Cisco®
Oracle
CompTIA
Checkpoint
ISC
EC-Council
EXIN
Fortinet
ITIL®
Juniper
Microsoft
VMware
Avaya
SAP
Google
Salesforce
Amazon
Palo Alto Networks
ISC2
Splunk®
All Vendors
  2. Home
  3. Exams
  4. Test Prep
  5. CFA-Level-I

Free Test Prep CFA-Level-I Exam Questions (page: 187)

Page 99 of 496
PDF with 3963 Questions

In futures markets, the role of the clearing house is to:

  1. prevent arbitrage and enforce federal regulations.
  2. act as guarantor to both sides of a futures trade.
  3. reduce transaction costs by making contract prices public.

Answer(s): B



Morgan Dexter has been asked by his supervisor to present the features of interest rate swaps to a group of newly hired risk managers. In his presentation, Dexter notes that in a plain-vanilla interest rate swap, there is one floating rate-payer and one fixed-rate payer. Dexter points out that the netting arrangements typical to plain vanilla swaps reduce the credit risk for both counter parties Dexter also states that some interest rate swaps may have two floating rate payers. Are Dexter *s statements regarding swaps correct or incorrect?

  1. Only Dexter's statement about reduced credit risk from netting is correct.
  2. Only Dexter's statement about two floating rate payers is correct.
  3. Both statements are correct.

Answer(s): C



Debbie Chon, CFA, is evaluating a put option on Lincoln Industrial. Lincoln's current stock price is $64 per share and the company will pay a $0.56 dividend. The 90-day U.S. Treasury bill is yielding 5.3%. Lincoln's 3- month European call option with a strike price of $70 has a premium of $3.50. Based on the put-call parity, calculate the value of the associated Lincoln put option.

  1. $8.05
  2. $8.60
  3. $9.15

Answer(s): C

Explanation:



Peter Black is an options trader for High Smith Investments. Black trades options on the U.S. and U.K. stock exchanges. Over the past three weeks, Black has been following the price movements of options on two companies: U.S.-based Pacific Chemicals Inc. (PCI), and U.K.-based Merchant Clothing Co. (MCC). Black has observed that over the past few days, the price of put options on PCI stock have suddenly increased, and the price of call options on MCC stock have suddenly increased. Which of the following provides the most accurate explanation of Black's observations? Interest rates in:

  1. the U.S. have risen and the volatility of MCC stock has risen.
  2. the U.K. have fallen and the volatility of PCI stock has risen.
  3. the U.S. have fallen and the volatility of MCC stock has risen.

Answer(s): C



An investor holds a long position in a futures contract on the S&P 500 Index. The futures contract has a term of three months, requires 10% margin, and has a futures price of 1,574. The investor posted $37,500 into the margin account at contract initiation. After the contract initiation, the futures price on the index experienced infrequent but dramatic drops. Two days ago, the investor received a margin call and was required to post an additional $17,500 to the margin account. Which of the following is most likely the maintenance margin on the contract?

  1. $17,500.
  2. $18,750.
  3. $22,500.

Answer(s): C



Frank Holmes, CFA, is reviewing Martha Inc, a distributor. Holmes is interested in the company's European- style call option, which has a value of $5.90. Currently, Martha's stock is trading at $33 per share and pays no dividend. The exercise price of both the call and put options is $30, with 80 days to expiration. The current risk- free rate is 5.50%. Martha's put option sells for $2.75. Calculate the synthetic call option value.

  1. $3.35
  2. $5.75
  3. $6.10

Answer(s): C



Kim Lee is valuing a closely held private shoe retailing company. She compares the company to other shoe retailing competitors that are publicly traded and are highly liquid. Relative to the private company, the shares of the publicly traded competitors most likely include a:

  1. marketability discount.
  2. minority interest discount.
  3. control premium.

Answer(s): B



Nina Foch, CFA, is considering investing in an exchange traded fund (ETF). However, she is unsure how the ETF compares to open-end and closed-end funds. Which of the following statements comparing ETFs with open-end and closed-end funds is least likely to be true?

  1. ETF shares can be sold short, while open-end fund shares cannot be shorted.
  2. The legal structure of an ETF is similar to a closed-end fund.
  3. ETF shares trade like closed-end fund shares.

Answer(s): B



Viewing page 187 of 496



Post your Comments and Discuss Test Prep CFA-Level-I exam prep with other Community members:

CFA-Level-I Exam Discussions & Posts