Real CFA-Level-I are Uploaded by Exam4Labs provide 2021 Latest CFA-Level-I Practice Tests Dumps.
All CFA-Level-I Dumps and CFA Institute CFA Level I Chartered Financial Analyst Training Courses Help candidates to study and pass the CFA Institute CFA Level I Chartered Financial Analyst Exams hassle-free!
NEW QUESTION 1026
XYZ Corp. recently issued some preferred shares with a fixed preferred rate of $1.32 per share.
Further research reveals that XYZ's common shares have a beta of 1.3, at a time when the market risk premium is 5.2% above the risk-free rate of 3.2%. If the difference in the risk premium between XYZ's common and preferred shares is 2%, what would be a fair value for the preferred shares?
- A. $15.71
- B. Cannot be solved with the given information.
- C. $16.58
Answer: C
Explanation:
Step 1. Compute the cost of common equity. R = 3.2 + 1.3 x 5.2 = 9.96.
Step 2. Since the risk premium for preferred shares is always lower than the common equity of the same issuer. Rpre = 9.96 -2.0% = 7.96%.
Step 3. Compute value. P = 1.32/0.0796 = $16.58.
NEW QUESTION 1027
Assume the managers want to maximize bonuses, which are based on current net income.
Managers should prefer:
- A. Expensing research & development costs.
- B. Using straight-line rather than accelerated depreciation for financial statement purposes.
- C. Successful efforts rather than full costing of oil & gas drilling.
Answer: B
NEW QUESTION 1028
Which country's central bank has an explicit inflation target?
- A. Japan.
- B. United States.
- C. United Kingdom.
Answer: C
Explanation:
The Bank of Japan and the U.S. Fed don't have a formal inflation target.
NEW QUESTION 1029
On January 1, a business exchanged a plant asset with a book value of $1,500 for a similar asset that had a price of $23,000. The business received a trade-in allowance of $2,100 on the old plant asset. What was the result of the exchange?
- A. A credit to revenue for $600.
- B. A cost basis of $22,400 for the new plant asset.
- C. A credit to cash for $21,900.
Answer: B
Explanation:
The trade-in is $600 more than the book value of the asset. A trade-in transaction is simply a sale of the old asset and the acquisition of a similar or like-kind asset. The $600 gain should not be recognized.
NEW QUESTION 1030
What is the only source in the financial statements for learning about cash generation?
- A. the balance sheet
- B. the statement of cash flows
- C. the income statement
Answer: B
Explanation:
The statement of cash flows is the only source in the financial statements for learning about cash generation. The statement of cash flows provides information about cash inflows and cash outflows during an accounting period.
NEW QUESTION 1031
Which of the following will increase the demand for money?
- A. an increase in the interest rate
- B. a fall in the price level or a decrease in the inflation rate
- C. an increase in real output
Answer: C
Explanation:
As output increases and thus incomes increase, individuals will wish to make more purchases, and money demand increases.
NEW QUESTION 1032
Inventories valued using ______ are least likely to incur inventory write-downs.
- A. FIFO.
- B. LIFO.
- C. Weighted average cost.
Answer: B
Explanation:
The inventory carrying amounts under the LIFO method are already conservatively presented at the oldest and lowest costs (given increasing inventory costs).
NEW QUESTION 1033
The clearinghouse is:
- A. an independent entity with no ties to the futures exchange
- B. closely associated with the futures exchange
- C. a department of the Federal Reserve
Answer: B
Explanation:
The clearinghouse is not an agency of the U.S. government. It is closely tied to the exchange and must cooperate closely with its associated exchange.
NEW QUESTION 1034
Trading Co. uses the percentage-of-completion method to recognize revenue. In 2000, Trading Co., agreed to construct a facility at a total contract price of $27.0 million and a total expected cost of $24.0 million. At the end of 1999 estimated costs have been changed to $25.0. Actual costs and cash inflow information are presented below (in $ millions):
What will Trading Co. report as net income in 1998, 1999 and 2000 respectively?
- A. 1.1163 1.6473 1.9364
- B. 0.0587 0.5885 0.8240
- C. 0.5875 0.5885 0.8240
Answer: C
Explanation:
Cumulative Cost 1998 = (4.7/24.0)*100 = 19.5833% Cumulative Revenue 1998=
(4.7/24.0)*27.0 = 5.2875 Current Revenue 1998=(4.7/24.0)*27.0 Profit= Current Revenue - Cost = 0.5875
Cumulative Cost 1999 = (14.7/25.0)*100 = 58.8% Cumulative Revenue 1999= (4.7/25.0)*27.0 = 15.876
Profit= Current Revenue - Cumulative realized profit - cumulative Cost = 15.876 - 0.5875 - 14.7 = 0.5885.
NEW QUESTION 1035
When should a rational financial manager pay a bill if 1) a discount is offered, 2) the discount has not yet expired, 3) the firm needs to borrow funds to take the discount, 4) the firm will have sufficient cash by the end of the net period, and 5) the best possible borrowing rate exceeds the cost of forgoing the discount?
- A. No sooner than six months so as to maximize the use of "free" trade credit financing.
- B. As soon as possible after the discount date so as to not upset the supplier.
- C. On the final due date.
Answer: C
Explanation:
The supplier has made only the full net period available to the firm, thus the firm should choose the least costly method which is to pay on the final due date. Taking extra time will cause supplier and possible legal problems.
