QUESTION: 1077

The distribution of the annual incomes of a group of middle management employees approximated a normal distribution with a mean of $37,200 and a standard deviation of $800. About 68 percent of the incomes lie between what two incomes?

$36,400 and $38,000
None of these answers
$34,800 and $39,600
$35,600 and $38,800
$30,000 and $40,000

Answer(s): A

Explanation:

68/2 = 0.34. The z value for 0.34 is 1. x = u +/- z*sigma. So x = 37200 +/- 1*800. e get x = 38,000 and 36,400.

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QUESTION: 1078

What is the future value of $750 per year for 6 years, with the first cash flow occurring today, rather than 1 year from now? Assume interest is 7% per year, compounded annually.

$5,364.97
$4,500.00
$5,740.52
$6,209.48
$5,293.55

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 6 N, 7 I/Y, 0 PV, 750 PMT, CPT FV. 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 6 n, 7 i, 0 PV, 750 PMT, FV. 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.

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QUESTION: 1079

In computing kurtosis, which of the following is true?

It raises the deviation from the mean to the fourth power.
II. The formula preserves the direction of the deviation.
III. Kurtosis measures how clustered the values in a distribution are to the mean.
I, II, and III
None of these answers is correct.
II and III
I and III

Answer(s): D

Explanation:

I is true. II is false because the fourth power of a negative number is not a negative number: -2 * -2 * -2 * -2 = +16. III is true.

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QUESTION: 1080

An investor has a required rate of return of 5% per year. How much will he pay for a seven-year ordinary annuity that pays $200 per year?

$1,093
$1,157
$1,215
$1,213

Answer(s): B

Explanation:

The value of the annuity = (200/0.05)*(1- 1/(1.05^7)) = 1,157

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Free CFA-Level-I Exam Braindumps (page: 270)

QUESTION: 1077

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QUESTION: 1078

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QUESTION: 1079

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QUESTION: 1080

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