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

Updated On: 17-Jul-2026
Page 119 of 793
PDF with 3960 Questions

How long will it take for an initial deposit of $2,500 to grow to be $4,000, if the interest rate is 5% per year, compounded annually?

  1. 32 years
  2. 9.63 years
  3. 7.72 years
  4. 6.93 years
  5. 14.48 years

Answer(s): B

Explanation:

Either the $2,500 or the $4,000 must be entered as a negative number - it won't matter which. On the BAII Plus, press 5 I/Y, 2500 PV, 0 PMT, 4000 +/- FV, CPT N. On the HP12C, press 5 i, 2500 PV, 0 PMT, 4000 CHS FV,
F. Note that the HP12C will indicate 10 years for the answer.



Which of the following is/are true?

  1. Multiplying a variable by a positive constant will cause its standard deviation to be multiplied by the square of that constant.
    II. Multiplying a variable by a constant will cause its mean to be multiplied by that constant.
    III. Adding a constant leaves the mean of a variable unchanged.
    IV. Adding a positive constant to a variable causes the standard deviation of the variable to increase by the same amount.
  2. IV only
  3. I, II and IV
  4. II only
  5. I only
  6. I & II
  7. III only
  8. II only
  9. II and IV

Answer(s): C

Explanation:

Adding a constant changes the mean by the same amount and leaves the variance and standard deviation unchanged. Multiplying with a constant causes the mean and the standard deviation to be multiplied by the same constant. The variance gets multiplied by the square of the constant.



If the alternate hypothesis states that u (Mu) does not equal 4,000, what is the rejection region for the hypothesis test?

  1. Center
  2. None of these answers
  3. Lower or left tail
  4. Upper or right tail
  5. Both tails

Answer(s): E

Explanation:

The alternate hypothesis says does not equal, which means it could be less or more than 4000. So we must consider both tails.



An investor faces the following investment scenarios:

Scenario Probability Return
Bull market 60% 30%
Neutral market 30% 7%
Market crash 10% -25%

The variance of the investor's rate of return is ________.

  1. 17.6%%
  2. 4.17%%
  3. 307.4%%
  4. 6.17%%

Answer(s): C

Explanation:

The expected return equals 0.6 * 30% + 0.3 * 7% + 0.1*(-25%) = 17.6%. To calculate the variance, an easy way is to first calculate the second moment, which is the expected value of the square of the return. Thus, the second moment equals 0.6*[(30%)^2] + 0.3*[(7%)^2)] + 0.1*[(-25%)^2] = 617.2%%.
The variance of a random variable equals the second moment minus the square of the mean. In this case, the variance equals 617.2%% - 17.6%^2 = 307.4%%



According to Chebyshev's Theorem, what percent of the observations lie within plus and minus 1.75 standard deviations of the mean?

  1. Cannot compute because it depends on the shape of the distribution
  2. 56%
  3. 95%
  4. 67%
  5. None of these answers

Answer(s): D

Explanation:

Chebyshev's theorem applies regardless of the shape of the distribution. The minimum proportion that lie within k standard deviations of the mean is at least 1-[1/(k^2)]. In this case k = 1.75. k^2 = 3.0625. So we get 67%.



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