Level 1 - EXAM 1 Afternoon

Level 1 - EXAM 1 Afternoon 更多资料请访问豆丁达人冰川主页—— 二〇一一年七月 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— Go to answer sheet Schweser Printable Tests - Level 1 - EXAM 1 Afternoon - 180 minutes - Level 1 - EXAM 1 Afternoon You can print this page by going to file -> print in your internet browser. Ethics - 18 Questions - 27 minutes Question: 1 - 23386 Which of the following are appropriate uses of the CFA mark? I. The CFA designation put after your name cannot exceed the size print used for your name. II. Any description of the CFA designation should be limited to a concise description of the requirements and/or organization conferring the designation. III. CFA candidates must indicate their level by putting the highest level of the exam they have passed along with the CFA designation after their name, such as CFA II. I only. A) I and II only. B) I and III only. C) I, II, and III. D) Question: 2 - 28434 According to AIMR's Standards of Professional Conduct Standard which of the following activities violates Standard IV(B.4), Priority of Transactions? I. Trading for the firm's account before handling the client's trades. II. An analyst makes trades for his son's account before he trades his institutional accounts. III. An analyst buys stock for his own account on an inside tip while not doing so for his clients. IV. An analyst buying shares for his personal account after all the firm's clients have been informed and their trades completed. I and II. A) I and IV. B) I and III. C) All of these choices are correct. D) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— Question: 3 - 28435 Julie Hoffman, a trainee and CFA candidate, is in her first week with BUK Management Corp., a local brokerage house. Hoffman was given a phone list and told to make a few cold calls to round up some clients. To generate business she has made the following statements: I. I personally guarantee this investment it's a sure winner. II. Sure, we can perform all the financial and investment services you need. III. We've consistently outperformed the market indexes and will continue to do so. IV. Believe me, I've been at this game long enough to know what I'm talking about. In which of the following statements has Hoffman made a material misrepresentation? I only. A) I and III. B) I, II, III, and IV. C) II and IV. D) Question: 4 - 28436 Which of the following statements is FALSE? The investment manager must inform the client that the manager may engage in A) soft dollar arrangements before doing so. The investment manager cannot allocate a client's brokerage to a broker based on B) the amount of referrals the manager receives from the broker. The broker can use brokerage from another client's account to pay for research C) under the client-directed brokerage arrangement. To use client brokerage to buy research the manager should determine that the D) research meets the definition of research and that it directly benefits the client. Question: 5 - 28437 A compliance system that seeks to control the flow of information between departments in a firm by supervising interdepartmental communications, reviewing employee and proprietary trading, especially when the firm is in possession of material nonpublic information and memorializing the firm's documents and procedures is called the: Insider Trading Sanctions Act. A) SEC Enforcement Program. B) Misappropriation Theory of compliance. C) Fire Wall compliance system. D) Question: 6 - 28438 Which of the following statements about AIMR's Performance Presentation Standards for use by investment managers in calculating and presenting their investment returns is FALSE? Investment income should be included on a full accrual basis. A) Cash and cash equivalents must be included in composite returns. B) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— Accounts no longer under management may be excluded from historical composite C) performance results. Performance returns should combine both income and capital appreciation. D) Question: 7 - 29231 An AIMR? member, undertaking independent practice that could result in compensation or other benefit, must: obtain written consent from the employer. A) obtain written consent from the persons or entities for whom they undertake B) independent practice. obtain written consent from both their employer and the persons or entities for C) whom they undertake independent practice. inform both the employer and the persons or entities for whom they undertake D) independent practice. Question: 8 - 29232 Which of the following would be permissible under Standard II(C), Prohibition against Plagiarism? Using excerpts from a report prepared by a well known outside research firm A) without acknowledgement. Reporting statistics prepared by an outside firm, identifying the source but omitting B) caveats and qualifying statements. Attributing research to "investment experts." C) Including a graph showing the Fed's discount rates over the previous 12 months in D) a report that goes to clients. Question: 9 - 29233 All of the following are acceptable ways that AIMR? members may notify their employer of the Code and Standards EXCEPT: by memo. A) by e-mail. B) verbally. C) by letter. D) Question: 10 - 29234 What is the rule of thumb for members, CFA charterholders and candidates in the CFA program when weighing the requirements of the AIMR Code and Standards and the requirements of local laws? If the applicable laws are: more strict, they must still follow the Code and Standards. A) more strict, they must adhere to the applicable laws. B) less strict, they must still follow the local country laws. C) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— less strict, they should make a judgment call on which to follow, the Code and D) Standards or the local laws and requirements. Question: 11 - 29235 Members should: suggest that their employers adopt the Code and Standards and disseminate them A) throughout the firm. require that their employees adopt the Code and Standards. B) inform all employees in the firm of their requirement to follow the Code and C) Standards. inform their supervisors orally that they must follow the Code and Standards. D) Question: 12 - 29236 John Martin, an analyst and CFA charterholder, discovers that Jurix Co. has knowingly misstated information in their prospectus. To comply with AIMR’s Code of Ethics and Standards of Professional Conduct, he should: resign from his job in order to disassociate from the potentially illegal activity. A) call the appropriate regulatory agency and report the action. B) do nothing and see if the firm corrects the problem. C) report the finding to the appropriate supervisory person in his firm. D) Question: 13 - 29237 Jack Salyers, CFA, is considering starting his own firm to compete with his current employer. He takes several actions before turning in his resignation. Which of the following actions is NOT in violation of Standard III(B), Duty to Employer? Jack told his employer that he was considering leaving and requested that the A) employer write him a letter of recommendation. Before leaving, Jack solicits his employer's current clients. B) Jack took home client lists and investment statements. C) Jack copied the employer's computer models and other property. D) Question: 14 - 29238 Sarah Johnson, portfolio manager, is being paid a bonus directly by the client if she meets certain performance goals. She should: disclose to her client that it is illegal to receive a bonus outside of her compensation A) from her employer. disclose this arrangement to her employer. B) do nothing since her interests are in line with the client's interests and thus she C) need not make special disclosures. do nothing since she does not know if she'll actually meet the performance goals D) and receive the bonus. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— Question: 15 - 29239 Jason Jones, a stock broker who has completed Level I of the CFA program and is registered for Level II: may claim to be a CFA since he has completed Level I. A) may claim the partial designation that AIMR allows for those who have partially B) completed the program. may reference his participation in the program but must clearly state that he is a C) candidate in the program. may not mention at all that he is involved in the CFA program until he has passed D) all three levels. Question: 16 - 29240 Brokerage is an asset of the: managing firm. A) manager within the managing firm. B) brokerage firm conducting the trades. C) client. D) Question: 17 - 29241 Ruth Mayer, CFA, recommends Monolo, Inc. to all of her clients as a strong buy. Ruth is on the board of Monolo and her firm is in talks with Monolo for the rights to lead the syndicate of investment banks in the upcoming equity issue. Monolo promises to put Ruth’s husband on the board of a subsidiary if she can significantly increase interest in Monolo’s stock. Ruth is violating which standard(s) from the Code and Standards in this scenario? I. Standard IV(B7), Disclosure of Conflicts to Clients and Prospects. II. Standard IV(B2), Portfolio Investment Recommendations and Actions. III. Standard IV(B1), Fiduciary Duties. IV. Standard III(D), Disclosure of Additional Compensation Arrangements. I, II, IV. A) II, III, IV. B) I, III, IV. C) I, II, III, IV. D) Question: 18 - 29243 Sallie Reid, CFA, is asked by her boss, also a CFA charterholder, to use a research report of a competing firm, change a few details, sign it and send it to a large client. He says their firm’s researchers will draw the same conclusions but haven’t gotten to them yet. If she complies, she is doing all of the following EXCEPT: 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— violating AIMR? standards dealing with plagiarism. A) complying with AIMR? standards because she cannot disobey her boss. B) violating AIMR? standards regarding the member's obligation to inform supervisors C) of the Code and Standards. obeying her boss, a CFA charterholder, but violating several of AIMR?'s Codes and D) Standards. Quantitative Analysis - 18 Questions - 27 minutes Question: 19 - 18886 An investor in a fund makes a 25 percent return the first year but loses 25 percent in the second year, what will be the annual geometric return on this investment? 