program:
参考答案B
解析If the company’s executive management compensation program includes downward repricing of strike prices for previously granted stock options, then the managers would have little motivation to serve the share holder’s interests for the reason that they can still exercise their option even if they did a poor job.
72.
In calculating the weighted average cost of capital (WACC), which of the following statements is least accurate?
参考答案C
解析The cost of debt is equal to one minus the marginal tax rate multiplied by the before-tax marginal cost of debt.
73.
The following data is regarding the Link Company:
·A target debt/equity ratio of 0.5
·Bonds are currently yielding 10%
·Link is a constant growth firm that just paid a dividend of $3.00
·Stock sells for $31.50 per share, and has a growth rate of 5%
·Marginal tax rate is 40%
What is Link’s after-tax cost of capital?
·A target debt/equity ratio of 0.5
·Bonds are currently yielding 10%
·Link is a constant growth firm that just paid a dividend of $3.00
·Stock sells for $31.50 per share, and has a growth rate of 5%
·Marginal tax rate is 40%
What is Link’s after-tax cost of capital?
参考答案B
解析Use the revised form of the constant growth model to determine the cost of equity.Use algebra to determine the weights for the target capital structure realizing that debt is 50% of equity.Substitute 0.5E for D in the formula below.
=
+growth = (3)*(1.05)/(31.50)+0.05=0.15 or 15%
V= debt + equity=0.5+1=1.5
WACC = (E/V) () + (D/V)(
)(1-t)
WACC = (1 / 1.5)*(0.15) + (0.5 / 1.5)*(0.10)*(1 - 0.4) = 0.1 + 0.02 = 0.12 or 12%
=+growth = (3)*(1.05)/(31.50)+0.05=0.15 or 15%V= debt + equity=0.5+1=1.5
WACC = (E/V) (
) + (D/V)()(1-t)WACC = (1 / 1.5)*(0.15) + (0.5 / 1.5)*(0.10)*(1 - 0.4) = 0.1 + 0.02 = 0.12 or 12%
74.
An analyst does research about capital investment project.A company is evaluating a capital investment project that has the same risk as the company.The project is expected to generate end-of-year, after-tax cash flows of €2 million each year for five years.The company’s cost of equity capital is 15 percent, and the company’s weighted average cost of capital is 10.4 percent.If the project’s profitability index is equal to 1.0, the initial investment for that project is closest to:
参考答案C
解析Using WACC to discount after-tax cash flow to calculate PV=7.5 million.
PI = PV of future cash flows / Initial investment = 1, so initial investment is 7.5 million.
PI = PV of future cash flows / Initial investment = 1, so initial investment is 7.5 million.
75.
Forand Co.currently sells 2 million units at $350 per unit.Fixed operating costs are $100 million and variable operating costs are $150 per unit.If Forand pays $40 million in interest, the sales level at the operating breakeven and total breakeven points are?
参考答案B
解析Operating breakeven units = $100 million / ($350 - $150) = 500,000 units
Operating breakeven sales = $350 * $500,000 = $175,000,000
Total breakeven units = ($100 million+＄40 million) /($350 - $150) = 700,000 units
Total breakeven sales = $350 * $700,000 = $245,000,000
Operating breakeven sales = $350 * $500,000 = $175,000,000
Total breakeven units = ($100 million+＄40 million) /($350 - $150) = 700,000 units
Total breakeven sales = $350 * $700,000 = $245,000,000
76.
A large corporation accepts a project which generates no revenue and has a negative net present value.The project most likely is classified in which of the following categories?
参考答案B
解析Regulatory, safety, and environmental projects are often mandated by governmental agencies.They may generate no revenue and might not be undertaken by a company maximizing its own private interests.
For example, a corporation may be required to install equipment to meet a regulatory standard, and the cost of satisfying the standard is born by the corporation.In this case, the corporation selects the lowest cost alternative that meets the requirement, i.e., the alternative with the least negative net present value.
For example, a corporation may be required to install equipment to meet a regulatory standard, and the cost of satisfying the standard is born by the corporation.In this case, the corporation selects the lowest cost alternative that meets the requirement, i.e., the alternative with the least negative net present value.
