Unique Top-selling CFA-Level-I Exams - New 2021 CFA Pratice Exam
CFA Level Dumps CFA-Level-I Exam for Full Questions - Exam Study Guide
NEW QUESTION 615
Which one of the following would not result in a timing difference?
I). Accelerated depreciation is used for tax purposes and straight-line is used for financial reporting.
II). Warranty expense is estimated for financial reporting; however, for tax purposes it is recognized as incurred.
III). Installment sales are recognized at point of sale for financial purposes but as the cash is received for tax purposes.
- A. All would result in a timing difference.
- B. I and III.
- C. II only.
Answer: A
Explanation:
All of the items would result in timing differences and the application of income tax allocations.
NEW QUESTION 616
A firm had an asset with a carrying value of $600,000. The estimated future undiscounted cash flows from the use of the asset have decreased to $300,000. Under U.S. GAAP, the firm should:
I). write down the asset
II). recognize an impairment loss
III). determine the fair value of the asset, if possible
- A. I and II.
- B. I, II and III.
- C. II and III.
Answer: B
Explanation:
When the undiscounted estimated cash flows expected from use of the asset are decreased significantly, there exists one of the conditions for recognizing an impairment of value.
NEW QUESTION 617
Under the percentage-of-completion method:
- A. billings on construction contract are used in determining the percentage of the project completed to date.
- B. accumulated construction costs can be used in determining the percentage of the project completed to date.
- C. accumulated construction costs can be in determining the percentage of the project completed in the current year.
Answer: B
Explanation:
To use the percentage-of completion method, the firm must be able to estimate the portion of the contract that has been completed. One way to do this is to use the actual costs that have been incurred to date.
NEW QUESTION 618
Which of the following is not included in investing activities?
- A. collection of the principal on a loan made to others
- B. repayment of the principal on a loan borrowed from others
- C. purchases and sales of property, plant, and equipment
Answer: B
Explanation:
Repayment of the principal on a loan borrowed from others is a financing activity.
NEW QUESTION 619
Which of the following items would not generally be addressed when constructing an investment policy?
- A. Credit rating above which securities may be considered.
- B. Allowable margins within which the manager may deviate away from the original asset mix.
- C. The required rate of return expected for the risk that's being taken.
Answer: C
Explanation:
While the investment policy will discuss the type or returns that are expected (i.e. Growth, income, or income and growth), it is not often that a specific expected return is incorporated into the policy statement.
NEW QUESTION 620
Which of the following characteristics is not representative of an industry that's in the maturity stage of its life cycle?
- A. There are a lot of companies from other industries entering into this particular industry.
- B. Competition is intense among the rivals within the industry.
- C. Instead of product differentiation, price is the primary competitive weapon.
Answer: A
Explanation:
As an industry matures, sales are either stagnant or growing slowly. This lack of industry sales growth forces companies to increase sales by stealing market share from each other, often using price to lure away customers. All these factors make the industry a very unattractive market for new competitors to enter into.
NEW QUESTION 621
Barry Call has supervisory responsibility at DGR Brokerage House. Paul Harry an employee of DGR has committed an offence of the Code and Standards. What course of action should Barry follow in terms of Standard IV (C): Responsibilities of Supervisors, with respect to this violation?
- A. Barry must immediately initiate an investigation to ascertain the extent of the wrong doing and pending the outcome of the investigation Barry should take all steps to ensure that the violation will not be repeated.
- B. Barry must immediately initiate an investigation to ascertain the extent of the wrong doing and no further action is needed.
- C. Barry must initiate an investigation within a 90 day period to ascertain the extent of the wrong doing and pending the outcome of the investigation Barry should take all steps to ensure that the violation will not be repeated.
Answer: A
Explanation:
Just because the person is an aggressive person this is no excuse not to initiate an investigation. In addition, an investigation is not enough, pending the outcome of the investigation the supervisor should take all steps to ensure that the violation will not be repeated. The investigation must be initiated immediately there is no 90 day grace period in which to initiate the investigation.