0.0%. A) -3.0%. B) +3.0%. C) +5.0%. D) Question: 20 - 18889 A distribution is normal when: I. the expected value of the distribution equals the mode and median. II. the probability distribution is symmetric around the expected value. III. the distribution can be defined completely by its expected value and standard deviation. I, II, and III. A) I only. B) III only. C) II and III only. D) Question: 21 - 18920 Given a population of 10, 5, and 15, the coefficient of variation would be: 30%. A) 40%. B) 60%. C) 100%. D) Question: 22 - 18921 If a distribution is positively skewed, then generally you could say: 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— mean < median < mode. A) mean > median < mode. B) mean = median = mode. C) mean > median > mode. D) Question: 23 - 28427 Which of the following statements is FALSE? The relative frequency is the class frequency divided by the total frequency. A) When building a frequency distribution the classes should be mutually exclusive. B) The advantage of a frequency distribution over a stem-and-leaf display is that the C) frequency distribution maintains the identity of the individual observations. The class interval is the distance between the lower limit of a class and the upper D) limit of the class. Question: 24 - 28428 Which of the following statements are TRUE? I. An event is the collection of one or more actual outcomes from an experiment. II. A conditional probability is the probability that two or more events will happen concurrently. III. The revised probability that an event will happen given that you have received additional information is called the posterior probability. IV. Out of a sample of 100 widgets 10 were found to be defective, 20 were perfect, and 70 were OK. The probability of picking a perfect widget at random is 29 percent. IV only. A) I and IV only. B) I and III only. C) II, III, and IV only. D) Question: 25 - 28429 Which of the following statements is TRUE? A Poisson distribution counts the number of events that occur during a specific time A) interval. A cumulative probability is the sum of all the individually determined probabilities B) between two points. A binomial distribution counts the number of successes that occur in a fixed number of independent trials that have mutually exclusive (i.e. yes or no) C) outcomes. All of these choices are correct. D) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页——: 26 - 28430 A normal distribution has a mean of 10 and a standard deviation of 4. Which of the following statements are TRUE? I. 68% of all the observations will fall between 6 and 14. II. The probability of finding an observation below 2 is 5%. III. 81.5% of all the observations will fall between 6 and 18. IV. The Z-statistic for an observation from this distribution with a value of 5 is 1.25. I and II only. A) II and III only. B) I, II, III, and IV. C) I and III only. D) Question: 27 - 28431 An analyst wants to use the continuous normal distribution to approximate a discrete binomial distribution. To do this the analyst must adjust the Z-statistic. Z = [(observation + correction factor) - mean] /standard deviation. What is the correction factor? +1.0. A) Mean /square root of n - 1. B) +0.5. C) standard deviation / square root of n. D) , There is a parking lot with 100 red and blue cars in it. , 40% of the cars are red. , 70% of the red cars have radios. , 80% of the blue cars have radios. Question: 28 - 28432 What is the probability of selecting a car at random and having it be red and have a radio? 25%. A) 28%. B) 40%. C) 48%. D) Question: 29 - 28432 What is the probability of selecting a car at random that is either red or has a radio? 28%. A) 88%. B) 76%. C) 116%. D) Question: 30 - 28432 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— What is the probability that the car is red given that you already know that it has a radio? 28%. A) 47%. B) 88%. C) 37%. D) Question: 31 - 28433 Which of the following statements is FALSE? A discrete random variable is a variable that can assume only certain clearly A) separated values resulting from a count of some set of items. A continuous random variable is a quantity resulting from a random experiment that B) by chance can assume an infinite number of different values. A binomial probability distribution is an example of a continuous probability C) distribution. The Poisson probability distribution is the limiting form of the binomial distribution D) where n is large and the probability of success (p) is small. Question: 32 - 29400 Which of the following statements is TRUE regarding the mean of a nonsymmetrical (or skewed) distribution? For a: positively skewed distribution, the mode is less than the mean, which is less than A) the median. negatively skewed distribution, the mode is less than the median, which is less than B) the mean. positively skewed distribution, the mode is less than the median, which is less than C) the mean. negatively skewed distribution, the mode is less than the mean, which is less than D) the median. Question: 33 - 29401 If an investor puts $5724/year starting at the end of the first year in an account earning 8 percent and ends up accumulating $500,000, how many years did it take the investor? 87 years. A) 26 years. B) 32 years. C) 27 years. D) Question: 34 - 28251 2 2 Given: n = 12, ΣXY = 75, ΣX = 20, ΣY = 10, ΣX= 150, ΣY= 75, r = .66. What is the coefficient of determination? 0.34. A) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 0.76. B) 0.44. C) 0.81. D) Question: 35 - 28425 Which one of the following statements is TRUE? The linear trend equation is y = a + b(t). A) The curvilinear trend equation is log (y) = a + log (b)*(t). B) A linear series increases by a constant percentage over time. C) A curvilinear series increases by a constant amount over time. D) Question: 36 - 28426 Which of the following statements are TRUE? I. Given: n = 5, ΣX = 20 and ΣY = 30, if beta = 1 alpha is 2. 2II. The bigger the standard error of estimate the bigger the R. III. If alpha is 2 and beta is 1, if Y is given to be 3 then X would be 5. IV. Regression analysis assumes there is a linear relation ship between the X and Y variables. I and IV only. A) I and II only. B) I and III only. C) I, III, and IV only. D) Economics - 14 Questions - 21 minutes Question: 37 - 12356 Initially, the risk free nominal interest rate is 10 percent and the expected rate of inflation is 8 percent. One year later, the nominal risk free interest rates fall to 8 percent and expected inflation rate falls to 5 percent. It follows that the real rate of interest: has risen. A) has fallen. B) has remained the same. C) insufficient information given. D) Question: 38 - 28205 If the Fed wanted to expand the money supply they would probably: reduce taxes. A) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— raise the discount rate. B) purchase T-bills on the open market. C) increase government expenditures. D) Question: 39 - 28208 If the money supply increases and the price level declines, according to the quantity theory of money: velocity declined and output rose; velocity remained constant and the growth rate A) in output rose more than enough to compensate for the decline in prices. velocity declined and output rose. B) velocity remained constant and the growth rate in output rose more than enough to C) compensate for the decline in prices. velocity and output declined. D) Question: 40 - 29292 Which of the following is the correct definition of the labor force? All people of working age (18+). A) Those people of working age (16+) who are either employed or seeking B) employment. Those people of working age (18+) who are either employed or seeking C) employment. All people of working age (16+) who are working. D) Question: 41 - 29294 In the basic Keynesian Aggregate Expenditure Model, given that C = personal consumption, I = private investment, G = government spending, and NX = net exports (exports – imports), which of the following relationships is TRUE? Real gross domestic product (GDP) = planned C+I+G+NX. A) planned C+I-G-NX. B) planned C+I+G-NX. C) planned C-I-G-NX. D) Question: 42 - 29295 In the Keynesian Model, equilibrium occurs when expenditures are equal to output. If total output is greater than planned aggregate expenditures, then the tendency is for the economy to: expand. A) contract. B) create a new equilibrium at a higher level. C) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— rapidly expand. D) Question: 43 - 29296 Which of the following is NOT one of the three basic functions of money? Medium of exchange. A) Store of value. B) Tangible asset. C) Unit of account. D) Question: 44 - 29297 Which of the following statements regarding the money supply is FALSE? M is the narrowest definition of money. A) 1 M is the most common measure used for analysts trying to compare the money 1B) supply across periods. M is relied on more heavily when comparing the money supply across periods. C) 2 Credit cards do not provide purchasing power, but merely are a facilitator of D) purchasing power. Question: 45 - 29298 Which of the following statements is FALSE regarding the demand and supply of money? As nominal GDP increases as the result of inflation and/or increased output, the A) demand for money increases. The supply of money is determined by the monetary authority and is not affected by B) changes in interest rates. The supply of money curve is vertical. C) As the Fed reduces the money supply, interest rates fall. D) Question: 46 - 29299 The Phillips curve indicates a trade-off between: inflation and output. A) inflation and the unemployment rate. B) unemployment and output. C) prices and wages. D) Question: 47 - 29052 Consider the following financial information for Cabrillo & Third Diversified: , Annual Sales of $250,000 , Opportunity cost of capital of $25,000 , Fixed costs (excluding depreciation) of $70,000 , Variable costs at 35% of sales 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— , Value of owner’s financial advice estimated at $15,000 , Depreciation of $35,000 , Corporate tax rate of 40% Based on this information, Cabrillo and Third Diversified: is earning the normal rate of return. A) has positive economic profits. B) is not earning the normal rate of return. C) has negative accounting profits. D) Question: 48 - 28210 You observe that the exchange rate for pesos is 8 per US dollar, and the exchange rate for francs is 6 per US dollar. What is the peso to franc (MXN/FRF) exchange rate? 1.333. A) 0.750. B) 14.0. C) Cannot be determined with the data given. D) Question: 49 - 29067 Given the American terms for the Mexican Peso (MXP) and the Peruvian Nuevo Sol (PEN), determine the MXP/PEN bid-ask spread. (Note: Carry calculations to at least five decimal places.) Select the closest correct answer. $/MXP Bid Ask MXP 0.11001 - 0.00035 / MXP $/PEN Bid Ask PEN 0.28818 - 0.00100 / PEN MXP 2.62890 - 0.01740 PEN. A) MXP 0.03042 - 0.00254 PEN. B) MXP 2.61227 - 0.01740 PEN. C) MXP 0.38300 - 0.00254 PEN. D) Question: 50 - 29072 According to the law of comparative advantage: if a foreign government subsidizes the textile industry, the domestic government A) should impose a tariff. Mexico is considered to have a comparative advantage in plastics if Mexico can B) produce plastic using fewer resources than the U.S. a nation will benefit from trade when it imports goods for which it is the high cost C) producer and exports goods for which it is the low-cost producer. