[Sep-2022] CFA Level CFA-Level-I Exam Practice Dumps
2022 CFA-Level-I Premium Files Test pdf - Free Dumps Collection
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NEW QUESTION 1075
If both the demand and the supply are perfectly inelastic, a tax results in
- A. a smaller quantity traded and a larger deadweight loss.
- B. a smaller quantity traded and a smaller deadweight loss.
- C. no change in quantity and no deadweight loss.
Answer: C
NEW QUESTION 1076
Which of the following statements is false with respect to the price volatility of a bond arising out of changes in the yield curve?
- A. For a one basis point change in yields, a bond will be less volatile at higher levels of yield than it would be at lower levels of yield.
- B. Higher coupon paying bonds will always be less volatile than low coupon paying bonds, holding everything else constant.
- C. Government bonds will always be less volatile than corporate bonds.
Answer: C
Explanation:
When it comes to interest rate risk, not even government bonds are immune. In fact, a long term government bond's price will be a lot more volatile than a short term corporate bond's price. This is despite the fact that corporate bonds have a credit risk.
NEW QUESTION 1077
Industry consolidation usually happens in the _____ stage.
- A. decline
- B. mature
- C. shakeout
Answer: B
NEW QUESTION 1078
A company in Hong Kong, where there is no taxes on dividends and capital gains, is considering either paying a special dividend or repurchasing its own shares. Shareholders of the company would have
- A. greater wealth if the company repurchased its shares.
- B. the same wealth under either a cash dividend or share repurchase program.
- C. greater wealth if the company paid a special cash dividend.
Answer: B
NEW QUESTION 1079
An individual has part of his money tied up in 6 stocks. He decided that each must remain in his portfolio, be sold, or be given to his son. How many possible outcomes does this individual face?
- A. 0
- B. 1
- C. 2
Answer: B
Explanation:
6
The number of possible outcomes is 3 = 729.
NEW QUESTION 1080
We can determine something about the skewness of a distribution by considering which of the following?
- A. The fourth power of differences from the mean.
- B. The sum of the squares of differences from the mean.
- C. The cubes of differences from the mean.
Answer: C
Explanation:
The formula for the sample relative skewness definition.
NEW QUESTION 1081
The variance or standard deviation is a measure of:
- A. Market risk
- B. Unique risk
- C. Total risk
Answer: C
NEW QUESTION 1082
A company is in breach of a covenant in the lending facility if the interest coverage ratio,
EBITDA/Interest , falls below 3. You forecast interest of $30 million. You estimate EBITDA to be between
$ 50 and $75 million. Assume the outcomes for EBITDA are equally likely, what is the probability that the coverage ratio will fall below 1.8?
- A. 16%.
- B. 12%.
- C. 15%.
Answer: A
Explanation:
You forecast interest of $30 million. You estimate EBITDA to be between $50 and $75 million. Assume the outcomes for EBITDA are equally likely, the probability is 16%, and the coverage ratio will fall below 1.8.
EBITDA/Interest is a continuous uniform random variable because all outcomes are equally likely. The coverage ratio can have a range of values as follows:
EBITDA/Interest = 50/30 = 1.667 and, EBITDA/Interest = 75/30 = 2.5. Range = 2.5 - 1.667 = 0.833. The distance between 1.8 and 1.667 is 0.133. The value of 0.133 as a percentage of 0.833 is 0.133/0.833 =
0 .16 = 16%.
NEW QUESTION 1083
A temporary difference is one that:
- A. represents the difference between the tax basis of an asset or a liability and its reported balance sheet amount and that is expected to result in taxable or deductible amounts in future years
- B. is caused by an item not deductible for tax purposes but used in computing financial reporting income
- C. is caused by an item not taxable on the tax return but included in pretax accounting income
Answer: A
Explanation:
A temporary difference is one that is caused by using different methods on the tax return and the financial accounting records, such that the basis for the affected asset and liability is different over the life of the asset or liability. The difference is temporary because it will reverse by the end of the life of the asset or liability.
NEW QUESTION 1084
Which of the following statements is recommended with regards to personal investing?
I). Restrictions on participation in an IPO of equity or equity-related securities.
II). Preclearance of all trades.
III). Disclosure of all holdings in which the employee has a beneficial interest.
- A. I and III.
- B. I, II and III.
- C. II and III.
Answer: B
NEW QUESTION 1085
The less reliable a source, the ______ likely the information provided would be considered ______.
- A. less, non-public and material.
- B. less, material.
- C. more, material.
Answer: B
Explanation:
The source or relative reliability of the information determines materiality. The less reliable a source, the less likely the information provided would be considered material.
NEW QUESTION 1086
In a perfectly competitive market,
- A. The firm's demand curve is horizontal.
- B. The industry demand curve is vertical.
- C. The industry demand curve is horizontal.
Answer: A
Explanation:
In a perfectly competitive market, while the demand curve facing the industry is downward sloping, the demand curve facing an individual firm is perfectly elastic, i.e., horizontal.
NEW QUESTION 1087
Which of the following statements is true with respect to a statistical decision and an economic decision?
I). When in conflict, a statistical decision must override an economic decision since the former is an objective test.
II). A statistical decision will always be objective whereas an economic decision may be subjective.
III). If the statistical decision is not to reject the null, it simply implies that the sample results were inconclusive.
IV). A statistical decision may easily be influenced by changing the level of significance of the test.
- A. I and III.
- B. IV only.
- C. II, III and IV.
Answer: B
Explanation:
I and II are incorrect since a statistical output could very well be manipulated by what's inputted into the test. Therefore, a decision must make both statistical and economic sense.
III is incorrect because if the statistical decision is not to reject the null, it simply implies that the sample results were not strong enough to reject the null.
NEW QUESTION 1088
Increases and decreases in the level of sales are due to business risk. The business risk of a particular company is characterized by
- A. The level of risk assumed by the debt providers.
- B. Operating leverage and uncertainty about demand, output prices, and competition.
- C. Uncertainty about credit ratings, government debt, interest rates, and the demand for the domestic currency.
Answer: B
Explanation:
Business risk results from economic factors and operating leverage.
NEW QUESTION 1089
Which of the following is/are true?
I). If P(A or B) = P(A) + P(B), then A and B are independent.
II). If P(A and B) = P(A) x P(B), then A and B are mutually exclusive.
III). If P(A and B) = P(A) + P(B), then P(A) = P(B) = 0.
- A. II & III
- B. III only
- C. I only
Answer: B
Explanation:
If A and B are independent, P(A and B) = P(A) x P(B) and vice versa. If A and B are mutually exclusive, P(A and B) = 0.Note that P(A or B) = P(A) + P(B) - P(A and B). Hence, if P(A and B) = P(A) +
P(B), then P(A or B) = 0. This implies that neither A nor B can occur, giving P(A) = P(B) = 0.
NEW QUESTION 1090
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