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Free CFA-Level-I Exam Braindumps (page: 246)

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PDF with 3963 Questions

What is the present value of $350 per year for 10 years, with the first cash flow occurring today, rather than 1 year from now? Assume interest is 8% per year, compounded annually.

  1. $2,408.90
  2. $48.49
  3. $2,536.41
  4. $3,500.00
  5. $2,348.53

Answer(s): C

Explanation:

Recognize that this question is an annuity due situation, since the first cash flow occurs immediately or at the beginning of each period. Annuities where the first payment occurs 1 period from today (or at the end of each period) are called "ordinary" annuities. This requires placing the calculator into "Begin" mode prior to solving the question. NOTE: Be sure to place the calculator OUT OF annuity due mode after this question before going on to subsequent questions, or you will get the wrong answers! On the BAII Plus, press 2nd BGN. If the display shows END, then press 2nd SET and then 2nd Quit. This will place the BAII Plus into annuity due mode (you can tell this because the BAII Plus will display BGN in small letters). Now press 10 N, 8 I/Y, 350 PMT, 0 FV, CPT PV. Place the calculator back into End mode (for ordinary annuities) by pressing 2nd BGN and then if the calculator is displaying BGN, press 2nd SET and 2nd Quit. The BGN letters should disappear from the display.
On the HP12C, press BlueShift END, which is the blue function on the front of the 8 digit key. This places the HP12C into Begin mode (the HP12C shows the word BEGIN in the display when in this mode). Then press 10 n, 8 i, 350 PMT, 0 FV, PV. To place the HP12C back into ordinary annuity mode (or END mode), press BlueShift BEG (the blue function written on the front of the 7 digit key). Note that the answer is displayed as a negative number. Make sure the BAII Plus has the value of P/Y set to 1.



For which measure of central tendency will the sum of the deviations of each value from that average always be zero?

  1. Median
  2. Geometric mean
  3. Mean
  4. Mode
  5. None of these answers

Answer(s): C

Explanation:

For the mean, the sum of the deviations from the average is always zero because the mean is the average.



Which of the following statements is false in reference to confidence intervals and/or tests of significance?

  1. As the confidence level increases, the area between the upper confidence limit and the lower confidence limit increases.
  2. More than one of these answers is false.
  3. The significance level is denoted by the Greek letter alpha.
  4. The significance level is typically measured by (1 - the probability of a Type II error).
  5. As the confidence level increases, the power of the does not necessarily increase.
  6. Significance levels are typically set equal to 0.10, 0.05, and 0.01.

Answer(s): D

Explanation:

In most statistical tests, the significance level is equal to one minus the probability of a Type I error. The Type I error is given much more attention in hypothesis testing than is the Type II error, and this is partially because of the inherent difficulty in quantifying the probability of a Type II error. Remember that a Type II error occurs when one incorrectly fails to reject the null hypothesis. Reliably predicting this occurrence is difficult. Conversely, determining the probability of a Type I error requires much less effort and is subject to much less estimation bias. The remaining answers are correct.



The mean gross annual income of certified tack welders are normally distributed with the mean of $20,000 and a standard deviation of $2,000. The ship building association wishes to find out whether their tack welders earn more or less than $20,000 annually. The alternate hypothesis is that the mean is not $20,000. The 0.10 level of significance is to be used. What is the decision rule?

  1. Do not reject the null hypothesis if computed z lies between -1.96; otherwise, reject it
  2. None of these answers
  3. Reject the null hypothesis if computed z is below -1.96; otherwise, reject it
  4. Do not reject the null hypothesis if computed z lies greater than 1.645; otherwise, reject it
  5. Do no reject the null hypothesis if computed z lies between -1.645 and +1.645; otherwise, reject it

Answer(s): E

Explanation:

Since it is at the 10% significance level we must use z=+/-1.645. The null hypothesis Ho will not be rejected if the z-value falls between the critical value. We reject Ho if it falls beyond the critical level.






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