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Test Prep CFA-Level-I Exam Questions
CFA® Level I Chartered Financial Analyst (Page 109 )

Updated On: 24-Feb-2026
Page 109 of 793
PDF with 3963 Questions

An automatic machine inserts mixed vegetables into a plastic bag. Past experience revealed that some packages were underweight and some were overweight, but most of them had satisfactory weight.

Weight % of Total
Underweight 2.5
Satisfactory 90.0
Overweight 7.5

What is the probability of selecting and finding that all three of them are overweight?

  1. 0.0004218
  2. 0.0000156
  3. 0.075
  4. 0.0000001
  5. None of these answers

Answer(s): A

Explanation:

P(all three overweight)=0.075*0.075*0.075 = 0.0004218.



Variables X and Y are perfectly negatively correlated. Given only this information, if you run a regression of Y against X, which of the following is/are true?

  1. The intercept term is zero.
    II. The slope equals 1.
    III. R-square equals 1.
    IV. The percentage of unexplained variance equals 100%.
  2. I only
  3. III & IV
  4. IV only
  5. I & II
  6. III only
  7. I & III
  8. II only

Answer(s): E

Explanation:

If Y = aX + b, then X and Y are perfectly negatively correlated for any value of b and any negative value of a.
Hence, given the information in the question, the slope must be negative but not necessarily equal to 1 and the intercept term cannot be determined. Since the correlation coefficient is 1, R-square is also 1, as expected, since all the variation in Y can be explained by variation in X. Note that the percentage of unexplained variance equals zero.



If you make an initial deposit $500 now into an account, an additional deposit of $800 in 2 years, and a final deposit of $300 in 4 years, how much is in your account in 5 years? Assume the account earns interest at 8% per year, compounded annually.

  1. $2,120.04
  2. $2,408.29
  3. $2,066.43
  4. $1,905.51
  5. $2,331.88

Answer(s): C

Explanation:

Solve this question by working several compound interest problems, moving each dollar amount over to year 5.
On the BAII Plus, press 5 N, 8 I/Y, 500 PV, 0 PMT, CPT FV, which yields $734.66. Then press STO 1, 3 N, 800 PV, CPT FV, which yields $1,007.77. Then press + RCL 1 = STO 1. Then press 1 N, 300 PV, CPT FV, which yields $324.00. Then press + RCL 1 = to see the answer. On the HP12C, press 5 n, 8 i, 500 PV, 0 PMT, FV.
Then press STO 1, 3 n, 800 PV, FV. Then press RCL 1 + STO 1. Then press 1 n, 300 PV, FV. Then press RCL 1 + to see the answer. Note that the answer will be displayed as a negative number. Also note that the value of "N" for each dollar amount is based on the distance from year 5. Make sure the BAII Plus has the P/Y value set to 1.



What simple annual interest rate would cause a $110 deposit to grow to $120 in 2 years?

  1. 4.55%
  2. 9.09%
  3. 8.33%
  4. 54.55%
  5. 4.17%

Answer(s): A

Explanation:

To solve this question, we have to rearrange the simple interest formula, I=PRT so that the R is by itself. Note that the I (interest) is equal to 10 (120 - 100). On the BAII Plus, press 10 divide 110 divide 2 = to see the answer. On the HP12C, press 10 ENTER 110 divide 2 divide to see the answer.



The probability that events A and B do not occur simultaneously equals 0.77. The probability of neither A nor B occurring equals 0.38. If P(A) equals 0.26, the probability of B occurring equals ________.

  1. 0.43
  2. 0.59
  3. 0.62
  4. 0.21

Answer(s): B

Explanation:

The probability that events A and B do not occur simultaneously equals one minus the probability that events A and B occur simultaneously. Thus,
P(A and B) = 1 - 0.77 = 0.23.
The probability of neither A nor B occurring equals one minus the probability of either A or B occurring. Thus, P (A or B) = 1 - 0.38 = 0.62.
Now, P(A or B) = P(A) + P(B) - P(A and B). Therefore, P(B) = P(A or B) - P(A) + P(A and B) = 0.62 - 0.26 + 0.23 = 0.59.






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