CFA Level I June 2010 - Mock Exam Questions
1. Which of the following least likely violates Standard VII (B): Reference to CFA Institute, the CFA Designation and the CFA Program? A. Joe Smith, C.F.A. B. Joe Smith, CFA C. Joe Smith, Chartered Financial Analyst
Answer: C According to Standard VII (B), an analyst must not exaggerate the meaning or implications of membership of CFA Institute, holding the CFA designation, or candidacy in the CFA Program. A member cannot use a bold or larger font for the letters CFA.
2. Which of the following is least likely a characteristic of GIPS? A. The investment management firm must define the entity that claims compliance. B. All fee-paying ...view middle of the document...
Rejected B. Not rejected C. Accepted. Answer: A. The p-value is the lowest level of significance at which the null hypothesis can be rejected. At the 5% significance level the null hypothesis will be rejected as the significance level of the test is greater than the p-value (4%). We can only reject or fail to reject the null hypothesis in a hypothesis test. The null is never ‘accepted’.
6. Consider the following statements: Statement 1: The MRP of labor for a firm that is a price taker remains constant at all output levels. Statement 2: The MRP of labor for a firm that is a price searcher rises as it expands output. Which of the following is most likely? A. Both statements are correct B. Both statements are incorrect C. Only Statement 1 is correct. Answer: C
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A firm that is a price-taker faces a perfectly elastic demand curve. Since the price of its output remains constant, MRP remains constant as well. A firm that is a price-searcher faces a downward-sloping demand curve for its output. Since MR is less than price, the MRP of each additional unit of labor falls as output expands.
7. The imposition of which of the following by the government is least likely to result in a deadweight loss from underproduction? A. Taxes B. Quotas C. Subsidies Answer: C Taxes and production quotas result in deadweight losses from underproduction. Subsidies result in deadweight losses from overproduction.
8. Consider the following two statements: Statement 1: The more effectively a monopoly can price discriminate the greater the deadweight loss to society. Statement 2: Perfect competition results in an efficient allocation of resources and an efficient scale of production. Which of the following is most likely? A. Both statements are incorrect B. Only Statement 1 is correct C. Only Statement 2 is correct. Answer: C Statement 2 is correct. The more perfectly a monopoly can price discriminate, the lower the deadweight loss to society. Under perfect price discrimination, the monopoly’s MR curve equals its demand curve, and there is no deadweight loss to society. Bear in mind however, that in this scenario the entire consumer surplus is taken up by the monopoly.
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9. An analyst obtains the following financial ratios for a company: Net profit margin Return on assets Asset turnover Financial leverage ratio 15% 20% 1.33 1.5
The return on equity for this company is closest to: A. 30% B. 40% C. 20% Answer: A ROE = NP margin * Asset TO * Financial leverage ratio 0.15 * 1.33 * 1.5 = 0.2993 = 30%
10. In the year of lease inception, recognition of a lease as an operating lease as opposed to a direct-financing lease by the lessor will most likely result in a higher: A. Net income B. Total debt C. CFO Answer: C In the year of inception, a lessor who recognizes an operating lease as opposed to a direct-financing lease will report: Lower net income Higher CFO Lower CFI
11. Which of the...