QUESTION: 1117

For the normal distribution, the mean plus and minus 1.96 standard deviations will include about what percent of the observations?

None of these answers
50%
68%
95%
99.7%

Answer(s): D

Explanation:

95% of the are under the curve will lie within plus and minus 2 standard deviations of the mean.

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Assume you buy a car for $18,000 today and agree to pay $250 a month, beginning next month, for 5 years with a final payment also due 5 years from today to pay off any remaining balance. How large will that final payment be, if interest accrues at 2.9% per year, compounded monthly?

$3,000.00
$4,683.97
$4,280.77
$9,690.32
$1,204.41

Answer(s): B

Explanation:

There are 60 months in 5 years. This is a problem known as a balloon payment. On the BAII Plus, press 60 N, 2.9 divide 12 = I/Y, 18000 PV, 250 +/- PMT, CPT FV. On the HP12C, press 60 n, 2.9 ENTER 12 divide i, 18000 PV, 250 CHS PMT, FV. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the value of P/Y set to 1.

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QUESTION: 1119

After a sterling year, your boss has decided to reward you. She has offered you three alternatives:
Take $28,000 right now.
Take $2,500 bonus per month for the next 12 months, starting next month. Take $16,000 at the end of six months and another $15,000 at the end of the year. If your discount rate is 6% per year on a monthly compounded basis, how much is the present value of your bonus?

$29,656
$29,047
$28,000
$30,176

Answer(s): A

Explanation:

The discount rate per period (1 month) = 6%/12 = 0.5%. The present value of alternative B is (using the annuity formula) 2,500/0.005*[1 - 1/1.005^12] = $29,047. The present value of alternative C is trickier, since the rate you have been given is compounded monthly. Therefore, the PV of C is 16,000/1.005^6 + 15,000/1.005^12 = $29,656. So you should take alternative C and your bonus is worth $29,656.

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QUESTION: 1120

Excess kurtosis is a problem for investment researchers using normal distributions because:

The likelihood of extreme outcomes will be overestimated.
Historical returns are better modeled with platykurtic distributions.
It is difficult to calculate.
The likelihood of extreme outcomes will be underestimated.

Answer(s): D

Explanation:

Historical returns are better modeled with fat-tailed (or leptokurtic) distributions, not platykurtic ones. If a researcher uses a normal distribution to model a fat-tailed distribution, the estimated probability of an extreme outcome will be underestimated. Thus, the frequency of market crashes will be underestimated, an underestimation of the volatility risk.

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Free CFA-Level-I Exam Braindumps (page: 280)

QUESTION: 1117

Explanation:

QUESTION: 1118

Explanation:

QUESTION: 1119

Explanation:

QUESTION: 1120

Explanation: