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

Free Test Prep CFA® LEVEL 1 Dumps Questions (page: 132)

If the decision in the hypothesis test of the population correlation is to reject the null hypothesis, what can we conclude about the population correlation?

  1. None of these answers is correct
  2. Is not zero
  3. Equals the computed sample correlation
  4. Is zero
  5. Could be zero

Answer(s): B

Explanation:

The Ho is always stated as Ho: Population parameter=0. So if we reject Ho, we say that it is not zero.



As the head of a trading desk at a major bank, it is your job to evaluate whether the superior performance of a trader is due to skill or luck. To test this, you set up the following hypothesis:
Ho: Expected excess returns = 0
H1: Expected excess returns > 0
The excess returns are returns adjusted for risk using a proprietary factor model. In this set-up, which of the following is/are true?

  1. You must employ a one-tailed test.
    II. H1 is a directional alternative.
    III. Your critical z-statistics will be larger than the z-statistics in the case where the alternative is specified as H1:
    Excess returns are non-zero.
  2. I only
  3. II & III
  4. I & III
  5. I & II
  6. III only
  7. II only
  8. I, II & III

Answer(s): D

Explanation:

The alternative hypothesis, H1, does not assign a specific value to the expected excess return but specifies a directional region. Since it specifies the region to the right of 0 as an alternative, he must employ a right-tailed test i.e. a one-sided test. Note that the critical z-statistics in one-tailed regressions are always lower than the z- statistics in the corresponding two-tailed test.



If you buy a computer for $950 and agree to pay for it with 24 payments of $35 with the first payment occurring next month, what is the size of the final payment needed at month 24 to completely pay off the computer? Assume the interest rate you are being charged is 16% per year, compounded monthly.

  1. $294.39
  2. $0.00
  3. $207.88
  4. $87.14
  5. $323.18

Answer(s): E

Explanation:

This question describes a situation often called a balloon payment. On the BAII Plus, press 24 N, 16 divide 12 = I/Y, 950 PV, 35 +/- PMT, CPT FV. On the HP12C, press 24 n, 16 ENTER 12 divide i, 950 PV, 35 CHS PMT, FV. The answer is shown as a negative number. Make sure the BAII Plus has the value of P/Y set to 1.



What is the range of values for the coefficient of determination?

  1. None of these answers
  2. 0 to +1 inclusive
  3. -1 to +1 inclusive
  4. -3 to +3 inclusive
  5. #AI -1 to 0 inclusive

Answer(s): B

Explanation:

R-square ranges from 0-1 inclusive.



A cola dispensing machine is set to dispense a mean of 2.02 liters into a container labeled 2 liters. Actual quantities dispensed vary and the amounts are normally distributed with a standard deviation of 0.015 liter. What is the probability a container will have less than 2 liters?

  1. 0.8741
  2. 0.0918
  3. 0.3413
  4. 0.1926
  5. None of these answers

Answer(s): B

Explanation:

z = (x-u)/sigma = 2 - 2.02/0.015 = -1.33 (negative since it is below the mean). The area between - infinity and z = -1.33 is 0.0918.



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