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CFA CFA I Exam
CFA Level I Chartered Financial Analyst (Page 104 )

Updated On: 26-Jan-2026
Page 104 of 793
PDF with 3960 Questions

Which of the following assumptions is least likely to be consistent with the concept of efficient capital markets?

  1. Expected returns implicitly include risk in the price of the security.
  2. Market participants correctly adjust prices based on new information.
  3. New information about securities comes to the market in a random fashion.

Answer(s): B



Sal Nunn, CFA, is a portfolio manager at Walker Investments. Nunn sold 300,000 shares of a NASDAQ listed stock on an electronic crossing network in after hours trading because the company announced a significant negative earnings surprise. Indicate whether the third or fourth market best describes the Nunn trade and state whether the NASDAQ market is a call or continuous market.

  1. Nunn's trade is in the third market and NASDAQ is a call market.
  2. Nunn's trade is in the fourth market and NASDAQ is a call market.
  3. Nunn's trade is in the fourth market and NASDAQ is a continuous market.

Answer(s): C



An investor purchased 100 shares of a stock two years ago for $50 per share after deciding the stock would be a good value investment. Since the initial purchase, the stock price has fallen to $35 per share after several of the company's major customers canceled contracts. The investor has decided to purchase another 50 shares at the lower price. Which of the following behavioral biases best characterizes the investor's actions?

  1. Escalation bias.
  2. Momentum bias.
  3. Overconfidence bias.

Answer(s): A



Ian Lance, CFA, is discussing short selling with a client and states, "The short seller must pay any dividend of the issuer to the lender of the stock. In addition, the short seller must provide some collateral to the brokerage house." Is Lance correct about the short seller's obligations?

  1. Yes.
  2. Lance is correct about paying the dividend, and incorrect about providing collateral.
  3. Lance is incorrect about paying the dividend, and correct about providing collateral.

Answer(s): A



An analyst is using the following information to value AGF Company's common shares. AGF paid a dividend of $1.90 per share last year. Dividends are expected to grow at 6% forever. The risk-free rate is 5%, the market risk premium is 7%, and the beta of the common shares is 1.3. The value of the AGF Company's common shares is closest to:

  1. $23.46
  2. $24.86
  3. $33.57

Answer(s): B



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