NEW QUESTION 622
Covariance of returns is zero
- A. if returns on the assets are unrelated.
- B. when the return on one asset is below its expected value, the return on the other asset is also below its expected value.
- C. when the co-movement between random variables is linear.
Answer: A
Explanation:
Covariance of returns is zero if returns on the assets are unrelated.
NEW QUESTION 623
Which element is "defined" in a defined benefit pension plan?
- A. Pay-in formula.
- B. Pay-out amount.
- C. Pay-out formula.
Answer: C
Explanation:
Accounting for defined benefit plans is complicated is because only the pay-out formula, and not the pay-out amount, is known. The pay-in formula is specified in a defined contribution plan.
NEW QUESTION 624
Under U.S. GAAP, impairment of an asset must be recognized in a firm's accounts when:
- A. there has been a decrease in the market value of the asset.
- B. the carrying value of the asset is higher than the present value of expected future cash flows from the use of the asset plus its discounted disposal value.
- C. the carrying value of the asset is higher than the expected future cash flows from the use of the asset plus its disposal value.
Answer: C
Explanation:
A does not automatically lead to a write down if the value of the asset can be recovered through future cash flows. C is not correct; this is one of the calculations that can be done to work out the size of the loss on an impaired asset.
NEW QUESTION 625
A survey of top executives revealed that 35% of them regularly read Time magazine, 20% real
Newsweek and 40% read U.S. News & World Report. Ten percent read both Time and U.S. News &
World Report. What is the probability that a particular top executive reads either Time or U.S. News &
World Report regularly?
- A. 0.65
- B. 0.85
- C. 0.06
Answer: A
Explanation:
35% + 40% - 10% = 65%
NEW QUESTION 626
ABC Corp. is considering the following mutually exclusive projects:
Which of the following would represent the most optimal choice?
- A. Since Project A has an NPV of $23,997 and Project B has an NPV of $2,999, only project A should be chosen.
- B. Since Project A has an NPV of $23,997 and Project B has an NPV of $47,565, only project B should be chosen.
- C. Since Project A has an NPV of $23,997 and Project B has an NPV of $2,999, both should be chosen.
Answer: A
Explanation:
Find NPV of each project: Note: NPV= (PV of CF)-( Cost)Project A: Given: PMT=45,000; N =
5 ; I = 10% -> Find: PV = 173,997 -> NPV = 173,997-150,000 = 23,997Project B: Given: PMT=162,912; N
= 5; I = 13% -> Find: PV = 572,999 -> NPV = 572,999-570,000 = 2,999Since the projects are mutually exclusive, the optimal choice would be to choose the project with the higher NPV, Project A
NEW QUESTION 627
The Gaffe Company had net income of $1,500,000. Gaffe paid preferred dividends of $5 on each of the 100,000 preferred shares. Each preferred share is convertible into 20 common shares. There are 1 million Gaffe common shares outstanding. In addition to the common and preferred stock, Gaffe has $25 million of 4 percent bonds outstanding. If Gaffe's tax rate is 40 percent, what is its diluted earnings per share?
- A. $0.33.
- B. $0.50
- C. $1.00.
Answer: B
Explanation:
Earnings available to common shares is net income available to common ($1 million) plus the preferred dividends ($500,000). The preferred shares are convertible into 100,000 x 20 = 2 million common shares.
NEW QUESTION 628
Dora receives $10 for each pizza that she sells. However, the marginal cost of pizza production increases with each pizza produced. The marginal cost of the first pizza is $1. How many pizzas will Dora sell?
- A. Dora will sell pizzas until the marginal cost of the last pizza is $10.
- B. Dora will sell only one pizza, because the first pizza costs the least.
- C. We cannot tell what Dora should do from the information given.
Answer: A
Explanation:
According to the marginal principle, Dora should sell pizzas until the marginal benefit of the last pizza ($10) is equal to the marginal cost.
NEW QUESTION 629
Characteristics of a population are called ______, while those of a sample are termed _______.
