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CFA CFA I Exam
CFA Level I Chartered Financial Analyst (Page 124 )

Updated On: 26-Jan-2026
Page 124 of 793
PDF with 3960 Questions

Three equity analysts at Schiler & Company are debating their supervisor's claim that significant excess return can be generated by exploiting inefficiencies in the capital markets. Analyst A states, "... the large number of profit maximizing investors researching investment opportunities creates an efficient market." Analyst B rebuts by stating, "Over the past three years, my technical analysis strategy has outperformed all the major benchmarks, which proves the markets are not efficient." Analyst C states, "High transactions costs improve the information efficiency of capital markets." The statement that is most likely to be correct was made by:

  1. Analyst
  2. Analyst B
  3. Analyst C

Answer(s): A



Rose Half, CFA, is analyzing EI Toro Electric Company. She has collected the following data:
What is El Toro Electric Company's expected long-run rate of return?

  1. 10.5%.
  2. 13.3%.
  3. 15.0%.

Answer(s): B

Explanation:



Peterson Manufacturing has earnings per share of $4.00 and paid a dividend of $1.00 per share. Peterson's return on equity is 16.0%. Peterson is considering a debt issue that would increase its financial leverage. Peterson is also considering increasing its dividend payout ratio. Assuming all other factors are constant, Peterson's potential growth rate:

  1. will increase due to the increased leverage, and increase further due to the higher payout ratio.
  2. will increase due to the higher payout ratio, but this increase will be offset to some extent by the increased leverage.
  3. will increase due to the increased leverage, but this increase will be offset to some extent by the higher payout ratio.

Answer(s): C



Curzon Corp reported the following in its Shareholder's Equity account:
In calculating a Price to Book value for Curzon, the appropriate book value per common share is closest to:

  1. $10.50
  2. $12.50
  3. $13.13

Answer(s): B

Explanation:



Given the academic research supporting the efficiency of the stock market, which of the following is the least accurate description of a portfolio manager's role in an efficient market?

  1. Identifying and specifying a client's objectives and constraints.
  2. Specifying an explicit investment strategy to meet the client's needs.
  3. Diversifying the client's portfolio across all asset classes to eliminate systematic risk.

Answer(s): C

Explanation:



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