QUESTION: 1177

A mortgage holding company has found that 2% of its mortgage holders default on their mortgage and lose the property. Furthermore, 90% of those who default are late on at least two monthly payments over the life of their mortgage as compared to 45% of those who do not default. What is the probability that a mortgagee with two or more late monthly payments will default on the mortgage and lose the property?

0.018
None of these answers
0.441
0.039
0.459

Answer(s): D

Explanation:

We have P(def) = 0.02. P(not def) = 0.98. P(two late payments/def) = 0.90. P(two late payments/not def) = 0.45. Using Bayes formula: p(def/two late payments) = (0.02*0.9)/(0.02*0.9 + 0.98*0.45) = 0.039.

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QUESTION: 1178

How many monthly payments of $40 are needed to pay off a debt of $1,000, if interest accrues at 10% per year, compounded monthly?

No solution/Error
28.15
31.48
17.60
22.80

Answer(s): B

Explanation:

On the BAII Plus, press 10 divide 12 = I/Y, 1000 PV, 40 +/- PMT, 0 FV, CPT N. On the HP12C, press 10 ENTER 12 divide i, 1000 PV, 40 CHS PMT, 0 FV, n. Note that the HP12C will display 29 as the answer. Make sure the BAII Plus has the value of P/Y set to 1.

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QUESTION: 1179

What is the present value today of these annual cash flows: $2,500, $1,200, $300? Assume the first cash flow occurs 1 year from today and an interest rate of 9% per year, compounded annually.

$3,535.25
$4,000.00
$3,976.69
$3,608.82
$3,114.09

Answer(s): A

Explanation:

You could solve this question using 3 different compound interest problems, but it is easier to solve them using the calculator's cash flow functions. On the BAII Plus, press CF 2nd CLRWork 0 ENTER DownArrow 2500 ENTER DownArrow DownArrow 1200 ENTER DownArrow DownArrow 300 ENTER DownArrow DownArrow 2nd Quit. Then press NPV 9 ENTER DownArrow CPT. On the HP12C, press these keys: 0 BlueShift CFo 2500 BlueShift CFj 1200 BlueShift CFj 300 BlueShift CFj. Then press 9 i, YellowShift NPV. The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard. Make sure that the BAII Plus has the P/Y value set to 1.

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QUESTION: 1180

How much is in your account in 5 years, if you start with a balance of $1,000 and add $3,500 in 18 months and add an additional $1,000 in 48 months, if the money earns interest at 6% per year, compounded monthly?

$5,500.00
$6,514.27
$7,131.50
$6,726.14
$6,892.81

Answer(s): D

Explanation:

Solve this question by working three compound interest problems. On the BAII Plus, press 60 N, 6 divide 12 = I/ Y, 1000 PV, 0 PMT, CPT FV, which yields $1,348.85. Then press STO 1. Then press 42 N, 3500 PV, CPT FV, which yields $4,315.61. Then press + RCL 1 = STO 1. Then press 12 N, 1000 PV, CPT FV, which yields $1,061.68. Then press + RCL 1 = for the final answer. On the HP12C, press 60 n, 6 ENTER 12 divide i, 1000 PV, 0 PMT, FV. Then press STO 1. Then press 42 n, 3500 PV, FV. The press RCL 1 + STO 1. Then press 12 n, 1000 PV, FV. Then press RCL 1 + for the final answer. Note that the answer will be a negative number.
Make sure the BAII Plus has the value of P/Y set to 1. Note that the $3,500 deposit is 42 months away from the end of the 60-month time period.

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Free CFA-Level-I Exam Braindumps (page: 295)

QUESTION: 1177

Explanation:

QUESTION: 1178

Explanation:

QUESTION: 1179

Explanation:

QUESTION: 1180

Explanation: