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CFA CFA I Exam
CFA Level I Chartered Financial Analyst (Page 119 )

Updated On: 26-Jan-2026
Page 119 of 793
PDF with 3960 Questions

The loss from an uncollectible account is

  1. an asset
  2. a regular expense of doing business
  3. a liability
  4. a reduction in revenue

Answer(s): B

Explanation:

The benefit from selling on credit to customers far outweighs the cost of losses from uncollectible accounts.
These losses are a regular expense of doing business.



An advantage of the duration/convexity approach over the full valuation approach is:

  1. its superior accuracy for nonparallel shifts in the yield curve
  2. it is not based on yield to maturity, which is a summary measure.
  3. it saves considerable time when working with portfolios of bonds.

Answer(s): C



Which of the following is the least accurate statement about the price-to-sales multiple?

  1. Price-to-sales is a poor valuation technique for growth companies.
  2. Sales growth drives all subsequent earnings and cash flows.
  3. Revenue has minimal accounting manipulation concerns relative to other numbers.

Answer(s): A



Bond X is a nonmailable corporate bond maturing in ten years. Bond Y is also a corporate bond maturing in ten years, and Bond Y is callable at any time beginning three years from now. Both bonds carry a credit rating of AA. Based on this information, identify the most accurate statement:

  1. Bond Y will have a higher nominal spread over a 10-year U.S. Treasury security than Bond X.
  2. The option adjusted spread (OAS) of Bond Y will be greater than the nominal spread of Bond Y.
  3. The nominal spread of Bond X will be greater than the option adjusted spread of Bond X.

Answer(s): A



A Treasury bond dealer observes the following Treasury spot rates from the spot rate curve: 1-year 7.40%, 2- year 7.00%, and 3-year 6.3%. The bond dealer also observes that the market price of a 3-year 8% coupon, 100 par value bond is $103.95. Based on this information, the dealer should:

  1. buy the 8% coupon bond in the open market, strip it, and sell the pieces.
  2. sell the 8% coupon bond short, and buy the component cash flow strips with the proceeds.
  3. do nothing since the 8% bond is selling for its arbitrage-free price.

Answer(s): A



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