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CFA CFA I Exam
CFA Level I Chartered Financial Analyst (Page 122 )

Updated On: 26-Jan-2026
Page 122 of 793
PDF with 3960 Questions

Call options on the stock of Verdant, Inc., with a strike price of $45 are priced at $3.75. Put options with a strike price of $45 are priced at $3.00. Which of the following most accurately describes the potential payoffs for owners of these options (assuming no underlying positions in Verdant)?

  1. The call writer has the maximum loss exposure.
  2. The put buyer has the maximum loss exposure.
  3. The put writer has the maximum potential gain.

Answer(s): A



An analyst is considering buying a call option on ZXC stock, which is currently trading at $33.75 per share. Three month call options with a strike price of $30 are trading at a premium of $4.50. Identify which of the following statements is most likely true regarding the ZXC call options.

  1. The ZXC call options are currently out of the money.
  2. The breakeven underlying price for ZXC stock is $38.25 per share.
  3. The potential upside of the ZXC call options is unlimited.

Answer(s): C



IRK Investments is actively engaged in various risk management strategies involving swaps. The company currently has a position as the fixed rate payer in a quarterly fixed for equity swap with an interest rate of 6.8%, a tenor of five years and notional principal of $10 million. Payments on the swap are netted. The underlying equity return is based on the S&P 500 Index. IRK currently owes a payment of $400,000. Which of the following is most likely correct?

  1. The underlying equity index experienced a loss greater than 1.7% over the quarter.
  2. The underlying equity index experienced a loss less than 1.7% over the quarter.
  3. The underlying equity index experienced a loss equal to 1.7% over the quarter.

Answer(s): A



An analyst is interested in determining the value of a real estate investment and has estimated the following data for the property:
---------------------------------------------------------------------------------- Net operating income $50,480 Cost of debt 8.2%
Depreciation $3,550 Cost of equity 12.5%
Interest expense $2,720 WACC 9.6%
Tax rate 35% Cap rate 11.0%
---------------------------------------------------------------------------------- Which of the following is closest to the value of the property using the income approach?

  1. $403,900
  2. $458,900
  3. $466,500.

Answer(s): B



SIMULATION
Bob Kramer, CFA, manages money for high net worth clients. Kramer creates an investment portfolio tailored to his clients' specific needs using mutual funds. Kramer is considering the following Emerging Market Fund and uses a live year time frame. Exhibit 1 details the Emerging Market Fund's fees and expenses.
Exhibit 1 - Fees and expenses for Emerging Market Fund




Kramer expects the Emerging Market Fund to earn 12% per year.
Select the class of Emerging Market Fund shares that are most appropriate for Kramer's clients.

  1. Class A
  2. Class B
  3. Class C

Answer(s): C



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