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— a nation will benefit from trade when its exports exceed its imports. D) Financial Statement Analysis (FSA) - 30 Questions - 45 minutes Question: 51 - 28232 Which of the following statements is FALSE? Discontinued operations are reported "below the line" net of taxes. A) Gains and losses from the early retirement of debt are classified as unusual or infrequent items and are listed as a component of net income from continuing B) operations. Extraordinary items are reported net of taxes below income from continuing C) operations. Accounting errors are prior period adjustments and are not reported in the income D) statement but are rather adjustments directly to retained earnings. Question: 52 - 28973 Walker Company received a letter on November 31, 1997 indicating that Johnson, Inc. would purchase a specialty machine priced at $4,000,000. On February 13, 1998 a binding contract was executed for the machine’s construction. Materials costing $2,000,000 were ordered in December 1997, arrived with an invoice in August, 1998, and were used in the manufacturing process in the first quarter of 1999. After a labor dispute, Walker finally completed manufacture and delivered the machine in December, 2000. Johnson received the first invoice in 2001 and paid the $4,000,000 purchase price in 2001. Walker Company uses the accrual method of accounting. Walker should record the materials used to construct the machine as expenses in the year: 2001. A) 1999. B) 1998. C) 2000. D) Question: 53 - 28974 Eastern, Inc. has a twelve month operating cycle and had the following obligations on its books as of December 31, 2001: , $15,000,000 was due for taxes on March 15, 2002 of which $10,000,000 was for tax expense for calendar year 2001, $3,000,000 was for tax expense which was from calendar year 1999, and $2,000,000 was for taxes which must be paid in advance for calendar year 2003. , $20,000,000 of 10 percent annual interest coupon bonds were outstanding from March 31, 2002, with interest due annually on March 31 and with half of the principal due March 31, 2002 and the balance with interest due March 31, 2003. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— For the calendar year ended December 31, 2001, the balance sheet of Eastern Inc. will show current liabilities of: 25,000,000. A) 25,500,000. B) 39,000,000. C) 27,000,000. D) Question: 54 - 28975 Blast, Inc. issued $2,000,000 face value bonds on December 31, 2001. The bonds had a five percent coupon payable semi-annually with principal due December 31, 2008. Proceeds of the sale were $1,700,000. The $300,000 difference between face value and bond proceeds was shown on the balance sheet of Blast, Inc. as of December 31, 2001 as: Unamortized Bond Premium. A) Unamortized Bond Discount. B) Prepaid Interest Expense. C) Bonds Payable. D) Question: 55 - 28976 Charles Company enters into long-term contracts that extend over several years. All things equal, which of the following would generally be lower in the early years of the contracts if Charles Company accounted for its contracts under the percentage-of-completion method as compared to the completed contract method? Revenues. A) Liabilities. B) Expenses. C) Net Income. D) Question: 56 - 28977 Analysts reviewing Amber, Inc.’s and Bold, Inc.’s long-term contracting activities for the year ended December 31, 2001 observed that Amber, Inc.’s contracts were being accounted for under the percentage-of-completion method while Bold, Inc.’s were being accounted for under the completed contract method. A true picture of the status and performance of the two companies is best obtained by analyzing their: income statements. A) assets on the balance sheets. B) liabilities and equity on the balance sheets. C) statements of cash flows. D) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页——: 57 - 28978 Each of the following is included in X Company’s cash flow from operations (CFO) EXCEPT: dividends paid to X Company's shareholders. A) interest received by X Company on a loan from a shareholder to purchase B) company stock. dividends received by X Company on an equity investment. C) interest paid by X Company on a loan to buy factory equipment. D) Question: 58 - 28979 The Orange Company’s balance sheet as of December 31, 2001 was as follows: Dec. 31, 2000 Dec. 31, 2001 Cash $1,500,000 $1,900,000 Accounts Receivable 3,000,000 3,400,000 Inventory 2,300,000 2,500,000 Property, Plant & Equipment 16,700,000 19,700,000 Less Accumulated Depreciation (5,300,000) (8,200,000) Total Assets $18,200,000 $19,300,000 Accounts Payable $2,100,000 $1,900,000 Interest Payable 800,000 1,200,000 Income Taxes Payable 1,000,000 800,000 Notes Payable 2,700,000 2,900,000 Deferred Income Taxes 2,600,000 2,900,000 Common Stock 1,000,000 1,000,000 Retained Earnings 8,000,000 8,600,000 $18,200,000 $19,300,000 Orange’s interest expense was $900,0000 and income tax expense was $1,000,000 in 2001. Orange prepares its Statements of Cash Flows using the direct method. The other cash outflows section of Cash Flow from Operations (CFO) for 2001 would total: $1,400,000. A) $1,700,000. B) $2,100,000. C) $1,900,000. D) Question: 59 - 28980 Variety Company sold equipment with a book value of $10,200,000 for $10,700,000 cash in 2001 and used the proceeds to repay $10,700,000 of its notes payable. Variety uses the indirect method of calculating cash flow from operations (CFO). On its Statement of Cash Flows for the year ended December 31, 2001 Variety should report: cash flow from operations (CFO) of -$500,000, cash flow from investing activities A) (CFI) of $10,700,000 and cash flow from financing activities (CFF) of -$10,700,000. cash flow from operations (CFO) of $500,000, cash flow from investing activities B) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— (CFI) of $10,200,000, and cash flow from financing activities (CFF) of -$10,700,000. cash flow from operations (CFO) of $500,000 and cash flow from financing (CFF) activities of -$500,000 with the remainder of the transaction disclosed in a footnote C) as an offsetting transaction. a footnote describing the transaction as offsetting. D) Adams Co.'s common sized financial statements show that: , Earnings After Taxes = 15% , Current Liabilities = 20% , Equity = 45% , Sales = $800 , Current Assets = 45% , Total Assets = $2,000 Question: 60 - 14640 What is Adams' Total Debt to Equity ratio? 1.0. A) 2.0. B) 1.2. C) 2.25. D) Question: 61 - 14640 What is Adams' working capital? $250. A) $900. B) $500. C) $2,000. D) Question: 62 - 28981 Balance sheets of Johns Company and Peters, Inc. as of December 31, 2001 are as follows: (in $ millions) Johns Company Cash 60 Accounts Payable 60 Accounts Receivable 90 Long-term Debt 80 Inventory 30 Common Stock 70 Property, Plant & Equip. (net) 100 Retained Earnings 70 Total Assets 280 Total Liabilities & Equity 280 Peters, Inc. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页——, Plant & Equip. (net) 900 Retained Earnings 220 Total Assets 1,740 Total Liabilities & Equity 1,740 Comparing current, quick, and cash liquidity measures for these two companies would lead an analyst to conclude that: Peters is generally more liquid than Johns, but quick liquidity measures favor A) Johns. Peters is more liquid than Johns. B) Johns is more liquid than Peters. C) Johns is generally more liquid than Peters, but quick liquidity measures favor D) Peters. Question: 63 - 28982 Selected financial data from Virginia Company’s financial statements for the year ended December 31, 2001 are as follows: Sales $400,000 Sales Returns (40,000) Net Sales 360,000 Beginning Receivables Balance 60,000 Ending Receivables Balance 90,000 Average Receivables Balance 80,000 Industry data shows that receivables turnover in Virginia’s industry averaged 4.0 times in 2001. Virginia’s receivables turnover in 2001 was: between ten and twenty percent higher than the industry average. A) more than twenty percent higher than the industry average. B) the same as the industry average. C) less than the industry average. D) Question: 64 - 28983 The capital structure of Delta Corporation would be classified as a simple capital structure even though it included all of the following EXCEPT: callable preferred stock. A) class B common shares. B) convertible bonds. C) treasury stock. D) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页——: 65 - 28984 Oregon Corp.’s stock transactions during the year 2001 were as follows: January 1 320,000 shares issued and outstanding April 1 1 for 2 reverse stock split occurred July 1 acquisition of Smith, Inc. in exchange for issuance of 60,000 shares in a purchase method transaction October 1 30,000 shares issued for cash What is Oregon’s weighted average number of shares outstanding during 2001 for earnings per share (EPS) computation purposes? 250,000. A) 197,500. B) 277,500. C) 167,500. D) Question: 66 - 28985 Selected information from Baltimore Corp’s financial activities in the year 2001 is as follows: , Net income was $4,200,000 . , 750,000 shares of common stock were outstanding on January 1. , The average market price per share was $50 in 2001. , Dividends were paid in 2001. 10,000 warrants, which allowed the holder to purchase 10 shares of common stock for each warrant held at a price of $40 per common share, were outstanding the entire year. Baltimore’s diluted earnings per share (Diluted EPS) for 2001 is closest to: $5.60. A) $4.94. B) $4.83. C) $5.45. D) Question: 67 - 28986 Tornado, Inc. is evaluating the potential effect on basic earnings per share (EPS) and diluted earnings per share (Diluted EPS) in deciding whether to finance an acquisition by issuing 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— preferred stock or convertible preferred stock. Tornado should consider all of the following EXCEPT: convertible preferred stock is a potentially dilutive security, but preferred stock is A) not. market preference for convertible versus standard preferred stock. B) the dividend rate on convertible preferred stock is usually less for the same par C) value than the dividend rate on preferred stock. preferred stock dividends are subtracted from net income in computing basic EPS, D) while convertible preferred stock dividends are not. Question: 68 - 28987 Moulding Company’s net income for 2001 was $13,820,000 with 2,600,000 shares outstanding. The average share price in 2001 was $58.00. Moulding had 10,000 options to purchase 10 shares each at $40 per share outstanding since 2000. Moulding Company’s diluted earnings per share (Diluted EPS) for 2001 is closest to: $5.25. A) $5.32. B) $3.84. C) $3.71. D) Question: 69 - 28988 Arlington, Inc. uses the first in, first out (FIFO) inventory cost flow assumption. Beginning inventory and purchases of refrigerated containers during 2001 for Arlington were as follows: Units Unit Cost Total Cost Beginning Inventory 20 $10,000 $200,000 Purchases 4-12-01 10 12,000 120,000 Purchases 7-13-01 10 12,500 125,000 Purchases 10-19-01 20 15,000 300,000 On November 15, 2001 Arlington sold 35 refrigerated containers to Johnson Company. What is the cost of goods sold assigned to the 35 sold containers? $485,000. A) $382,500. B) $434,583. C) $416,667. D) Question: 70 - 28989 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— Fledgling, Corp. uses the last in, first out (LIFO) inventory cost flow assumption. Selected information from Fledgling’s financial statements for the year ended December 31, 2001 is as follows (in $): Sales $9,300,000 Cost of Goods Sold (5,200,000) Gross Profit 4,100,000 Other expenses (2,700,000) Earnings before Taxes 1,400,000 Income Tax Expense (490,000) Net Income $910,000 Beginning Inventory $2,700,000 Ending Inventory 3,100,000 Beginning LIFO Reserve 450,000 Ending LIFO Reserve 600,000 If LIFO were changed to FIFO, Fledgling’s net income for 2001 would: increase $150,000. A) increase $550,000. B) increase $97,500. C) increase $67,666. D) Question: 71 - 28990 Selected information from Industrial Corp.’s financial statements for the year ended December 31, 2001 included the following (in $): Cash $200,000 Accounts Receivable 350,000 Inventory 590,000 Property, Plant & Equip. 