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Test Prep CFA-Level-I Exam Questions
CFA® Level I Chartered Financial Analyst (Page 124 )

Updated On: 24-Feb-2026
Page 124 of 793
PDF with 3963 Questions

An investment of $2,300 grows to $2,904 in 4 years. The annually compounded rate of return is:

  1. 6.00%
  2. 6.25%
  3. 5.90%
  4. 6.37%

Answer(s): A

Explanation:

Let r be the annually compounded rate. Then, 2904 = 2300*(1+r)^4. Hence, r = (2904/2300)^(1/4) - 1 = 6%



Assume the least squares equation is Y' = 10 + 20X. What does the value of 10 in the equation indicate?

  1. None of these answers
  2. For each unit increased in X, Y increases by 10
  3. Y intercept
  4. For each unit increased in Y, X increases by 10

Answer(s): C

Explanation:

The regression is written as Y' = a + bX. The letter "a" is the Y intercept and b is the slope of the line. Y' is the predicted value of Y given a specific value of X. Here a=10.



What quarterly payment would you have to make to pay off a $5,000 debt in 7 years, assuming the first payment is made 3 months from today and interest accrues at 6% per year, compounded quarterly?

  1. $220.01
  2. $72.96
  3. $145.01
  4. $372.96
  5. $757.78

Answer(s): A

Explanation:

On the BAII Plus, press 28 N, 6 divide 4 = I/Y, 5000 PV, 0 FV, CPT PMT. On the HP12C, press 28 n, 6 ENTER 4 divide i, 5000 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. The value of "N" is set to 28 since there are 28 quarters in 7 years (7 x 4 =
28).



If you deposit $1,202.50 into an account paying 6% per year simple interest, how much interest will you have earned in 2 years?

  1. $124.00
  2. $126.80
  3. $120.50
  4. $112.50
  5. $144.30

Answer(s): E

Explanation:

Since this is a simple interest question, the formula is I=PRT, with T here being 2, since the timeframe is 2 years. On the BAII Plus, press 1202.50 x 0.06 x 2 = to see the answer. On the HP12C, press 1202.50 ENTER 0.06 x 2 x to see the answer. Since the question asks for the amount of interest earned, the original deposit should not be added to this value.



In a large metropolitan area, past records revealed that 30 percent of all the high school graduates go to college. From 20 graduates selected at random, what is the probability that exactly 8 will go to college?

  1. 0.114
  2. 0.400
  3. 0.231
  4. 0.887
  5. None of these answers

Answer(s): A

Explanation:

This is a binomial probability. The probability of getting r successes out of n trials where the probability of success each trial is p and probability of failure each trial is q (where q = 1-p) is given by: n!(p^r)[q^(n-r)]/r!(n-r)!.
Here n = 20, r = 8,p = 0.3 and q = 0.7. Therefore we have 20!(0.3^8)(0.7^12)/8!12! = 0.114.






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