77.
Which of the following is the most likely result of an internally, financed cash dividend?
参考答案C
解析A cash dividend reduces current ratio by using corporate cash while a stock dividend has no impact on the company’s current ratio.
78.
An analyst determines the following cash flows for a capital project:
The required rate of return for the project is 13 percent.The net present value (NPV) of the project is closest to:
The required rate of return for the project is 13 percent.The net present value (NPV) of the project is closest to:参考答案A
解析Using a calculator with a 13 percent discount rate, the NPV is $14.85 (CF0 = - 100, CF1 = 30, CF2 = 40, CF3 = 40, CF4 = 30, CF5 = 20, I = 13, solve for NPV).
79.
An analyst gathered the following data about common stocks J, K, and L, which together form a value-weighted index:
*Two-for-one stock split
The value-weighted index (base index=100) at the end of 2009 is closest to:
*Two-for-one stock splitThe value-weighted index (base index=100) at the end of 2009 is closest to:
参考答案C
解析In a market-value-weighted index, the total ending market value for the securities is divided by the beginning market value for the securities to determine the percentage of change, which in turn is applied to the beginning index value:
$1,100,000 / $1,030,000=1.06796, 1.06796 × 100=106.796.
$1,100,000 / $1,030,000=1.06796, 1.06796 × 100=106.796.
80.
An analyst gathered the following information about a common stock:
If the stock’s annual dividend is expected to remain at $2.10, the value of the stock is closest to:
If the stock’s annual dividend is expected to remain at $2.10, the value of the stock is closest to:参考答案A
解析If the dividend is expected to remain constant, the value of the stock is determined by dividing the amount of the dividend by the required rate of return for the stock: $2.10/0.11=$19.09.
81.
With respect to the informational efficiency of markets, is the ability to correct the mispricing of assets likely to weakened if:
Short sales The amount of capital allocated
are restricted? to arbitrage activities decrease?
Short sales The amount of capital allocated
are restricted? to arbitrage activities decrease?
参考答案C
解析Restricted short sales and decreased amount of capital allocated to arbitrage activities will weaken the informational efficiency.
82.
An analyst does research about ratio impact according to the dividend discount model.With respect to the inputs used in the dividend discount model, an increase in a company’s growth rate is least likely to be associated with an increase in that company’s:
参考答案C
解析g=ROE × (1-Payout ratio) = ROA × Assets/Equity × (1-Payout ratio)
Increase in company’s growth rate has negative relationship dividend payout ratio.
Increase in company’s growth rate has negative relationship dividend payout ratio.
83.
An analyst gathered the following information about a company’s common stock.
If markets are in equilibrium, the expected constant dividend growth rate is closest to:
If markets are in equilibrium, the expected constant dividend growth rate is closest to:参考答案B
解析Since markets are in equilibrium,
84.
An analyst does research about tangible book value for the company.With respect to the computation of the price to book value ratio for a company’s common stock, an appropriate estimate of tangible book value for the company could most likely exclude the value of:
参考答案A
解析Tangible book value = Assets - liabilities - preferred stock issued by the company.
Patent is the tangible book value.Off-balance-sheet assets/liabilities should be adjusted to indicate tangible value.
Patent is the tangible book value.Off-balance-sheet assets/liabilities should be adjusted to indicate tangible value.
85.
If an analyst want to take into consideration most of the differences among companies with respect to quality of earnings, he can use:
参考答案B
解析Earning quality will be taken into consideration in P/CF measure.
86.
An analyst wants to calculate an appropriate price to earnings (P/E) ratio for a company that operated in a cyclical indusdivy.The analyst determined that the company’s average return on equity was 14.5 percent during the four-year period ending in 2008, and that the company’s book value per share was $9.8 at the beginning of that period but had increased to $13.58 in 2008.If the company’s stock is priced at $50 per share, the appropriate P/E is closest to:
参考答案A
解析Earnings = ROE*Book value per share = 14.5% × 13.58 = 1.9691
P/E = Price / Earning = 50/1.9691=25.4
P/E = Price / Earning = 50/1.9691=25.4
87.