2,800,000 Total Assets $3,940,000 Accounts Payable $320,000 L.T. Deferred Tax Liability 610,000 Long-term Debt 1,240,000 Common Stock 800,000 Retained Earnings 970,000 Total Liabilities & Equity $3,940,000 LIFO Reserve at Jan. 1 $210,000 LIFO Reserve at Dec. 31 330,000 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— Income Tax Rate (percent) 40 Industrial used the last in, first out (LIFO) inventory cost flow assumption. If Industrial changed from LIFO to first in, first out (FIFO) in 2001, Industrial’s long-term debt-to-equity ratio would: decrease from 1.045 to 0.881. A) increase from 1.045 to 1.232. B) decrease from 1.045 to 1.007. C) decrease from 1.045 to 0.923. D) Question: 72 - 28991 Balance sheet data for Roland Corp. for the year ended December 31, 2001 was as follows (in $): Cash $100,000 Accounts Receivable 300,000 Inventories 150,000 Franchise (net of amortization of $350,000) 525,000 Property, Plant & Equipment 260,000 Total Assets $1,335,000 , Net income for Roland for 2001 was $120,000. , Roland acquired a franchise at the beginning of 2000 at a cost of $875,000, which was being amortized over a five-year period. Ignoring income taxes, if the franchise cost would have been expensed in 2000 instead of being amortized, the return on total assets at year-end 2001 would have: increased from 8.99 percent to 22.10 percent. A) increased from 8.99 percent to 14.81 percent. B) increased from 8.99 percent to 58.02 percent. C) increased from 8.99 percent to 36.42 percent. D) Question: 73 - 28992 Brand Company was depreciating its roller press, acquired January 1, 1998 for $3 million with a salvage value of $500,000, on a straight line (SL) basis over ten years. During 2001, Brand decided to change the method of depreciation to double declining balance (DDB). Ignoring income tax effects, the total amount of depreciation expense Brand will recognize on this press in 2001 is: $1,021,200. A) $771,200. B) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— $726,000. C) $1,771,200. D) Question: 74 - 28993 Harding Corp. has a permanently impaired asset. The difference between its carrying value and the present value of its expected cash flows should be written down immediately and: reported as a non-operating loss before computation of net income. A) reported as a separately disclosed loss net of tax effect, if any, due to a change in B) accounting method. directly charged against retained earnings. C) reported as an operating loss. D) Question: 75 - 28234 When a deferred tax liability account reverses it means that: cash flows have been lessened by the amount of the reversal. A) the actual tax bill is equal to the tax expense reported in the income statement. B) the actual tax bill is greater than the tax expense reported in the income statement. C) the actual tax bill is lower than the tax expense reported in the income statement. D) Question: 76 - 28235 If an analyst adjusts the financial statements and capitalizes an operating lease the analyst will observe that the: current ratio will increase. A) times interest earned ratio will decrease. B) acid test ratio will increase. C) debt to equity ratio will decrease. D) Question: 77 - 28994 Longboat, Inc. sold a luxury passenger boat from its inventory on December 31, 2001 for $2,000,000. It is estimated that Longboat will incur $100,000 in expenses servicing the warranty during its 5-year obligation. Longboat’s tax rate is 30 percent. To account for the tax implications of the warranty obligation, Longboat should: record a decrease in taxes payable of $30,000. A) record a deferred tax asset of $30,000. B) record a deferred tax liability of $30,000. C) make no entry until actual warranty expenses are incurred. D) Question: 78 - 28995 Nomad Company issued $1,000,000 face value 2-year zero coupon bonds on December 31, 1999 to yield eight percent interest. Bond proceeds were $857,339. In 2000 Nomad recorded 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— interest expense of $68,587. In 2001 Nomad recorded interest expense of $74,074 and paid out $1,000,000 to redeem the bonds. Based on these transactions only, Nomad’s Statement of Cash Flow for 1999, 2000, and 2001 would show cash flow from operations (CFO) of: -$68,587 in 2000 and -$74,074 in 2001. A) zero in all years. B) -$142,661 in 2001. C) -$1,000,000 in 2001. D) Question: 79 - 28996 On December 31, 2000, Tandem, Inc. executed a 5-year lease with annual payments of $700,000 for heavy equipment for its manufacturing facility. The economic life of the equipment is seven years. Tandem has the option to purchase the machine for 10 percent of its original fair market value at the end of the lease. The interest rate implicit in the lease is eight percent. Tandem, Inc.’s incremental borrowing rate is 10 percent. Treating the above transaction as an operating lease, Tandem’s income statement for the year ended December 31, 2001 was as follows: Sales $13,400,000 Cost of Goods Sold (7,200,000) Gross Profit 6,200,000 Depreciation (1,700,000) Lease Expense (700,000) Sales and Administration (1,100,000) Operating Profit 2,700,000 Interest Expense (600,000) Income taxes (1,200,000) Net Income $900,000 After considering whether the heavy equipment lease should be reclassified as a capital lease, Tandem’s interest coverage ratio will: decrease from 4.50 to 3.05 times. A) decrease from 4.50 to 3.45 times. B) increase from 4.50 to 4.74 times. C) remain unchanged. D) Question: 80 - 28997 Penguin Company is planning to lease a $5 million machine to produce goods for eventual sale. Penguin is able to structure the lease so as to classify it as either an operating or a capital lease. The advantages to Penguin of classifying this lease as an operating lease include all of the following EXCEPT: no disclosures of payments due under the lease are required. A) the lease is not reported as debt on Penguin's balance sheet, so leverage ratios B) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— are not increased. the lease is not reported as an asset, so profitability ratios are not reduced. C) depreciation is not recorded. D) Asset Valuation - 28 Questions - 42 minutes Question: 81 - 28242 Which of the following statements about capital is FALSE? If the firm needs more funding than can be supported by retained earnings the A) firm's weighted average cost of capital (WACC) will increase. As the firm raises more and more capital, market efficiency would indicate that the B) firm's marginal weighted average cost of capital should fall. Assuming constant risk, the correct discount rate to use in its capital budgeting C) decision is the firm's marginal weighted average cost of capital. If a firm earns exactly the marginal cost of capital on its new investment projects it D) will satisfy the return requirements of its creditors and equity investors. Question: 82 - 28244 Which of the following statements about independent projects is FALSE? If the modified internal rate of return (MIRR) < the cost of capital reject the project. A) The internal rate of return (IRR) and the NPV methods can yield different B) accept/reject decisions. If the net present value (NPV) is positive you should accept the project. C) The NPV tells how much the value of the firm has increased if the project is D) accepted. Question: 83 - 28246 Which of the following statements is FALSE? The equivalent annual annuity approach assumes that it is possible to make A) continuous replacements each time the asset's life ends. When comparing mutually exclusive projects with unequal lives, replacement chain B) analysis yields the same decision as the equivalent annual annuity method. Mutually exclusive projects sometimes have very long lives making the replacement chain method difficult to apply. The equivalent annual annuity (EAA) is C) a substitute method that uses annuity concepts to value a project's cash flows. A 5-year project has a NPV of $2,000, if the firm's cost of capital is 10% the D) equivalent annual annuity is $725. Question: 84 - 28247 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— Which of the following statements is FALSE? The degree of total leverage equals the degree of operating leverage times the A) degree of financial leverage. The firm's optimal capital structure occurs where the firm's earnings per share is B) maximized. Other things held constant, if you increase a firm's financial leverage you will C) increase the firm's beta coefficient. Asymmetric information involves a situation where the firm's managers have better D) information about the firm's prospects than the investors do. Question: 85 - 28249 Which of the following statements is FALSE? Stock dividends do not change the fundamental position of current shareholders. A) The tax preference theory states that investors prefer stocks that pay low dividends B) to stocks that pay high dividends. If the bird-in-hand theory were correct if a firm increased its dividend payout ratio C) the firm's cost of equity capital would fall. The clientele effect suggests that companies should follow a residual dividend D) policy. Question: 86 - 28222 Which of the following statements reflect the characteristics of a good market? Provides liquidity. A) All of these choices are correct. B) Provides timely and accurate information. C) Gives the lowest possible transactions costs. D) Question: 87 - 28223 Which of the following statements is FALSE? When exchange listed stocks are traded OTC, it is designated as a third market A) trade. The New York Stock Exchange sets the initial margin requirements for stocks? B) Block houses are brokerage firms that buy and sell large blocks of stock for C) institutions. The National Association of Securities Dealers Automated Quotation system D) (NASDAQ) is an electronic quotation system for the OTC market. Question: 88 - 28224 Which of the following are problems associated with creating a bond index? I. The universe of bonds is much broader than that of stocks. