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

Free Test Prep CFA® LEVEL 1 Dumps Questions (page: 157)

You are reviewing a list of 8 recommended securities and wish to invest in 4. You will put 40% of your capital in one, 30% in another, 20% in the third, and 10% in the last one. How many different ways can you choose among the 8 securities and invest according to your design?

  1. 1,980.
  2. 1,680.
  3. 1,774.
  4. 1,860.

Answer(s): B

Explanation:

The combination, or binomial formula, gives the number of ways that k objects can be chosen from n items, without regard to the order of choosing. The formula is (n choose k) = n! / [k! *(n-k)!]. However, in this case, the order does matter. If we choose stocks 3, 1, 7, and 5, we don't consider that the same as choosing 5, 7, 1 and 3, because the portfolio weights would differ. We need the general permutation formula, which gives the number of ways that k objects can be chosen from n items, with regard to order. The formula is n_P_k = n! / (n- k)!. Here, it is 8! / (8-4)! = 8 * 7 * 6 * 5 = 1,680.



The significance level in hypothesis testing refers to the:

  1. probability of Type II error.
  2. 1-probability of Type I error.
  3. joint significance of the associated regression, indicated by the F-statistic.
  4. probability of Type I error.
  5. none of these answers.

Answer(s): D

Explanation:

Type I error refers to the event that we will reject the null when, in fact, it is true. The probability of this error is called the "significance level" of the test used to evaluate the hypothesis. Clearly, lower significance levels are better, all else equal.



What is the area under the normal curve between z = -1.0 and z = -2.0?

  1. 0.0228
  2. 0.4772
  3. 0.3413
  4. 0.1359
  5. None of these answers

Answer(s): D

Explanation:

From the z-tables, z = 1 is 0.3413 and z = 2 is 0.4772. So the area in between is 0.4772 - 0.3413 = 0.1359.



What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$14,000>, Year 1:
$5,000, Year 2: $4,000, Year 3: $5,000, Year 4 a negative number).

  1. 10.69%
  2. 11.14%
  3. 12.04%
  4. 45.29%
  5. 10.49%

Answer(s): B

Explanation:

On the BAII Plus, press CF 2nd CLRWork 14000 +/- ENTER DownArrow 5000 ENTER DownArrow DownArrow 4000 ENTER DownArrow DownArrow 5000 ENTER DownArrow DownArrow 4000 ENTER DownArrow DownArrow 2nd Quit. Then press Irr CPT. On the HP12C, press these keys: 14000 CHSBlueShift CFo 5000 BlueShift CFj 4000 BlueShift CFj 5000 BlueShift CFj 4000 BlueShift CFj. Then press YellowShift Irr. The "DownArrow" represents the downward-pointing arrow on the top
row of the BAII Plus keyboard. Make sure the BAII Plus has the value of P/Y set to 1.



If the sample variance for a frequency distribution consisting of hourly wages was computed to be 10, what is the sample standard deviation?

  1. $3.16
  2. None of these answers
  3. $1.96
  4. $4.67
  5. $10.00

Answer(s): A

Explanation:

Sample standard deviation is the square root of the sample variance.



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