- A. parameters; statistics
- B. statistics; parameters
- C. statistics; measures
Answer: A
NEW QUESTION 630
In an environment where the level of required return is decreasing for all bonds:
- A. the prices of small coupon bonds will increase by the largest percentage amount
- B. the prices of large coupon bonds will decrease by the largest percentage amount
- C. the prices of large coupon bonds will increase by the largest percentage amount
Answer: A
Explanation:
There is an inverse relationship between a bond's price and its required return. The elasticity of a bond's price with respect to its required return is inversely related to the bond's coupon rate.
NEW QUESTION 631
An increase in income for consumers of a(n) ______ leads to an increase in the quantity purchased at each price.
- A. Giffen good.
- B. Inferior good.
- C. Veblen good.
Answer: C
Explanation:
The opposite is true for a Giffen good and inferior good. Note that Giffen goods are inferior goods.
NEW QUESTION 632
Which of the following assumptions does the Gordon growth dividend discount model require?
I). Dividends grow at a constant rate.
II). The dividend growth rate continues indefinitely.
III). The required rate of return is less than the dividend growth rate.
- A. I and II only.
- B. I, II and III.
- C. I only.
Answer: A
NEW QUESTION 633
Two bonds issued by the same corporation have identical coupon rate, payment frequency, par value and time to maturity. The indenture of the first bond contains a call option, and the indenture of the second bond specifies a conversion privilege.
- A. The value of the first bond is greater than or equal to the value of the second bond
- B. The value of the first bond is less than the value of the second bond
- C. There is not enough information to determine the correct response
Answer: B
Explanation:
Because the promised cash flows are identical, the value of the bonds would be the same except for the impact of the embedded options. The call option, because it is an option the bond issuer can exercise, reduces the value of the bond. The conversion option, because it is an option the bond owner can exercise, increases the value of the bond.
NEW QUESTION 634
Suppose you have a discrete probability function such that P(X=5) = 10%, P(X=6) = 20%, P(X=7) =
3 0%, P(X=8) = 20%, P(X=9) = 20%. Find F(8).
- A. 20%
- B. 80%
- C. 60%
Answer: B
Explanation:
F(8) is the probability that the function takes on values less than or equal to 8. So F(8) = p(5)
+ p(6) + p(7) + p(8) = 0.10 + 0.20 + 0.30 + 0.20 = 0.80 = 80%.
NEW QUESTION 635
When the Federal Reserve raises the federal funds rate, the long-term real interest rate ____ and investment ____.
- A. falls; decreases
- B. rises; increases
- C. rises; decreases
Answer: C
Explanation:
Other things remaining the same, the lower the real interest rate, the greater is the amount of investment.
NEW QUESTION 636
The lifetime of a 2-volt non-rechargeable battery in constant use has a normal distribution with a mean of 516 hours and a standard deviation of 20 hours. Ninety percent of all batteries have a lifetime less than
- A. 536.00 hours.
- B. 517.28 hours.
- C. 541.60 hours.
Answer: C
Explanation:
The z-value corresponding to the proportion 0.9000 is 1.28. We need to use the formula x = u + z o, where z = 1.28 to get the correct answer, or x = 516 + 1.28 x 20 = 541.6.
NEW QUESTION 637
If the issuing company is considered to be of high risk and it may be years before the issuing company goes public, it is likely to issue ______ preferred shares.
- A. convertible.
- B. cumulative.
- C. participating.
Answer: A
Explanation:
Convertibles are particularly attractive to those investors who want to participate in the rise of hot growth companies while being insulated from a drop in price should the stocks not live up to expectations.
NEW QUESTION 638
The more ambiguous the effect on price, the ______ the information becomes.
I). less material.
II). more material.
III). less "public".
IV). more "public".
- A. I and III.
- B. II and IV.
- C. I only.
Answer: C
Explanation:
If it is unclear whether the information will affect the price of a security and to what extent, information may not be considered material.
NEW QUESTION 639
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