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

Free Test Prep CFA® LEVEL 1 Dumps Questions (page: 155)

A board of directors consists of eight men and four women. A four member search committee is to be chosen at random to recommend a new company president. What is the probability that all four members of the search committee will be women?

  1. None of these answers
  2. 1/16 or 0.0625
  3. 1/495 or 0.002
  4. 1/8 or 0.125
  5. 1/120 or 0.00083

Answer(s): C

Explanation:

4/12*3/11*2/10*1/9 = 1/495



You are evaluating 5 portfolio managers (A, B, C, D, and E) whose Sharpe ratios are 0.25, 0.41, 0.92, 0.78, and 0.51, respectively. Which manager would most risk-averse investors prefer?

  1. C.
  2. A.
  3. E.
  4. None of these answers is correct.

Answer(s): A

Explanation:

The Sharpe measure of risk-adjusted performance is equal to (rbar_p - rbar_f)/sigma_p, where rbar_p is the mean portfolio return, rbar_f is the mean risk-free return, and sigma_p is the standard deviation of portfolio return. Thus, the manager with the highest Sharpe ratio is generating the largest return in excess of the risk free rate, per unit of risk assumed. This is manager C, with a Sharpe ratio of 0.92.



The mean of a normal distribution is 400 pounds. The standard deviation is 10 pounds. What is the area between 415 pounds and the mean of 400 pounds?

  1. None of these answers
  2. 0.4332
  3. 0.3413
  4. 0.1932
  5. 0.5000

Answer(s): B

Explanation:

z = (x-u)/sigma. z = 415 - 400/10 = 1.5. From the z-tables, z = 1.5 is 0.4332. Since we are considering just one side of the distribution and the area from the mean, then the area between the points is 0.4332.



Four of your firm's analysts have been chosen as finalists for the Wealth Magazine All-Star Analysts team. They will get different bonuses depending on the order in which they finish among themselves. How many different ways could they finish?

  1. 10.
  2. 24.
  3. 16.
  4. 36.

Answer(s): B

Explanation:

The factorial method allows you to determine the number of ways of arranging n things. Initially, there are n choices for the first item, then n-1 for the second, and so on. The number of combinations is therefore n! = n * (n-1) * (n-2) * (n-3) * ... * (1). Here, we wish to find out how many different orders can be made with 4 persons.
The answer is 4! = 4 * 3 * 2 * 1 = 24.



If you deposit $2,000 today, how much will you have in 3 years, if interest is earned at a rate of 8% per year, compounded annually?

  1. $2,519.42
  2. $2,576.14
  3. $2,400.00
  4. $3,121.88
  5. $2,614.09

Answer(s): A

Explanation:

On the BAII Plus, press 3 N, 8 I/Y, 2000 PV, 0 PMT, CPT FV. On the HP12C, press 3 n, 8 i, 2000 PV, 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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