An analyst does research about various price multiple.For a given company, the price multiple that is least likely to be negative is the:
参考答案B
解析Sales is least likely to be negative, so we choose B.
88.
A security market in which all the bids and asks for a stock are gathered to arrive at a single price that satisfies most of the orders is best described as a:
参考答案A
解析A security market in which all the bids and asks for a stock are gathered to arrive at a single price that satisfies most of the orders is a call market.
89.
An analyst does research about common stock valuation and gathered the following annual information about a company:
If the 2008 growth rate is expected to remain constant, the value of a share of the company’s common stock is closest to:
If the 2008 growth rate is expected to remain constant, the value of a share of the company’s common stock is closest to:参考答案A
解析g=4.5% × 2 × (1-3.6/6) = 3.6%
(3.6 × 1.036) / (12%-3.6%) = 44.4
(3.6 × 1.036) / (12%-3.6%) = 44.4
90.
An analyst gathered the following information about three common stock that all have the same dividend payout ratio:
The lowest earnings multiplier (price earnings ratio) would most likely be associated with stock:
The lowest earnings multiplier (price earnings ratio) would most likely be associated with stock:参考答案C
解析The lowest earnings multiplier is associated with higher (r-g).
91.
With respect to the value of a call option at expiration, which of the following statements is least accurate?
参考答案C
解析The value at expiration of a long position in a call option is either zero or the difference between the stock price and the exercise price, whichever is higher.The value cannot be negative.
92.
Which is least likely to be divue? Forward condivacts:
参考答案C
解析Forwards have default risk.The seller may not deliver, and the buyer may not accept delivery.
In addition to the characteristics listed above, forward contracts are usually not regulated.
In addition to the characteristics listed above, forward contracts are usually not regulated.
93.
If left open until expiration, the type of futures condivact that is most likely to be settled in cash is:
参考答案B
解析Eurodollar futures contracts do not permit actual delivery of a Eurodollar time deposit; the contracts must be settled in cash.
94.
Prior to expiration, the maximum value of an Americana call option and an American put option, respectively, is closest to the:
American put option American call option
American put option American call option
参考答案B
解析The maximum value of a call option is the underlying price; it makes no sense to pay more for the right to buy the underlying than the value of the underlying itself, and the maximum value of an American put is the exercise price because the best outcome would be if the stock fell to zero, the holder could capture the value of the exercise price.
95.
The term (maturity) of a forward rate agreement is 90 days and the underlying rate is 180-day LIBOR.If 180-day LIBOR increases over the term (life) of the condivact, which of the following best describes the descriptive notation for the condivact and the party receiving payment at expiration, respectively?
Descriptive notation Party receiving payment at expiration
Descriptive notation Party receiving payment at expiration
参考答案B
解析The forward rate agreement contract is for three months and interest is paid nine months from the contract initiation date, hence the notation 3 * 9; when the rate on the underlying increases, the party that is long receives the payment at expiration.
96.
A plain vanilla interest rate swap is a condivact where one party pays a:
参考答案C
解析A plain vanilla interest rate swap is a contract where one party pays fixed while the counterparty pays floating, both in the same currency.
97.
A company issued a $1,000 face value bond on 1 January.The annual coupon rate on the bond is 12 percent, interest is paid semiannually, and the bond matures in five years.The market rate of interest when the bond was issued was 8 percent on an annual basis.The amount of the initially liability recorded and the interest expense recorded on the first coupon payment date, respectively, were closest to:
Amount of the initial liability recorded Interest expense recorded on the first
coupon payment date
Amount of the initial liability recorded Interest expense recorded on the first
coupon payment date
参考答案C
解析Because the liability and interest expense recorded are both based on market rates of interest when the bond was issued, not the coupon rate on the bond.The market value of the bond at issuance was $1,162.22 (FV=1000, PMT=60, N=10, I/Y=4).Interest expense is the market rate at date of issuance multiplied by the balance of the liability.($1,162.22) *(0.04) = $46.49.
98.
A fixed income portfolio manager wants to take advantage of a forecast decline in interest rates over the next several, months.Which of the following combinations of maturity and coupon rate would most likely result in the largest increase in portfolio value?