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页——(durations) constantly change due to changes in maturity and market yields. III. Pricing problems arise because of the lack of availability of continuous transactions prices. IV. The universe of bonds is constantly changing because of new issues, maturities, calls, and sinking funds. I, II, III, and IV. A) I only. B) I and II only. C) I, II, and IV only. D) Question: 89 - 28225 Which of the following statements about indexes is FALSE? The major U.S. stock market indexes are highly correlated. A) A two for one stock split will cause the divisor of a price-weighted index to increase. B) A value-weighted index automatically adjusts for stock splits. C) In value weighted indexes, large companies have a disproportionate influence. D) Question: 90 - 28237 If the Confidence Index decreases investors are: confident. A) nervous. B) buying junk bonds. C) selling quality bonds in greater proportion than they are buying junk bonds. D) Question: 91 - 28238 Which of the following statements best describes what happens when the relative strength ratio decreases? The stock increased in value. A) The market index is out performing the stock. B) The market decreased in value. C) The stock is out performing the market index. D) Question: 92 - 28239 All of the following are bullish signals to a contrarian EXCEPT when the: Investment Advisor's Ratio is high (>60%). A) OTC to NYSE Volume Ratio is low (<87%). B) Mutual Fund Ratio is low (<7%). C) Chicago Board Options Exchange (CBOE) Put/Call Ratio is high (>.90). D) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— Question: 93 - 28240 Which of the following statements are TRUE? I. Growth stocks have above-average investment opportunities while growth companies are ones offering higher rates of return than comparable companies. II. An underpriced stock would be one with a required rate of return exceeding the investor's expected rate of return. III. The factors determining the intensity of competition within an industry are rivalry, threat of new entrants, potential substitutes, and bargaining power of buyers and suppliers. I only. A) I and II only. B) III only. C) II and III only. D) Question: 94 - 29422 Using an infinite period dividend discount model, find the value of a stock that last paid a dividend of $1.50. Dividends are expected to grow at 6 percent forever, the expected return on the market is 12 percent and the stock’s beta is 0.8. The risk-free rate of return is 5 percent. $32.61. A) $34.57. B) $26.50. C) $25.00. D) Question: 95 - 13566 An investor in the 28 percent tax bracket buys a 20-year, 4 percent municipal bond for $750. What is this bond's taxable equivalent yield? 5.56%. A) 6.22%. B) None of these are correct. C) 9.62%. D) Question: 96 - 28218 If investors expect future interest rates to increase based on the pure expectations theory of interest rates the yield curve will be: upward sweeping. A) flat. B) humpbacked. C) downward sweeping. D) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— Question: 97 - 28214 Interest rates fall by 1 percent to 7 percent and a $675 bond's price rises by 6 percent. What is the bond's effective duration? 5.8. A) 7.0. B) 8.0. C) 6.0. D) Question: 98 - 28217 A 10 percent coupon bond was purchased at par. One year later the bond was sold for $915 to yield 11 percent. What is the bond's holding period yield? 1.5%. A) 9.0%. B) 10.0%. C) 18.5%. D) Question: 99 - 29420 Find the yield to maturity of a 6 percent semi-annual pay bond, priced at $860. The bond has 10 years to maturity. 4.03%. A) 8.07%. B) 6.00%. C) 7.79%. D) Question: 100 - 13931 Which of the following statements about futures is FALSE? Futures are subject to default risk while forwards are not. A) All of these choices are correct. B) Futures are private contracts while forwards are exchange traded. C) Futures are individualized contracts while forwards are standardized. D) Question: 101 - 28227 Which of the following statements is TRUE? Speculators trade to reduce some preexisting risk exposure. A) Hedgers accept market risk in exchange for expected profits. B) If a trader's account falls below the maintenance margin level they have three days C) to bring it back up to the maintenance margin level. Open interest is the number of futures contracts for which delivery is currently D) obligated. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— Question: 102 - 28228 Which of the following statements about call options is FALSE? The loss potential to the writer is unlimited. A) The most the holder will lose is the premium. B) The profit potential to the holder is unlimited. C) The most the writer can make is the premium plus the difference between X and S. D) Question: 103 - 28230 Which of the following statements about the value of a call option at expiration is FALSE? The value of a call equals zero or the exercise price minus the stock price, A) whichever is higher. The value of a call equals zero or the stock price minus the exercise price, B) whichever is higher. A short position in a call option can result in a loss if the underlying stock price C) exceeds the exercise price. A short position in a call option has a zero value for all underlying stock prices D) equal to or less than the exercise price. Question: 104 - 28231 The plain vanilla currency swap is pay: floating rate on dollars, pay fixed rate on foreign. A) fixed rate on dollars, pay fixed rate on foreign. B) fixed rate on dollars, pay floating rate on foreign. C) floating rate on dollars, pay floating rate on foreign. D) Question: 105 - 29421 Given the following data regarding Printer, Inc.’s call options, which of the following statements is FALSE? Stock Price Expiration Strike Option Prem. (Last) 50 June 45 6 50 June 50 2 50 June 55 0.50 The June $45.00 call is an in-the-money option. A) The June $55.00 call is an in-the-money option. B) The June $50.00 call is an at-the-money option. C) The intrinsic value of the June $45.00 call is $5.00. D) Question: 106 - 10784 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— Which of the following items are the determinants of real estate value? The demand for the property itself. A) The supply of competing properties. B) The basic characteristics of the property itself. C) All of these choices are correct. D) Question: 107 - 28179 Which of the following statements about loaded funds is TRUE? Trade their shares on the registered exchanges. A) Guarantee returns consistent with the fund's systematic risk. B) Deduct up to 1.25% of average assets per year to cover marketing expenses. C) Offer shares at the funds net asset value plus a sales charge. D) Question: 108 - 28181 A venture capitalist would typically do all of the following EXCEPT: provide business expertise and confidentiality. A) assist in the development of management teams. B) force the entrepreneur to carefully consider the viability of the project through the C) development of a business plan. manage the company after it has gone public. D) Portfolio Management - 12 Questions - 18 minutes Question: 109 - 28184 An analyst is managing a portfolio. If they add a new stock to the portfolio that has the same standard deviation of returns as the existing portfolio but has a correlation coefficient with the existing portfolio that is less than +1, what effect will adding the new stock have on the standard deviation of the revised portfolio's returns? The standard deviation will increase. A) The standard deviation will decrease. B) The standard deviation will be unaffected. C) The expected return of the portfolio will increase. D) Question: 110 - 28187 If an investor adds a stock to their portfolio that has the same total risk (standard deviation) as the other stocks in their portfolio but is negatively correlated with them what effect should it have on the total risk of the portfolio? No effect. A) Increase the portfolio's total risk. B) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— The effect cannot be determined with the data given. C) Decrease the portfolio's total risk. D) Question: 111 - 28189 The covariance of the market returns with the stock's returns is .006 and the standard deviation of the market's returns is .07. What is the stock's beta? 1.0. A) 1.5. B) 2.0. C) 1.2. D) Question: 112 - 28190 Arbitrage Pricing Theory: is a general case version of the capital asset pricing model (CAPM). A) All of these choices are correct. B) requires fewer assumptions than the CAPM. C) allows for multiple risk factors in the return generating process. D) Question: 113 - 28192 Which of the following statements is FALSE? International diversification is partially due to: regional economic events. A) local monetary and fiscal policies. B) the high correlations that exist between country stock indexes. C) differences in institutional and legal systems. D) Question: 114 - 28193 If the expected return on a stock is above the security market line (SML) in relation to its risk level the stock would be: inefficient. A) aggresive. B) underpriced. C) overpriced. D) Question: 115 - 28194 A mutual fund announces it is an aggressive fund with a beta of 1.2. The fund is fully diversified, so its correlation to the index is 1. During the period the index returns 12% and the risk free rate was 5%. What is the expected return on this fund? 8.4%. A) 13.4%. B) 12.0%. C) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 14.2%. D) Question: 116 - 28196 The total risk (measured by the standard deviation of returns) of Stock Y is 0.20. The total risk of the Index is 0.18. The covariance of returns between the stock and the index is 0.027. What is the stock's beta? 0.83. A) 0.75. B) 1.00. C) 1.13. D) Question: 117 - 28197 Which of the following statements about the capital market line is FALSE? The market portfolio is fully diversified and thus contains only risk free assets. A) The capital market line is tangent to the efficient frontier and passes through the B) risk free rate on the y-axis. The market portfolio is that portfolio that exists at the tangency point between the C) efficient frontier and the capital market line. A portfolio that falls on the capital market line offers more return per unit of risk than D) any other available portfolio at that risk level. Question: 118 - 28200 An investor's portfolio consists of the following asset allocation: , 40% of her funds are in T-Bills earning 5%. , 60% of her funds are in an equity portfolio yielding 15%. , The equity portfolio has a standard deviation of returns of 10%. What is the expected return and standard deviation of returns of her combined portfolio? Expected Return St'd Deviation A) .09 8% Expected Return St'd Deviation B) .10 7% Expected Return St'd Deviation C) .11 6% D) Expected Return St'd Deviation 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— .12 5% Question: 119 - 28203 The covariance of the market's returns with the stock's returns is .008. The standard deviation of the market's returns is .1 and the standard deviation of the stock's returns is .2. What is the correlation coefficient between the stock and market returns? 