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Test Prep CFA-Level-I Exam Questions
CFA® Level I Chartered Financial Analyst (Page 136 )

Updated On: 24-Feb-2026
Page 136 of 793
PDF with 3963 Questions

Which of the following is/are true ?

  1. Type I error is the event in which we reject the null when it is false.
    II. Type II error occurs when we accept the null when it is false III. Type I error occurs if we accept the alternative when it is false.
    IV. Type II error is the event where we reject the alternative when it is true.
  2. II, III & IV
  3. II only
  4. IV only
  5. I only
  6. II & IV
  7. I, II & IV
  8. I, II & III
  9. III only

Answer(s): A

Explanation:

Type I error is the event in which we reject the null when it is true. This is the same as accepting the alternative when it is false. Type II error is the event in which we fail to reject the null when it is false. This is the same as rejecting the alternative when it is true.



If you owe a debt of $1,000 today and also owe $2,000 in 24 months, what single payment could you make 15 months from today that would pay off both of these debts, if interest is assessed at 8% per year, compounded monthly?

  1. $2,988.71
  2. $2,751.62
  3. $3,041.93
  4. $3,000.00
  5. $1,980.86

Answer(s): A

Explanation:

To solve this question, set the problem up as the sum of two compound interest calculations. Move the $1,000 from today over to month 15 and add it to the $2,000 brought back from month 24 to month 15. On the BAII Plus, press 15 N, 8 divide 12 = I/Y, 1000 PV, 0 PMT, CPT FV which yields $1,104.80. Then press STO 1. Then press 9 N, 2000 FV, CPT PV, which yields $1,883.91. Finally press + RCL 1 = to see the answer. On the HP12C, press 15 n, 8 ENTER 12 divide i, 1000 PV, 0 PMT, FV. Then press STO 1. Then press 9 n, 2000 FV, PV. Finally press RCL 1 + to see the answer. Make sure the BAII Plus has the value of P/Y set to 1.



You recently purchased a twin-engine plane after landing an ultra-lucrative job on Wall Street. The annual payments on the plane are $8,000 per year and the installment plan extends over 5 years. The payments start today. If your discount rate is 8.5% per year, how much would it have cost you to purchase the plane on an all- cash basis?

  1. $34,205
  2. $40,611
  3. $41,232
  4. $36,429

Answer(s): A

Explanation:

The present value of the installment payments equals 8,000 + (8,000/0.085)*(1-1/(1.085^4)) = $34,205



A normal distribution has a mean of 39 and a variance of 625. The area under the distribution between 50 and 75 equals ________.

  1. 0.745
  2. 0.319
  3. 0.212
  4. 0.255

Answer(s): D

Explanation:

First note that the area between two numbers under a probability distribution is the same as the probability of getting a number between those two numbers. The standard deviation of the distribution equals sqrt(625) = 25.
The z-value of 50 equals (50-39)/25 = 0.44. The z-value of 75 equals (75-39)/25 = 1.44. Using the Normal probability tables, we get P(z < 0.44) = 0.67 and P(z < 1.44) = 0.9251. The area between 50 and 75 is then given by P(0.44 < z < 1.44) = P(z < 1.44) - P(z < 0.44) = 0.9251 - 0.67 = 0.255.



How much would an original deposit of $900 grow to be after 10 and a half years, if the deposit earns interest at 6.5% per year, compounded quarterly?

  1. $1,853.97
  2. $1,254.58
  3. $1,573.42
  4. $1,771.19
  5. $1,837.51

Answer(s): D

Explanation:

On the BAII Plus, press 42 N, 6.5 divide 4 = I/Y, 900 PV, 0 PMT, then press CPT FV. On the HP12C, press 42 n, 6.5 ENTER 4 divide i, 900 PV, 0 PMT, then press FV. Note that N = 42 quarters (10.5 x 4 =) and the answer is displayed as a negative number. Make sure that the BAII Plus has the P/Y value set to 1.






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