I Certification Exam Questions with AI Explanations

QUESTION: 786

Type II error refers to the event that we will:

Fail to reject the null when it is false.
Accept the alternative when it is false.
Reject the null when it is true.
Reject the alternative when it is true.

Answer(s): A

Explanation:

Remember that the null hypothesis is the one that you maintain to be true unless there is sufficient evidence to prove otherwise. Therefore, the first type of mistake that can happen is that you reject the maintained hypothesis when in fact, it is true. This error is referred to as "Type I" error. On the other hand, you may not have sufficient evidence to disprove the null when in fact, it is false. This failure to appropriately reject the null is referred to as "Type II" error.

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QUESTION: 787

Of 900 consumers surveyed, 414 said they were very enthusiastic about a new home decor scheme. What is the 99% confidence interval for the population proportion (in percent)?

42 and 50
None of these answers
30 and 40
30 and 60
31 and 51

Answer(s): A

Explanation:

Interval estimate can be found from p +/- z[p(1-p)/n]^0.5. Here we have n = 900, p = 414/900 = 0.46 and z = 2.58 (for 99%). Therefore 0.46 +/- 2.58*0.01661 and we get 0.42 and 0.50.

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QUESTION: 788

What is the present value today of these annual cash flows: $300, $1,200, $2,500? Assume the first cash flow occurs 1 year from today and an interest rate of 9% per year, compounded annually.

$3,215.70
$2,989.06
$3,244.09
$3,298.82
$3,308.86

Answer(s): A

Explanation:

You could solve this question using 3 different compound interest problems, but it is easier to solve them using the calculator's cash flow functions. On the BAII Plus, press CF 2nd CLRWork 0 ENTER DownArrow 300 ENTER DownArrow DownArrow 1200 ENTER DownArrow DownArrow 2500 ENTER DownArrow DownArrow 2nd Quit. Then press NPV 9 ENTER DownArrow CPT. On the HP12C, press these keys: 0 BlueShift CFo 300 BlueShift CFj 1200 BlueShift CFj 2500 BlueShift CFj. Then press 9 i, YellowShift NPV. The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard. Make sure that the BAII Plus has the P/Y value set to 1.

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QUESTION: 789

A perpetual preferred stock has a face value of $1,000 and a coupon rate of 6% per year. If it is issued at $850, what's the implicit annual discount rate?

6.94%
7.00%
7.19%
7.06%

Answer(s): D

Explanation:

A preferred stock is valued like a perpetuity. The price of a preferred stock with a face value F and a coupon rate c equals F*c/r, where r is the implicit discount rate. In this case, we have 850 = 1,000*0.06/r, giving r = 7.06%.

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QUESTION: 790

If you deposit $2,250 today into a savings account paying 8% per year, compounded semiannually, how much is in your account in 10 years?

$4,587.85
$10,487.15
$3,330.55
$4,857.58
$4,930.03

Answer(s): E

Explanation:

On the BAII Plus, press 20 N, 8 divide 2 = I/Y, 2250 PV, 0 PMT, CPT FV. On the HP12C, press 20 n, 8 ENTER 2 divide i, 2250 PV, 0 PMT, FV. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the P/Y value set to 1.

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CFA Level I Chartered Financial Analyst CFA I Exam Questions in PDF

Free CFA CFA I Dumps Questions (page: 479)

QUESTION: 786

Explanation:

QUESTION: 787

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QUESTION: 788

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QUESTION: 789

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QUESTION: 790

Explanation: