Updated Aug 26, 2023 Certification Exam CFA-Level-I Dumps - Practice Test Questions
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CFA Level I Exam is comprised of 240 multiple-choice questions that test a candidate's knowledge and understanding of fundamental concepts in finance, economics, accounting, and ethics. Candidates are given six hours to complete the exam, which is split into two three-hour sessions. CFA-Level-I exam is computer-based, and candidates receive their results within 60 days of taking the test.
NEW QUESTION # 729
Taking financial reports to evaluate the past, current and prospective performance and financial position of a company for the purpose of making investment, create and other economic decisions best describes the role of
- A. Financial reporting.
- B. Financial statements.
- C. Financial statement analysis.
Answer: C
Explanation:
The role of financial reporting is to provide information about the performance and financial position of companies so that users can make economic decisions.
NEW QUESTION # 730
A dramatic increase in the demand for short-term U.S. Treasury issues versus intermediate and long-term issues will have which of the following effects on the Treasury Yield curve?
I). An inverted yield curve will steepen.
II). An inverted yield curve will flatten.
III). A flat yield curve will become upward sloping.
IV). An upward sloping yield curve will flatten.
V. An upward sloping yield curve will steepen.
- A. II and V.
- B. I III and V.
- C. II, III and V.
Answer: C
Explanation:
A dramatic increase in the demand for short-term U.S. Treasury issues will cause the yields on these issues to fall relative to intermediate-term and long-term issues. This will have the following effects on the U.S. Treasury Yield curve: A flat yield curve will become upward sloping An upward sloping yield curve will steepen An inverted yield curve will flatten (or in extreme cases will become upward sloping).
The reason for these shifts is that a decrease in the yield on short-term Treasury issues versus intermediate and long-term U.S. Treasury issues will cause a shift in the yield spread between these securities, i.e. the difference between the yields on short-term issues and the yields on intermediate and long-term issues will be change. The U.S. Treasury Yield Curve will illustrate this change.
NEW QUESTION # 731
You are comparing two companies by looking at financial ratios they publish in their annual reports.
You know that
I). you must be careful because not all financial statement ratios are computed the same way.
II). the financial ratios of a large firm and a medium size firm cannot be compared.
III). these financial ratios will capture the relevant differences between the two firms, leaving you with no need to look at the rest of the reports.
- A. II only
- B. I and III only
- C. I only
Answer: C
NEW QUESTION # 732
For a normal good:
- A. The price elasticity of demand is positive; the income elasticity of demand is negative.
- B. The price elasticity of demand is negative; the income elasticity of demand is negative.
- C. The price elasticity of demand is negative; the income elasticity of demand is positive.
Answer: C
Explanation:
For a normal good demand increases as income increases and the quantity demanded falls a price increases.
NEW QUESTION # 733
Quotas are more harmful than tariffs because
- A. they prohibit foreign producers from selling additional units regardless of how much lower their costs are relative to domestic producers and they generate no revenue for the government.
- B. they generate no revenue for the government.
- C. they encourage free trade while tariffs impose restrictions that increase prosperity domestically.
Answer: A
Explanation:
Quotas are more harmful than tariffs because the quota restricts supply domestically and diverts resources from efficient to inefficient use. Additionally, a tariff transfers revenue from consumers to the government while a quota transfers revenue from domestic consumers to foreign producers.
NEW QUESTION # 734
A cumulative frequency distribution on days absent during a calendar year by employees of a manufacturing company is shown below.
How many employees were absent between 6 and 11 days?
- A. 0
- B. 1
- C. 2
Answer: A
Explanation:
This is found by the difference between the 6-8 class and the 12-14 class. In this case: 14 - 2
= 12.
NEW QUESTION # 735
To estimate the average length of their employee's telephone calls, FoneJack, Inc. randomly sampled 25 employee phone calls. If the sample mean was 1.3 minutes and the population can be assumed normal with a standard deviation of 0.3 minutes then a 90% confidence interval for the phone calls is ______.