0.91. A) 1.00. B) 1.25. C) 0.40. D) Question: 120 - 29363 Which of the following statements regarding an investor’s life cycle is FALSE? During the consolidation phase the investor still has earnings years ahead, a fairly long-term horizon and earnings that will exceed need. Investors look for moderate A) risk investments. During the spending phase the investor is concerned with generating income for B) spending and thus seeks moderate to high-risk investments. The accumulation phase represents the early to middle working years when C) investors may take higher risk in hopes of obtaining above average returns. The gifting phase runs concurrently with the spending phase and cover's estate D) planning and tax minimization plans. Copyright Schweser 2002 Schweser Printable Test Entry Form Back to Schweser Online Test # = 613469 Correct Answers 1) B 2) A 3) C 4) C 5) D 6) C 7) C 8) D 9) C 10) B 11) A 12) D 13) A 14) B 15) C 16) D 17) D 18) B 19) B 20) A 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 21) B 22) D 23) C 24) C 25) D 26) D 27) C 28) B 29) B 30) D 31) C 32) C 33) D 34) C 35) A 36) A 37) A 38) C 39) A 40) B 41) A 42) B 43) C 44) B 45) D 46) B 47) C 48) A 49) C 50) C 51) B 52) D 53) D 54) B 55) B 56) D 57) A 58) A 59) A 60) C 61) C 62) A 63) A 64) C 65) B 66) D 67) D 68) A 69) B 70) C 71) C 72) D 73) A 74) D 75) C 76) B 77) B 78) B 79) B 80) A 81) B 82) B 83) D 84) B 85) D 86) B 87) B 88) A 89) B 90) B 91) B 92) C 93) C 94) B 95) C 96) A 97) D 98) A 99) B 100) B 101) D 102) D 103) A 104) A 105) B 106) D 107) D 108) D 109) B 110) D 111) D 112) B 113) C 114) C 115) B 116) A 117) A 118) C 119) D 120) B Answers 1) B The CFA and Chartered Financial Analyst designations must always be used as adjectives, never as nouns or common names. It is incorrect to say that a person is a CFA or to say that they are a Chartered Financial Analyst. It is correct to say that a person is a CFA charterholder or they have earned the right to use the Chartered Financial Analyst designation. Always capitalize the letters "CFA". The CFA designation should not appear larger than the charterholder's name. No designation exists for someone who has passed Level I, Level II, or Level III of the exam. 2) A IV(B.4) Priority of Transactions. Give clients and employers priority over your personal interest. Personal transactions include: 1. trades for your own account. 2. trades for your family's account. 3. trades for accounts in which you have a beneficial interest. 3) C IV(B.6) Prohibition Against Misrepresentation of Services. You shall not make the following misrepresentations concerning: 1. the services you or your firm are capable of performing. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 2. you or your firm's qualifications. 3. your academic or professional credentials. 4. the expected performance of any investment. 4) C Topical Study 2: IMR Soft Dollar Standards. Brokerage is the property of the client. The manager cannot use it to pay for another client's research. 5) D V(A) Misappropriation Theory, the firm should build an impenetrable "fire" wall between departments and: 1. control the flow on interdepartmental communication. 2. review employee trading. 3. restrict trading while the firm is in possession of inside information. 6) C Performance Presentation Standards 7) C An AIMR member, undertaking independent practice that could result in compensation or other benefit, must obtain written consent from both their employer and the persons or entities for whom they undertake independent practice according to Standard III(B), Duty to Employer. 8) D The only permissible action in the above list is including a graph of the Fed’s discount rates over the last 12 months because it is factual information published by a recognizable financial and statistical reporting service. 9) C AIMR members must notify their employer of the Code and Standards in writing, which includes e-mail. All of the above are acceptable methods of notification except verbal notification. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 10) B The rule of thumb for members, CFA charterholders and candidates in the CFA program requires that they adhere to the applicable laws if the applicable laws are more strict than the requirements of the Code and Standards. If there are no laws or the laws are less strict, they must adhere to the Code and Standards. 11) A Members should suggest that their employers adopt the Code and Standards and disseminate them throughout the firm. Note that members must inform their supervisors in writing that they must follow the Code and Standards. 12) D To comply with the Code and Standards, John should notify the appropriate supervisory person in his firm of the violation. 13) A Asking for a letter of recommendation is perfectly acceptable. Soliciting clients and taking the employer’s property like client lists, computer programs, etc. are not permissible. 14) B Sarah should disclose this to her employer under Standard III(D), Disclosure of Additional Compensation Arrangements. 15) C Jason may reference his participation in the program but must clearly state that he is a candidate in the program. There is no partial designation. 16) D Brokerage is an asset of the client. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 17) D Ruth is violating all of the above standards. Because of her place on Monolo’s board and her firm’s potential deal for lead bank in the syndicate, she is violating I. Her buy recommendation to all of her clients is a violation of II and III. Her husband’s potential gain is a violation of IV. 18) B If Sallie complies, she is violating several of the Codes and Standards including those dealing with plagiarism and the requirement of members to inform employers of the Code and Standards. Sallie should attempt to disassociate from any activity that she knows is in violation of the standards. 19) B Logic: the average is zero. (+25 – 25)/2 = 0. The geometric mean is always less than the arithmetic mean. So the answer must be -3%. 1/2 Math: [(1+.25)(1-.25)]- 1 = .97 - 1 = -.03 = -3% 20) A Even though normal curves have different sizes, they all have identical shape characteristics. When discussing or comparing normal curves it is customary to compare them to a standardized normal curve with a mean of 0 and a standard deviation of 1. 21) B CV = (σ/mean)(100) 22σ = ?((5 + 5 /3) = ?16.67 = 4 plus a bit (4/10)(100) = 40% 22) D When a distribution is positively skewed the right side tail is longer than normal due to outliers. The mean will exceed the median, and the median will generally exceed the mode because large outliers falling to the far right side of the distribution can dramatically influence the mean. 23) C The stem-and-leaf display maintains the identity of the individual observations. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 24) C II. Conditional probability is the chance of one event happening given that another event has happened. IV. Probability= perfect/total = 20=100 = .20 25) D Binomial and Poisson probability distributions are used to study discrete random variables where you want to know the probability that an exact event will happen. The Poisson probability distribution is a special case version of the binomial when the probability of success (p) is small, and the number of trials (n) is large. The binomial and Poisson probability distribution give the result of a single outcome. When you want the result of a range of outcomes you must use the cumulative distribution. 26) D II. +/- 2 standard deviation is 95%. Looking at one tail is only 2.5% not 5% IV. Z = (obser – mean)/ st'd = (5 – 10)/4 = – 1.25 27) C The correction factor is used when you have a discrete probability distribution such as a binomial probability distribution and you want to use a continuous normal distribution to approximate the binomial distribution. To do this you have to add or subtract, depending on the circumstances, .5 to the observed value X in the equation to find the Z value. 28) B Define joint probability: happens at the same time. P(red and radio) (P(red))(P(radio)) = (.4)(.7) = .28 Radio No Radio Red 28 12 40 Blue 48 12 60 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 76 24 100 29) B General rule of addition. P(Red or radio) P(red) + P(radio) – P(red and radio) .40 + .76 – .28 = .88 or 88% 30) D You want P(red given radio) so this is Bayes' theorem P(red|radio) = (P(red))(P(radio|red)) / [(P(red))(P(radio|red)) + (P(blue))(P(radio|blue))] P(red|radio) = (.4)(.7) / (.4)(.7) + (.6)(.8) = .37. Why is it less than 40%? Because blue cars have more radios than red cars. P(red) is the prior probability while P(red|radio) is the posterior probability. P(radio|red) was a given conditional probability, that is 70% of the red cars had radios. 31) C The binomial probability distribution is an example of a discrete probability distribution. There are only two possible outcomes of each trial and the outcomes are mutually exclusive. For example, in a coin toss the outcome is either heads or tails. The other responses are all correct definitions. 32) C For a positively skewed distribution, the mode is less than the median, which is less than the mean. The opposite is true for a negatively skewed distribution; the mode is greater than the median, which is greater than the mean. For a symmetrical distribution, the mean, median and mode are equal. 33) D I/Y=8; PMT= -5724; FV=500,000; CPT N = 27. Remember, you must put the pmt in as a negative (cash out) and the FV in as a positive (cash in) to compute either N or I/Y. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 34) C 2 2 2 The coefficient of determination is the square of the coefficient of correlation. R= (r)= (.66) = .44 35) A Time series forecasting [The data set (the Y-variable) is a function of time (the X-variable)]. The equation is Y = a + b(t). In the basic linear relationship the line increases by a constant amount. If the data is curvilinear (means the data series increases by a constant percentage) you can straighten out the regression line with the log transformation of the basic equation: Log (y) = log (a) + log (b) (time). 36) A I. a = (ΣY)/n – b (ΣX)/n 2II. The bigger the standard error of estimate the smaller R III. Regression line is Y = a + bX . You need to be given the independent variable X to project Y, not the other way around. 37) A Nominal rate = real rate + inflation prem + risk prem Assume you are working with risk free securities so risk prem=0 NR = RR + Inf Prem redo NR - Inf Prem = real rate was 10 - 8 = 2 now it is 8 - 5 = 3 so it went up 38) C Changing the required reserve ratio exerts a major impact on the banking system, changing the discount rate has a dramatic psychological impact on the market, buying and selling T-Bills is quiet and efficient. 