Financial Institute CFA Level I Chartered Analyst® CFA Level 1 Exam Questions in PDF

Free Financial CFA Level 1 Dumps Questions (page: 133)

How long will it take for an initial deposit of $1,500 to grow to be $4,000, if the interest rate is 5% per year, compounded annually?

  1. 16.93 years
  2. 20.10 years
  3. 17.72 years
  4. 14.48 years
  5. 24.03 years

Answer(s): B

Explanation:

Either the $1,500 or the $4,000 must be entered as a negative number - it won't matter which. On the BAII Plus, press 5 I/Y, 1500 PV, 0 PMT, 4000 +/- FV, CPT N. On the HP12C, press 5 i, 2500 PV, 0 PMT, 4000 CHS FV,
F. Note that the HP12C will indicate 21 years for the answer. Make sure the BAII Plus has the P/Y value set to 1.



Ball-Bearing, Inc. produces ball bearings automatically on a Kronar BBX machine. For one of the ball bearings, the mean diameter is set at 20mm. the standard deviation of the production over a long period of time was computer to be 0.150 mm. What percent of the ball bearings will have a diameter of 20.27 mm or more?

  1. 41.00%
  2. 85.00%
  3. 12.62%
  4. None of these answers
  5. 3.59%

Answer(s): E

Explanation:

z = (x-u)/sigma = 20.27 - 20/0.15 = 1.8. from the z-table, z = 1.8 is 0.4641. So 1.0 - 0.9641 = 0.0359.



In an investment environment, an initial outlay of $100 grows to $156 in 7 years. The quarterly compounded rate of annual interest implicit in this is:

  1. 6.56%
  2. 6.40%
  3. 6.12%
  4. 6.73%

Answer(s): B

Explanation:

There are 28 quarters in 7 years. If the quarterly compounded rate is r, then we have 100*(1+r/4)^28 = 156, giving r = 6.4%



David's gasoline station offers 4 cents off per gallon if the customer pays in cash and does not use a credit card. Past evidence indicates that 40% of all customers pay in cash. During a one-hour period twenty-five customers buy gasoline at this station. What is the probability that at least ten pay in cash?

  1. None of these answers
  2. .575
  3. .425
  4. .416
  5. .586

Answer(s): B

Explanation:

This is a binomial distribution: n!(p^r)(q^(n-r))/r!(n-r)!. n = 25, r = 10, p = 0.4 q = 0.6 P(10) = 25!(0.4^10)(0.6^15)/10!15! = 0.1612
P(11) = 25!(0.4^11)(0.6^14)/11!14! = 0.1465
P(12) = 25!(0.4^12)(0.6^13)/12!13! = 0.1140
P(13) = 25!(0.4^13)(0.6^12)/13!12! = 0.0760
P(14) = 25!(0.4^14)(0.6^11)/14!11! = 0.0434
P(15) = 25!(0.4^15)(0.6^10)/15!10! = 0.0212
P(16) = 25!(0.4^16)(0.6^9)/16!9! = 0.0088
P(17) = 25!(0.4^17)(0.6^8)/17!8! = 0.0031
Summing up we get close to 0.574.
We can continue until r = 25 but the probability gets smaller and converges to 0.575.



Consider the following three investments:

Future valueyearsinterest rate
1.$50,000 89% per year
2.$20,000 612% per year
3.$35,000 37% per year

The present values of the 3 investments are:

  1. $28,193, $12,145, $31,422
  2. $99,628, $39,476, $42,877
  3. $25,093, $10,133, $28,570
  4. $24,192, $11,876, $27,864

Answer(s): C

Explanation:

Future value = Present value*(1+r)^N for annual compounding. Therefore, Future valueyearsratePresent Value
1.50,000 89% 50,000/(1.09)^8 = 25,093
2.20,000 612% 20,000/(1.12)^6 = 10,133
3.35,000 37% 35,000/(1.07)^3 = 28,570
Note that the future value must always be greater than the present value.



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