Test Prep CFA® Level I Chartered Financial Analyst CFA® LEVEL 1 Dumps in PDF

Free Test Prep CFA® LEVEL 1 Real Questions (page: 112)

An empirical finance professor estimates the following regression between the return on a stock, R, and the return on S&P 500 index, Rsp:

R = 5% + 1.1 Rsp + error term

If the regression R-square is 0.25, estimate the change in the return on the stock when the return on the S&P 500 index changes from 12% to 15%.

  1. 19.5%
  2. 8.8%
  3. 18.2%
  4. 3.3%

Answer(s): D

Explanation:

With the given regression, the change in the return on the stock when the return on the S&P 500 index changes by one unit equals the slope coefficient, 1.1. Hence, when the return on the S&P 500 index changes by 3% from 12% to 15%, the return on the stock will change by 1.1*3% = 3.3%



The lengths of time (in minutes) several underwriters took to review applications for similar insurance coverage are: 50, 230, 52 and 57. What is the median length of time required to review an application?

  1. 141.0
  2. 54.5
  3. None of these answers
  4. 109.0
  5. 97.25

Answer(s): B

Explanation:

Order the numbers: 50,52,57,230. The median is (52 + 57)/2 = 54.5



A statistician has framed his hypothesis testing problem as:
Ho: mean = 0H1: mean > 0
For the given sample, he calculates the z-statistic. Then, the region of rejection at the 99% level is given by:

  1. z-statistic > +2.32
  2. z-statistic < 1.96
  3. z-statistic < -2.32 or z-statistic > +2.32
  4. z-statistic > +1.96

Answer(s): A

Explanation:

Since the alternative is directional and to the right, we use a right-tailed test. For this, the critical value at 99% level is +2.32. +2.32 is the value above which only 1% of the probability mass of the standard normal distribution lies). The rejection region is then given by z-statistic > +2.32.



A cumulative frequency distribution on days absent during a calendar year by employees of a manufacturing company is shown below.

Days AbsentCumulative ## of Employees
0 - 260
3 - 531
6 - 814
9 - 116
12 - 142

How many employees were absent between 6 and 11 days?

  1. 12
  2. 17
  3. 20
  4. None of these answers
  5. 8

Answer(s): A

Explanation:

This is found by the difference between the 6-8 class and the 12-14 class. In this case: 14 - 2 = 12.



Which of the following is the formula for the correlation between X and Y?

  1. Cov(X,Y)/[(sigma_X)*(sigma_Y)]^2.
  2. [Cov(X,Y)]^0.5
  3. (sigma_X)*(sigma_Y)/Cov(X,Y).
  4. Cov(X,Y)/[(sigma_X)*(sigma_Y)].

Answer(s): D

Explanation:

The correlation between two random variables X and Y is Cov(X,Y)/[(sigma_X)*(sigma_Y)].



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