39) A MV = PY M goes up and P goes down. So, V must go down, Y must go up; or if V is constant Y increases more than P decreases 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 40) B The definition of the labor force is those people of working age (16+) who are either employed or seeking employment. Note that the labor force does not consist of all people over 16 years of age. 41) A The relationship is: real gross domestic product (GDP) = planned C+I+G+NX. 42) B If total output is greater than planned aggregate expenditures, then the tendency is for the economy to contract. 43) C The three basic functions of money are as follows: , Medium of exchange – money simplifies and reduces the cost of transactions , Unit of account – money serves as a unit of measure by which the value of good can be compared , Store of value – money enables value to be stored and transported 44) B M, not M, is the most common measure used by analysts to compare the money supply 21 across time because of increases consumers have made in terms of interest bearing checking accounts and savings accounts. 45) D As the Fed reduces (increases) the money supply, interest rates rise (fall). The other statements concerning the demand and supply for money are true. 46) B The Phillips curve indicates a trade-off between inflation and the unemployment rate. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 47) C The company is not earning the normal rate of return because economic profits are negative (revenues do not cover both the company’s implicit and explicit costs). The other statements are false. Calculations are as follows: , Accounting profits = (Sales – variable costs – fixed costs – depreciation) * (1-tax rate) = (250,000 – 0.35 * 250,000 – 70,000 – 35,000) * (1 - 0.4) = 34,500. , Economic profits = Accounting profits – opportunity cost of capital – owner provided services = 34,500 – 25,000 – 15,000 = -5,500. 48) A 8 MXN/USD / 6 FRF/USD = 1.333 MXN/FRF 49) C We recommend using the following "Bid-Ask Matrix Method" to calculate the bid and ask quotes: Step 1: Put the bid-ask quotes into a matrix as below: Currency Bid Ask MXP 0.11001 0.11036 PEN 0.28818 0.28918 Step 2: "Divide Out" the diagonals and take the reciprocal. Remember that the quotes are originally in American terms! (Remember to put MXP in the numerator - because MXP is in the numerator of the quote we are asked to calculate.) MXP / PEN = 0.11001 $/MXP / 0.28918 $/PEN = 0.38042 PEN/MXP, BidAsk 1 / 0.38042 PEN/MXP = 2.62867 MXP/PEN MXP / PEN = 0.11036 $/MXP / 0.28818 $/PEN = 0.38296 MXP/PEN, AskBid 1 / 0.38296 PEN/MXP = 2.61127 MXP/PEN Step 3: Quote : The MXP/PEN Bid-Ask spread is: 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— (Note: The lower number from Step 2 is the bid, the higher number is the ask. MXP 2.61127 to 2.62867 PEN, or MXP 2.61227 - 0.01740 PEN. 50) C This statement is the law of comparative advantage. The other choices are false. The law of comparative advantage supports international trade. According to the law of comparative advantage, both trading partners are better off if they specialize in the production of goods for which they are the low-opportunity cost producer and trade for those goods for which they are the high-opportunity cost producer. Mexico is considered to have an absolute advantage in plastics if Mexico can produce plastic using fewer resources than the U.S. 51) B Gains or losses from retirement of debt are extraordinary items. 52) D Under the accrual concept, income is recognized when the earning activities are substantially completed, risk of ownership has transferred from buyer to seller, and payment is realizable and collectible. Under the matching principle, expenses incurred that directly relate to the sold item are expensed in the same period as the revenue is recognized. 53) D Current liabilities are obligations that the company expects to pay within one year (or current operating cycle). The $15,000,000 in taxes due on March 15, 2002 were payable within one year of the balance sheet date and were, therefore, a current liability even though some of expense was for a prior period and some of the expense was for a future period. The principal and interest that will be paid within twelve months ($10,000,000 + $20,000,000 (.10) =) was $12,000,000. Current liabilities were a total of ($15,000,000 + $12,000,000 =) $27,000,000. 54) B Blast, Inc.’s bonds were issued at a $300,000 discount, so a bonds payable account is credited for the face amount of the bonds ($2,000,000) and an unamortized bond discount account is debited for the amount of the discount ($300,000). The unamortized bond discount account is reduced with each payment of interest and reaches zero on the date the bonds are due. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 55) B Cash flows are equal under both the percentage-of-completion method and the completed contract method, but under the completed contract method, revenue is not recognized until the end of the contract. Under the percentage of completion method, revenue is earned as costs are incurred. The completed contract method generally produces a net advance billings liability account that tends to exceed its counterpart under the percentage-of-completion method. Note that under the percentage of completion method, revenues and expenses will be higher in early years, as both will be recognized as costs are incurred. Net income will also tend to be higher in early years with the percentage of completion method assuming revenues recognized exceed expenses. 56) D All things equal, the cash flows are no different under the percentage-of-completion method compared to the completed contract method. The income statement and balance sheet accounts will differ between the two firms. 57) A Dividends paid are always considered financing, not operating, activities. Dividends earned and interest paid or received are considered operating activities. 58) A Other cash outflows is the third step in calculating CFO using the direct method. It consists of Cash taxes paid + Cash interest paid. Cash interest paid = interest expense less increase in interest payable: ($900,000 – (1,200,000 - $800,000) =) $500,000. Cash taxes paid = tax expense of $1,000,000 + decrease in income taxes payable (1,000,000-800,000) = 200,000 - increase in deferred income taxes (2,600,000-2,900,000) = 300,000 $900,000 Other cash outflows = $500,000 + 900,000 = $1,400,000 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 59) A The gain on the equipment sale ($500,000) would be subtracted out of cash flow from operations (CFO). The total proceeds of the sale ($10,700,000)are included in cash flow from investing activities (CFI), and the payment of the notes ($10,700,000) is reported in cash flow from financing (CFF) as a negative. Note that if the equipment had been directly exchanged for the bonds without any cash transactions, only a footnote describing the transaction would have been included in the statement. 60) C If equity equals 45% of assets then debt must be 55%. TD / Equity = .55 / .45 = 1.22 61) C Working Capital = CA - CL = 45% - 20% = 25% of assets WC = 2000(.25) = 500 62) A Using the current ratio, the most common liquidity measure, Peters is significantly more liquid (120 + 180 + 540 / 180 = 4.67) than Johns ((60 + 90 + 30) / 60 = 3.0). However Peters’ quick ratio ((120 + 180) / 180 = 0.67) is less than Johns’ quick ratio (60 + 90 / 60 = 2.5) and Peters’ cash ratio (120 / 180 = 0.67) is also less than Johns’ (60 / 60 = 1.0). In the event of bankruptcy, Johns’ would not be as dependent on liquidating inventory in order to raise cash to cover liabilities. 63) A Virginia’s receivables turnover (net annual sales / average receivables) was ($360,000 / $80,000 =) 4.5 times. Virginia’s inventory turnover is 0.5 times higher, which is 12.5% higher than the industry average. 64) C Simple capital structures are not permitted to include any potentially dilutive securities (a security that decreases earnings per share (EPS) if exercised). Convertible bonds are potentially dilutive. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 65) B The January 1 balance is adjusted retroactively for the reverse stock split and (320,000 / 2 =) 160,000 shares are treated as outstanding from January 1. The issuance of stock in a purchase method transaction is included from the date of issuance. The weighted average shares are computed as follows by multiplying the share amounts by the number of months the shares were outstanding: January 1 initial shares (160,000 * 12 = ) 1,920,000 July 1 Smith acquisition (60,000 * 6 = ) 360,000 October 1 cash issuance (30,000 * 3 = ) 90,000 Total $2,370,000 Oregon’s weighted average shares were (2,370,000 / 12 =) 197,500. 66) D Baltimore’s basic earnings per share (EPS) (net income / weighted average shares outstanding) for 2001 was ($4,200,000 / 750,000 =) $5.60. To calculate diluted EPS, we use the treasury stock method to account for the warrants: , Number of common shares created if options are exercised = 10,000 * 10 = 100,000 , Cash inflow if warrants are exercised = $40 * 100,000 = $4,000,000 , Shares purchased with these funds = $4,000,000/50 = 80,000 , Net increase in shares outstanding = 100,000-80,000 = 20,000 Diluted EPS = $4,200,000/(750,000 + 20,000) = $5.45. 67) D Both preferred and convertible preferred stock dividends are subtracted from net income in computing basic EPS, so there is no difference between standard preferred or convertible preferred in that respect. The other answers should all be considerations in the firm’s financing decision. 68) A Moulding’s basic EPS (net income / weighted average common shares outstanding) was ($13,820,000 / 2,600,000 =) $5.32. Using the treasury stock method to compute Diluted EPS, if the options were exercised, cash inflow would be (10,000 * 10 * $40 =) $4,000,000. Based on the average share price of $58.00, the number of Moulding shares that can be purchased with the cash flow is ($4,000,000 / $58 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— =) 68,966. The number of shares that would have been created is (100,000 – 68,966 =) 31,034. Diluted EPS was ($13,820,000 / (2,600,000 + 31,034) =) $5.25. 69) B A form of the inventory equation is: beginning inventory + purchases – ending inventory = cost of goods sold. Units available for sale by Arlington (beginning inventory + purchases) were (20 + 10 + 10 + 20 =) 60. Units available for sale less units sold leaves ending inventory (60 – 35 =) 25 units. Under FIFO, ending inventory consists of the most recent purchases. The 25 units remaining in ending inventory are all assumed to be from the last purchase(s) (($15,000 * 20) + ($12,500 * 5) =) $362.500. Cost of goods sold is ($200,000 + $120,000 + $125,000 + $300,000 - $362,500 =) $382,500. 70) C Fledgling’s cost of goods sold under LIFO would be reduced by the increase in the LIFO reserve from the beginning to the end of the year ($600,000 - $450,000 =) $150,000. Adjusting for the tax rate of 35 percent ($490,000 / $1,400,000), net income for 2001 would be increased by ($150,000 * (1 – 0.35) =) $97,500. 