- A. 1.24 m 1.36
- B. 1.2 m 1.4
- C. 1.18 m 1.42
Answer: B
Explanation:
For a 90% confidence interval we find z(0.05), the cut-off for the top 5% of the normal distribution. Looking up 0.95 in the middle of the table the reading to the row/column values, we get 1.645.
Working with the formula for E (see top right) we get E = 0.1. So, the 90% confidence interval is 1.3 - 0.1 m 1.3 + 0.1 or 1.2 m 1.4.
NEW QUESTION # 736
Below describes the total return rates (in percentages) for the past three years for 15 top-performing utilities mutual funds.
Biggest return: 15.1
Smallest return 3.1
Median return: 9.5
What interval length should be used if it is desired to construct a frequency distribution with four equally spaced intervals?
- A. 0
- B. 1
- C. 3.75
Answer: A
Explanation:
4
Determine how many classes we need: Since 2 > 15, we need 4 classes.
*
Interval: (15.1 - 3.1)/4 = 3.
*
NEW QUESTION # 737
In accounting for a lease transaction classified as a capital lease, over the term of the lease:
- A. the lease payments by the lessee constitute a payment for lease liability plus interest.
- B. the gross sum of the lease payments equals the dollar amount that would have been paid by the lessee to purchase the property on the date of the inception of the lease.
- C. the asset should be depreciated by the lessor in a systematic and rational manner.
Answer: A
Explanation:
Lesees must make a payment that includes a payment on the debt outstanding as well as interest on the debt.
NEW QUESTION # 738
Consider the following conditions of ending inventory and the stated results:
Ending Cost of Inventory Goods Sold Net Income
- A. Condition B
- B. Understated Overstated Understated
Which condition is true with regard to the ending inventory? - C. Overstated Overstated Overstated
- D. Overstated Understated Understated
- E. Condition A
- F. Condition C
Answer: B,F
Explanation:
When ending inventory is understated, inventory costs assigned to the cost of goods sold will be overstated and consequently the net income will be understated.
NEW QUESTION # 739
CFA Institute recommends maintaining records for at least ____ years.
- A. seven
- B. ten
- C. five
Answer: A
Explanation:
CFA Institute recommends maintaining records for at least seven years.
NEW QUESTION # 740
The economy is projected to emerge from a recession soon. The spread between AAA and CAA rated bond can be expected to
- A. increase.
- B. diminish and increase later as the economy rebounds.
- C. diminish.
Answer: C
Explanation:
As the economy expands, the risk of default due to improving cash flows would diminish and reduce the spread between higher rated and lower rated bonds.
NEW QUESTION # 741
If a firm's average per-unit costs fall as it produces a larger output, then
- A. average variable cost must also decline as output expands.
- B. marginal cost must also decline as output expands.
- C. marginal cost must be less than average total cost.
Answer: C
Explanation:
Average total costs increase when marginal costs are greater than average total costs.
Assume the following costs: Fixed cost = 100. The marginal cost of the first unit of output equals $10
(MC1), the marginal cost of the second unit of output equals $12 (MC2), MC3 = 14. Total costs for three units of output equals FC + VC which here equals $100 + ($10 + $12 + $14) which equals $136. Average total costs equals $136/3 or $45.333. If MC4 = $16 which is smaller than average total cost the average total cost will decline. Thus, total cost becomes $136 + $16 = $152 thus making average total cost equal
$ 152/4 or $38. Thus, when marginal cost is smaller than average total cost, the average total cost will decline.
NEW QUESTION # 742
You plan to buy a common stock and hold it for one year. You expect to receive both $1.50 in dividends and $26 from the sale of stock at the end of the year. If you wanted to earn a 15% return, the maximum price you would pay for the stock today is:
- A. $23.91
- B. $24.50
- C. $22.61
Answer: A
NEW QUESTION # 743
Which of the following is not an investing activity?
I). Borrowing money
II). Purchasing assets
III). Purchasing an investment
IV). Collecting the principal of a note receivable
V. Selling a fully depreciated asset
- A. IV and V.
- B. I only.
- C. I, IV and V.
Answer: B
NEW QUESTION # 744
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