NEW QUESTION 1036
When the level of market interest rates is anticipated to fall (select the best answer):
- A. option-free bonds with the largest coupon and the shortest time to maturity have the greatest potential for price appreciation
- B. option-free bonds with small coupons and the longest time to maturity have the greatest potential for price appreciation
- C. callable bonds with small coupons and the longest time to maturity have the greatest potential for price appreciation
Answer: B
Explanation:
A bond's time to maturity is positively related to the elasticity of the bond's price with respect to changes in its required return. A bond's coupon rate is inversely related to the elasticity of the bond's price with respect to changes in its required return. The upside potential of a reduction in required return is less for a callable bond than for a similarly defined option-free bond.
NEW QUESTION 1037
Financial statements are an input into which step in the financial statement analysis framework?
- A. Collect data.
- B. Analyze/interpret the processed data.
- C. Process data.
Answer: A
Explanation:
Sources of information for this step are financial statements, economic and industry data, interviews, etc.
NEW QUESTION 1038
Which of the following statements is not true of futures contracts?
- A. Futures contracts may be customized to meet the needs of specific parties.
- B. All futures contracts are highly standardized and trade on organized exchanges.
- C. The clearinghouse serves to guarantee performance by the parties to a futures contract.
Answer: A
Explanation:
Customization is a characteristic of forward contracts, not futures
NEW QUESTION 1039
According to CFA Institute's Standards of Professional Conduct, what is the responsibility of members in terms of Standard I.A.(Knowledge of the Law)?
- A. Members are only responsible for gross negligence but not other violations.
- B. Members are responsible for violations they knowingly participate in or assist.
- C. Members are not responsible for violations they knowingly participate in or assist if they did not have all the correct facts at the time.
Answer: B
NEW QUESTION 1040
Jake Stan, a CFA Charterholder, is writing an unfavorable research report on a company called PKO.
Larry Spelt, who is Jake's supervisor and who is NOT a CFA Charterholder, informs Jake that the firm is about to underwrite a large stock offering for PKO. Larry tells Jake to please upgrade his research report on PKO to reflect a purchase recommendation. Jake does this without disclosing the underwriting activity.
According to Standards of Professional Conduct, which Standard/s of Professional Conduct has/have been violated?
I). Standard V A - Diligence and Reasonable Basis.
II). Standard VI A - Disclosure of Conflicts to Clients and Prospects.
- A. II only.
- B. Both I and II.
- C. I only.
Answer: B
Explanation:
Jake has changed his opinion on the stock and has also not informed the firm participation in the offering to clients. He has therefore also violated Standard V A
- Diligence and Reasonable Basis and Standard VI A
- Disclosure of Conflicts to Clients and Prospects.
NEW QUESTION 1041
A company's quick ratio:
- A. Can never be larger than its current ratio at the same date.
- B. Indicates the length of time the company takes to pay its short-term creditors.
- C. Indicates how quickly the company converts its current assets to cash.
Answer: A
NEW QUESTION 1042
Tomas Arnaud is considering an investment property that can be purchased for E(EUR)700,000. The property is expected to provide an after-tax cash flow of E(EUR)60,000 per year for the next four years. Arnaud expects to sell the property for E(EUR)800,000 at the end of the fourth year. If the required rate of return is 11%, what is the net present value of the investment? (Round your answer to the nearest E(EUR)10.00.)
- A. E(EUR)22,560
- B. E(EUR)340,000
- C. E(EUR)13,130
Answer: C
Explanation:
The net present value is the present value of all cash flows. It is calculated by subtracting the initial investment from the present value of future cash inflows.
NPV = 60,000/1.111 + 60,000/1.112 + 60,000/1.113 + 860,000/1.114 - 700,000 = 13,131
NEW QUESTION 1043
A trial generates only two results, "success" and "failure." The probability of success is higher than that of failure. The variance of the number of failures in 20 trials equals 2.35. The probability of success on a given trial equals ________.
- A. 0.864
- B. 0.136
- C. 0.452
Answer: A
Explanation:
For a binomial distribution with N trials, with the probability of success = p in each trial, the variance equals Np(1-p). Hence, 20 x p x (1 - p) = 2.35. Solving this gives quadratic equation gives p =
0 .136 or p = 0.864.
NEW QUESTION 1044
An analysis of returns from securities P and Q produces a covariance of 0.0494. The correlation between these returns:
- A. could be positive or negative, depending on the magnitude of the standard deviations of P's and Q's returns
- B. equals the covariance multiplied by the product of the standard deviations of P's and Q's returns
- C. equals the covariance divided by the product of the standard deviations of P's and Q's returns
Answer: C
NEW QUESTION 1045
Beginning accounts receivable $ 50,000 Ending accounts receivable $ 30,000 Net sales $600,000
Cost of goods sold $375,000 Operating expenses $ 80,000
What was the amount of cash received from customers?
- A. $620,000
- B. $630,000
- C. $580,000
Answer: A
Explanation:
Cash received from customers = Net sales + Decrease in Accounts Receivable or - Increase in Accounts Receivable. $600,000 + ($50,000 - $30,000) = $620,000.
NEW QUESTION 1046
You are the landlord of a small office building. The rent is $750 per year paid at the beginning of each year. You always invest the rent payments at a rate of 6% per year. What will be the accumulated value of the invested payments at the end of 5 years?
- A. $5,356.51
- B. $3,975.00
- C. 4,481.49
Answer: C
Explanation:
5 4 3 2 1
FV = 750.00(1.06) + 750.00(1.06) + 750.00(1.06) + 750.00(1.06) + 750.00(1.06) = $4,481.49
NEW QUESTION 1047
......
Valid Way To Pass CFA's CFA-Level-I Exam with : https://www.exam4labs.com/CFA-Level-I-practice-torrent.html
Free Test Engine For CFA Institute CFA Level I Chartered Financial Analyst Certification Exams: https://drive.google.com/open?id=1JbKsXS24XDR8Skzya2rJdiBDM4TpLl8M