71) C Industrial’s inventory would increase by the amount of the ending LIFO reserve, $330,000. On the right side of the balance sheet, L.T. Deferred Tax Liability would increase by (the LIFO reserve times the tax rate) ($330,000 * .4 =) $132,000. Retained Earnings would increase by (the LIFO reserve * (1 – t)) = ($330,000 * 0.6 =) $198,000. Long-term debt under FIFO would be ($610,000 + $132,000 + $1,240,000 =) $1,982,000. Equity would be ($800,000 + $970,000 + $198,000 =) $1,968,000. The long-term debt-to-equity ratio under FIFO would be ($1,982,000 / $1,968,000 =) 1.007. 72) D Had Roland expensed the cost of the franchise acquisition in 2000, no amortization would have affected net income in 2001, and 2001 net income would be ($875,000 / 5 =) $175,000 higher. The franchise would not appear as an asset on the balance sheet, so total assets would be ($100,000 + $300,000 + $150,000 + $260,000 =) $810,000. Return on total assets, which was ($120,000 / $1,335,000 =) 8.99 percent on the original statement, would increase to (($120,000 + $175,000) / $810,000 =) 36.42 percent. 73) A 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— Brand’s depreciation schedule for the roller press is as follows: Year Cost Salvage SL DDB New DDB Basis 1998 3,000,000 500,000 250,000 600,000 2,400,000 1999 3,000,000 500,000 250,000 480,000 1,920,000 2000 3,000,000 500,000 250,000 384,000 1,536,000 2001 3,000,000 500,000 250,000 307,200 1,228,800 The SL rate is 0.10, so the DDB rate is 0.20 applied to the new DDB Basis (and ignoring salvage value) after prior year’s depreciation is subtracted. Brand’s depreciation expense for 2001 is the current DDB provision plus the difference between DDB and SL for 1998, 1999, and 2000. ($600,000 – $250,000) + ($480,000 - $250,000) + ($384,000 – $250,000) + $307,200) = $1,021,200. Note that the DDB rate is applied to the net book value at the beginning of the period and the salvage value is not explicitly used. Under the DDB method, depreciation is curtailed when book value is reduced to salvage value. The cumulative effect of this change in accounting principle must be disclosed on Brand’s financial statements net of taxes. 74) D Impairment write-downs are reported losses “above the line” and are included in the computation of income from continuing operations. 75) C Deferred tax liabilities occur when taxable income is sheltered (postponed) in tax accounting but is reported as pretax income in financial accounting. When the deferred tax liability reverses, it means that the tax sheltering has ended and a cash outflow for taxes is being made. 76) B CL increases, so CR will decrease. D increases, so D/E ratio will increase. EBIT decreases and I increases, so EBIT/I decreases. CL increases so acid test ratio [(CA -Inv)/CL] decreases. 77) B Warranty expense should be recorded when the inventory item covered by the warranty is sold. A deferred tax asset is created when warranty expenses are accrued on the financial statements but are not deductible on the tax returns until the warranty claims are paid. The full amount of the obligation, $100,000, is recorded as an expense, with a deferred tax asset of 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— $30,000. Note that a deferred tax assets results when taxable income is more than pretax income and the difference is likely to reverse (warranty will be paid) in future years. 78) B All of the cash flows for zero coupon bonds are included in cash flow from financing activities and none in cash flow from operations. 79) B Tandem’s interest coverage ratio (earnings before interest and taxes (EBIT) / interest (I)) with the lease classified as an operating lease, is ($2,700,000 / $600,000 =) 4.50 times. The heavy equipment lease is a capital lease, despite the fact that the lease is for (5 years / 7 years =) 71 percent of the assets’ economic life, because of the bargain purchase option. The minimum interest rate between the lease’s implicit interest rate of eight percent and Tandem, Inc.’s incremental borrowing rate of 10 percent is used to capitalize the lease. The present value of the lease payments is (PV annuity N = 5, I /Y = 8, PMT = $700,000) $2,794,897. The $700,000 payment made December 31, 2001 is allocated ($2,794,897 * 0.08 =) $223,592 to interest and ($700,000 - $223,592 =) $476,408 to principal. Depreciation expense is computed over five years on a straight-line basis ($2,794,897 / 5 =) $558,979. Adjusting the income statement to remove operating lease expense and include depreciation expense results in operating income of ($2,700,000 + $700,000 - $558,979 =) $2,841,021. Lease related expense of $223,592 is added to $600,000 to arrive at total interest expense of $823,592. The adjusted interest coverage ratio is ($2,841,021 / $823,592 =) $3.45 times. 80) A Cash payments due under an operating lease must be disclosed in the notes to the financial statements for each of the following five years and in aggregate. Operating leases are simpler to account for and the often adverse ratio implications of offsetting increases in assets and liabilities are avoided. 81) B WACC should rise. 82) B For independent projects the IRR and NPV give the same results. 83) D EAA = PMT = 528, i=10, n=5, PV = – 2000, PMT = 528. 84) B The optimal capital structure is where WACC is minimized not EPS maximized. 85) D The clientele effect implies stable dividends. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 86) B Another characteristic of a well-functioning market is informational or external efficiency meaning that prices rapidly adjust to new information so that the prevailing market price reflects all available information regarding the asset. 87) B The Federal Reserve sets margin requirements. 88) A 89) B the divisor will decline. 90) B In periods of confidence, investors sell quality bonds and buy lower quality bonds looking for yield. Quality bond prices will fall and their yields rise. Lower grade bond prices will rise and their yields fall. Thus, the CI ratio will increase during periods of confidence (e.g., from .07/.10 = .7 to 0.8/0.9 =.89. Note that the CI moves in the opposite direction of yield spreads. In periods of pessimism, spreads widen and the CI falls. 91) B The relative strength ratio = stock price/market price. If the ratio increases over time the stock is out-performing the market, a positive trend. If the ratio declines over time the stock is under-performing the market, a negative trend. 92) C The mutual fund ratio (MFR) = mutual fund cash/total fund assets. IF the MFR is low, it implies funds are investing cash and are, therefore, bullish on the market. Since contrarians do the opposite of what institutional or public investors are doing, they would see this as a bearish sign. 93) C I. Growth companies have above average investment opportunities. Growth stocks are underpriced thus giving higher return opportunities. II. Underpriced stocks have expected returns that exceed the investor's required rate of return. 94) B First find the required rate of return using the CAPM equation. k = .05 + .8(.12-.05) = 10.6% $1.50(1.06) /(.106 - .06) = $34.57 95) C Taxable equivalent yield = (Tax free rate)/(1 - marginal tax rate) 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— This equation only works if the bond is at par. Since the bond in this example is a discount bond, $750, you cannot determine what the equivalent taxable yield is. 96) A Under normal circumstances the normal yield curve is upward sloping meaning that interest rates are higher for longer duration treasuries. If the yield curve is inverted or downward sloping this means that short term interest rates are higher than long term interest rates and is usually observed during economic contractions. 97) D Eff D = – % change in P / change in i Eff duration = – (+.06)/( – .01) = 6 98) A HPR = [I + end] / beg HPR = [100 + 915] / 1000 HPR = 1015/1000 = 1.015 HPY = HPR – 1 = .015 or 1.5% 99) B N=2*10 = 20; PV = -$860.00; PMT = $30; FV = $1000 Compute I/Y = 4.033*2 = 8.07% 100) B Reverse the wording of futures and forwards and then the three statements will all be true. 101) D Speculators take risk for return. Hedgers are trying to reduce risk. Open interest is the number of open contracts. You must bring the margin account up to the initial level by the next day's opening. 102) D The most the writer can make is the premium. If the writer wrote a covered out of the money call, then the writer would make the premium plus the increase in the stock's price X-S. 103) A Should be 0 or S - X, not 0 or X - S. 104) A The most common type of currency swap pays a floating rate on the dollars received and pays a fixed rate on the foreign currency received called a plain vanilla currency swap. 105) B The June $55.00 call option is out-of-the money. It gives the purchaser the right to buy Printer, Inc. for $55.00 when they would only have to pay $50.00 in the market. 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 106) D The market for real estate is not efficient. There is no centralized market for trading and no organized method to disseminate information. This means skillful research and analysis can beat the averages. 107) D The investor pays the offering price and can be computed as follows: Offering Price = NAV/(1-load). Some funds also charge redemption fees or deferred sales loads. SEC Rule 12b-1 permits funds to deduct as much as 1.25 percent of average net assets per year to cover distribution costs. These costs are advertising, commissions paid to brokers, and general marketing expenses. 108) D Venture capitalists also provide risk capital 109) B Where the old portfolio is 1 and the new stock is 2. Now you are told that the standard deviations are all equal, so their impact on the portfolio is negated. The only thing that will influence the risk of the portfolio is the correlation coefficient. The lower the correlation coefficient the lower the risk of the revised portfolio. 110) D 111) D Beta = Covariance/Variance of the market Beta = .006/(.07)(.07) = 1.22 112) B 113) C 114) C Return = [Div + (Price expected - Price now)]/Price now If the return is too high, then the current price must be too low. 115) B Since the fund is fully diversified that means its correlation to the Index is 1, thus the fund should fall on the SML. You can use the CAPM to project the fund's performance. X = .05 + 1.2(.12 - .05) X = 13.4 116) A 2Beta = (covariance between the stock and the index)/(st'd index) Beta = (0.027)/(0.18)(0.18) = 0.83 117) A 欢迎加入豆丁社区管理资料团队—— 更多资料请访问豆丁达人冰川主页—— 118) C Since standard deviation of T-bills = 0 the correlation between T-bills and the stock will be 0. Therefore, the standard deviation of the portfolio will simplify to (W)(standard deviation. 11 =(.6)(.10)= .06 119) D Covariance = (standard deviation 1)(standard deviation 2)(correlation coefficient 1,2) Correlation coefficient = cov/(st’d1)(st’d2) = .008/(.1)(.2) = .4 120) B During the spending phase the investor is concerned with protection of assets and thus investors look for low risk investments. Copyright Schweser 2002 欢迎加入豆丁社区管理资料团队——