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Test Prep CFA-Level-I Exam Questions
CFA® Level I Chartered Financial Analyst (Page 107 )

Updated On: 24-Feb-2026
Page 107 of 793
PDF with 3963 Questions

Each salesperson in a large department store chain is rated either below average, average, or above average with respect to sales ability. Each salesperson is also rated with respect to his or her potential for advancement either fair, good, or excellent. These traits for the 500 salespeople were cross classified into the following table.

Sales Ability Potential for Advancement
Fair Good Excellent
Below Average 161222
Average 456045
Above Average 9372135

What is the probability that a salesperson selected at random will have above average sales ability and excellent potential for advancement?

  1. 0.20
  2. 0.50
  3. None of these answers
  4. 0.75
  5. 0.27

Answer(s): E

Explanation:

We need the prob(above average) = (93 + 72 + 135)/500 and prob(excellent given above average) = 135/300.
Therefore 300/500*135/300 = 0.27



What is the Net Present Value of this series of annual cash flows at an interest rate of 12% per year: Year 0:
<$14,000>, Year 1: $5,000, Year 2: $4,000, Year 3: $5,000, Year 4 are used to indicate a negative number).

  1. <$379.31>
  2. $114.37
  3. <$77.49>
  4. $51.21
  5. <$245.97>

Answer(s): E

Explanation:

On the BAII Plus, press CF 2nd CLRWork 14000 +/- ENTER DownArrow 5000 ENTER DownArrow DownArrow 4000 ENTER DownArrow DownArrow 5000 ENTER DownArrow DownArrow 4000 ENTER DownArrow DownArrow 2nd Quit. Then press NPV 12 ENTER DownArrow CPT. On the HP12C, press these keys: 14000 CHS BlueShift CFo 5000 BlueShift CFj 4000 BlueShift CFj 5000 BlueShift CFj 4000 BlueShift CFj. Then press 12 i, YellowShift NPV. The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard. Make sure the BAII Plus has the value of P/Y set to 1.



Your investment rate of return is 6% per year and you invest according to the following schedule:

Beginning of year 1: $100
Beginning of year 2: $200
Beginning of year 3: $300
Beginning of year 4: $400

The amount you will have at the end of year 4 is:

  1. $1,125
  2. $640
  3. $808
  4. $845

Answer(s): A

Explanation:

This is a future value question. The amount at the end of year 4 = 100*(1.06^4) + 200*(1.06^3) + 300*(1.06^2) + 400*1.06 = 1,125



What quarterly payment is required beginning one period from today to pay off a $3,000 debt, if interest accrues at 6% per year, compounded quarterly, and the debt is to be retired in 10 years?

  1. $107.41
  2. $88.63
  3. $114.29
  4. $87.83
  5. $100.28

Answer(s): E

Explanation:

On the BAII Plus, press 40 N, 6 divide 4 = I/Y, 3000 PV, 0 FV, CPT PMT. On the HP12C, press 40 n, 6 ENTER 4 divide i, 3000 PV, 0 FV, PMT. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the P/Y value set to 1.



Which of the following statements is false regarding confidence levels and/or tests of significance?

  1. In most hypothesis testing, the confidence level is equal to 0.10, 0.05, and 0.01.
  2. All else equal, the confidence interval of a hypothesis test with a 5% level of significance is less than the confidence interval for a hypothesis test with a 1% level of significance.
  3. In most hypothesis tests, the power of the test is equal to (1 - alpha).
  4. More than one of these answers is incorrect.
  5. The significance level of a test is equal to (1 - confidence level).
  6. The power of a test is equal to the confidence level.

Answer(s): D

Explanation:

More than one of these answers is incorrect. Specifically, in most hypothesis tests, the significance level is equal to the probability of a Type I error (denoted by the Greek letter alpha) and the power of the test can be found by (1 - beta), where beta represents the probability of a Type II error. Remember that statisticians are much more concerned with the probability of a Type I error, which is defined as the act of incorrectly rejecting the null hypothesis. A Type II error, which is defined as the act of incorrectly failing to reject the null hypothesis, is much more difficult to predict. Second, power of a test is not equal to the confidence level of the test.






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