Maturity Coupon rate
Maturity Coupon rate
参考答案C
解析If all other factors constant, the longer a bond’s maturity and the lower the bond’s coupon rate, the greater the bond’s price sensitivity to changes in interest rates.
99.
A newly issued ten-year option-free bond is valued at par on 1 June 2005.The bond has an annual coupon of 8.0 percent.On 1 June 2008, the bond has a yield to maturity of 7.1 percent.The first coupon is reinvested at 8.0 percent and the second coupon is reinvested at 7.0 percent.The future price of the bond on 1 June 2008 is closest to:
参考答案C
解析On 1 June 2008, the bond has seven years to maturity, an annual coupon payment of $80, and a discount rate of 7.1%.The value of the bond is $1,048.33 or 104.833% of par.
100.
All else being equal, the ceiling on a floating-rate security is most likely to benefit the:
参考答案B
解析When the interest rate increases, the periodic payment will be limited to the ceiling rate for the issue, which does great protection for the issuer.
101.
A 5 percent, semi-annual pay bond with a par value of $1,000 matures in 10 years and is selling for $925.61, for a percent yield to maturity.Over the life of the bond, the reinvestment income that must be earned in order to realize the 6 percent yield is closest to:
参考答案B
解析In order to realize the 6% yield, the reinvestment income required is:
$925.61 ×
-$1000-$1000 × 10 × 5% = $171.75.
$925.61 ×
-$1000-$1000 × 10 × 5% = $171.75.
102.
Do Treasury inflation protection securities (TIPS) issued by the U.S.Department of the Treasury have:
Fixed par values? Fixed coupon Payment amounts?
Fixed par values? Fixed coupon Payment amounts?
参考答案A
解析While the coupon rate itself is fixed, the coupon payment amounts are not as they change with the adjustment in the par value.The par values are not fixed as they adjust with change in the level of inflation.
103.
A 6 percent coupon bond with a par value of $1,000 matures in three years and pays interest semiannually.Using an annual discount rate of 4.5 percent, the price of the bond is closest to:
参考答案C
解析Future value = $1,000; payment=$ 30; n=6; i=2.25; resulting in a present value of $1.041.66.
104.
An analyst gathered the following information about two option-free bonds that each have a par value of $1,000:
Bond 1 Bond 2
Time to maturity 5years 10years
Annual coupon rate 5.0% 7.0%
Discount rate today 6.0% 6.5%
If the discount rate does not change for rather bond, one year from today, which of the following most likely describes the change in price for each bond?
Bond 1 Bond 2
Time to maturity 5years 10years
Annual coupon rate 5.0% 7.0%
Discount rate today 6.0% 6.5%
If the discount rate does not change for rather bond, one year from today, which of the following most likely describes the change in price for each bond?
参考答案C
解析Bond 1 is currently selling at a discount to par and bond 2 is selling at a premium to par.If the discount rate does not change for either bond, bond 1 will increase in price because of the passage of time, but bond 2 will decrease in price.
105.
Which of the following statements regarding zero-coupon bonds and spot interest rates is most accurate?
参考答案B
解析Zero-coupon bonds are quite special.Because zero-coupon bonds have no coupons (all of the bond’s return comes from price appreciation), investors have no uncertainty about the rate at which coupons will be invested.Spot rates are defined as interest rates used to discount a single cash flow to be received in the future.Any bond can be viewed as the sum of the present value of its individual cash flows where each of those cash flows are discounted at the appropriate zero-coupon bond spot rate.
106.
Which of the following provides the most protection to a bondholder?
参考答案A
解析Call protection means the bond cannot be called from the bondholder by the issuer for any reason.
107.
Which embedded option is most beneficial to a bond issuer?
参考答案C
解析An accelerated sinking fund provision gives the issuer an option to retire more than the sinking fund requirement.The other embedded options benefit bondholders.
108.
The most relevant definition for duration is:
参考答案A
解析This is the most relevant definition because users of duration are interested in a security’s price sensitivity to changes in yield.
109.
With respect to closed-end investment companies, generally they:
参考答案C
解析The market price of a closed-end investment company’s shares is determined in the secondary markets in which the shares trade.
110.
Kelly, CFA, want to buy ETFs that invest in index futures condivacts and other derivatives, which of the following types of risk is unique to it, compared with other exchange divaded funds (ETFs)?
参考答案C
解析Only those exchange traded funds that invest in index futures or other derivatives assume counterpart credit risk.
111.
An analyst gathered the following information about a rental property:
After-tax cash flow is closet to:
After-tax cash flow is closet to:参考答案C
解析Net operating income: $300,000*0.14=$42,000
Before-tax loss: $42,000-$37,500-$13,000=-$8,500
After-tax cash flow: $42,000-$39,100+$2,550=$5,450
Before-tax loss: $42,000-$37,500-$13,000=-$8,500
After-tax cash flow: $42,000-$39,100+$2,550=$5,450
112.
Compared to investing in a single hedge fund, an individual investing in a fund of funds is lease likely to obtain:
参考答案A
解析The fee charged by a fund of funds is in addition to that changed by each hedge fund, so the fees would most likely increase.
113.
In discussing the characteristics of exchange divaded funds (ETFs) in markets where capital gains are taxed, and analyst made the following statements:
Are the analyst’s statements correct?
Statement 1 Statement 2
Are the analyst’s statements correct?Statement 1 Statement 2
参考答案B
解析Both statements are true.An ETF does not require investors who remain in the fund to pay capital gain taxes due to redemptions by others.The in-kind redemption feature of an ETF means that the fund itself does not have to sell stocks to make redemptions.Because market makers are instrumental in the ETF creation and redemption processes, arbitrage helps keep the price of an ETF more in line with its underlying value (NAV).
114.
An investor taking a long position in commodity futures while simultaneously investing in government securities has created a:
参考答案C
解析A Collateralized Commodity futures position is a viable risk-diversification strategy because commodity have a negative correlation with stock and bond returns and a positive correlation with inflation.
115.
An analyst gathered the following information about stock A and the market index:
Based only on the information above, the analyst’s most appropriate conclusion is that the stock is:
Based only on the information above, the analyst’s most appropriate conclusion is that the stock is:参考答案B
解析
plots below the SML, overvalued.
plots below the SML, overvalued.
116.
An investor currently holds a portfolio that is expected to return 15 percent.The investor is planning to sell one of the securities included in the current portfolio that has an expected return of 13 percent and use the proceeds to purchase a security that has an expected return of 14 percent.Compared to the investor’s current portfolio, the expected return for the investor’s revised portfolio will be:
参考答案A
解析Change 13% to 14% and the weight in the portfolio is the same, which will result in average return above original 15% regardless the standard deviation and correlation coefficient.
117.
Robert Johnson, CFA, is considering the purchase of two stocks from different indusdivy.Each stock has an expected return of 12.5 percent and an expected standard deviation of returns of 16 percent.Which of the following statements Johnson said about the two stocks is most accurate?
参考答案C
解析The expected return of a portfolio is determined only by the individual return and weight in the portfolio, while standard deviation of a portfolio is determined by individual deviation, weight in the portfolio and correlation between two assets in the portfolio.
118.
All else equal, as the correlation of returns among a set of securities decrease, will a portfolio composed of those securities most likely experience an increase in expected:
Return? Risk?
Return? Risk?
参考答案C
解析Holding other factors constants, the lower the correlation of returns the diversification benefit.The standards deviation (risk) of the portfolio will decrease as correlations decrease; the expected return remains the same.
119.
An investor holds a portfolio of two stocks, ABC Inc., and XYZ Corp., and is considering adding the stock of New Company to her portfolio.For diversification purposes, the most important factor for her consider where making this decision is:
参考答案B
解析The average covariance of a stock’s return with returns of all other stocks in a portfolio is the most important factor to consider when adding a new stock to a portfolio.Adding a stock whose returns are less than perfectly positively correlated with the returns of the other stocks in the portfolio will cause the total standard deviation of the portfolio to be lower than the weighted average of the components’ standard deviations.This is the benefit of diversification.
120.
Which of the following is least likely considered a source of systematic risk for bonds?
参考答案C
解析Default risk is based on company-specific or unsystematic risk.