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Test Prep CFA-Level-I Exam Questions
CFA® Level I Chartered Financial Analyst (Page 123 )

Updated On: 24-Feb-2026
Page 123 of 793
PDF with 3963 Questions

The marketing department of a nationally known cereal maker plans to conduct a national survey to find out whether or not consumers of flake cereals can distinguish one of their favorite flake cereals. To test the questionnaire and procedure to be used, eight persons were asked to cooperate in an experiment. Five very small bowls of flake cereals were placed in front of a person. The bowls were labeled A, B, C, D, and E. The person was informed that only one bowl contained his or her favorite flake cereal. Suppose that the eight persons in the experiment were unable to identify their favorite cereal and just guessed which bowl it was in. What is the probability that none of the eight guessed correctly?

  1. 0.168
  2. 0.788
  3. 0.125
  4. None of these answers
  5. 0.009

Answer(s): A

Explanation:

This is a binomial probability. The probability of getting r successes out of n trials where the probability of success each trial is p and probability of failure each trial is q (where q = 1-p) is given by: n!(p^r)[q^(n-r)]/r!(n-r)!.
Here n = 8, r = 0,p = 0.2 and q = 0.80. Therefore we have 8!(0.2^0)(0.8^8)/0!8! = 0.168.



Which of the following is true?

  1. If the geometric return is zero, the arithmetic return must be negative.
  2. All of these answers are false.
  3. If the annual returns have zero volatility, the geometric return is equal to the arithmetic return.
  4. The geometric return is always less than the arithmetic return.

Answer(s): C

Explanation:

The mean and the geometric mean are equal when volatility in the rate of return is zero. For a non- zero volatility, the mean exceeds the geometric mean and the difference is larger the higher the volatility.



If you deposit $900 a year, beginning next year, for 20 years into an account paying 8% per year, compounded annually, how much is in your account after that last deposit?

  1. $40,598.15
  2. $50,003.98
  3. $530,118.37
  4. $48,304.12
  5. $41,185.77

Answer(s): E

Explanation:

On the BAII Plus, press 20 N, 8 I/Y, 0 PV, 900 PMT, CPT FV. On the HP12C, press 20 n, 8 i, 0 PV, 900 PMT, FV. On the BAII Plus, make sure the value of P/Y is set to 1. Note that the answer is displayed as a negative number.



In computing skewness, which of the following is true?

  1. It uses the cubed deviation from the mean.
    II. It raises the deviation from the mean to the third power.
    III. The formula preserves the direction of the deviation.
  2. I and III
  3. II and III
  4. I, II, and III
  5. None of these answers is correct.

Answer(s): C

Explanation:

I and II are true and equivalent. III is true because the cube of a negative number is still a negative number: -2 * -2 * -2 = -8.



How much must you deposit today if you wish to have $30,000 in 20 years, assuming that interest accumulates at 8% per year, compounded annually?

  1. $6,436.45
  2. $7,046.51
  3. $3,000.00
  4. $5,045.65
  5. $6,604.73

Answer(s): A

Explanation:

On the BAII Plus, press 20 N, 8 I/Y, 0 PMT, 30000 FV, CPT PV. On the HP12C, press 20 n, 8 i, 0 PMT, 30000 FV, PV. Note that the answer is displayed as a negative number. Make sure that the BAII Plus has the P/Y value set to 1.






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