CFA Level I FREE Sample Exam — Fixed Set

Vanessa Cruz passed Level II and writes on her business card that she is a CFA charterholder and that her superior exam performance guarantees superior investment results. She most likely violates:

only competence because she passed Level II

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neither rule if clients understand it is marketing

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the reference Standard by claiming a charter she has not earned and implying superior ability from the designation

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Adviser Thomas Reid sits on the board of a charity whose endowment he also manages for a fee from his firm, and the charity is a client. Reid most appropriately should:

keep the roles separate and tell no one to avoid confusion

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disclose only the board seat if a client specifically asks

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disclose the dual relationship and any related conflicts to his employer and affected clients so they can evaluate them

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Adding an asset to a portfolio is most likely to reduce portfolio risk when the returns of the added asset are:

perfectly positively correlated with the existing holdings

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less than perfectly positively correlated with the existing holdings

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identical in pattern to the returns of the existing holdings

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A data set of household incomes in a mining town contains a small number of extremely high executive salaries alongside many modest wages. For this data set, the mean income will most likely be:

below the median, because high values pull the mean downward

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equal to the median, because both measure the center of the data

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above the median, because the extreme high values pull the mean upward while leaving the median largely unaffected

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If nominal GDP rises by 7 percent while the GDP deflator rises by 4 percent, real GDP growth is closest to approximately:

11 percent

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3 percent

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7 percent

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An Irish software company reporting under IFRS pays dividends to shareholders and receives interest on surplus cash. Compared with US GAAP, the classification flexibility under IFRS is best described as allowing the company to classify:

Both items only within financing activities, with no choice

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Interest received only within financing, and dividends paid only within investing

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Interest received within operating or investing, and dividends paid within operating or financing

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A manufacturer reports EBIT of $300,000 and interest expense of $100,000, with no preferred dividends. Its degree of financial leverage is closest to:

3.00

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1.50

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0.67

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An analyst valuing Tamarack Utilities on a trailing-earnings basis starts from the investors’ required return of 10% and expected dividend growth of 3%, noting that the company distributes half of its earnings as dividends. The justified trailing price-to-earnings ratio is closest to:

7.14

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16.67

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7.36

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An auto-loan securitization issues a senior class and a smaller subordinated class that absorbs the first losses from loan defaults. This subordination most directly provides the senior class with:

A government guarantee of timely payment

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A right to convert into the originator's equity

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Credit enhancement that protects it until junior losses are exhausted

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Marco writes a call option with a strike of $50 and receives a premium of $2.50. At expiration the share trades at $42. His profit per share is closest to:

-$2.50

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$2.50

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$8.00

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A fund run by Karl Jensen has $80 million in assets, a 1.5% management fee, and earns a profit of $10 million subject to a 20% incentive fee. The total fee amount for the year is closest to:

$1.20 million

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$3.20 million

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$2.00 million

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In portfolio planning, capital market expectations are best described as:

Guarantees of the returns each asset class will deliver

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Forward-looking forecasts of return risk and correlation for asset classes over a long horizon

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Reports of the returns asset classes earned in the most recent year

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CFA Level I FREE Sample Exam — Fixed Set

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