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Free CFA-Level-I Exam Braindumps (page: 138)

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PDF with 3963 Questions

What is the proportion of the total area under the normal curve within plus and minus two standard deviation?

  1. 68%
  2. 95%
  3. 99.7%
  4. None of these answers are correct
  5. 34%

Answer(s): B

Explanation:

95% of the area under the curve lies within plus and minus one standard deviation of the mean.



Suppose the probability that oil prices will rise any given quarter is 0.51, and the probability that oil prices will stay level or decline is 0.49. If oil prices rise, GNP will contract by 1% with 80% probability, and expand by 0.5% with 20% probability. If oil prices decline or stay level, GNP will expand 3% with a 75% probability and contract 0.5% with a 25% probability. What is the expected change in GNP in the next quarter?

  1. +0.68%
  2. -0.86%
  3. +0.86%
  4. -0.68%

Answer(s): A

Explanation:

We need the total probability rule for expected value, for which the formula is E(X) = E(X | S_1) * P(S_1) + E(X | S_2) * P(S_2) + ... + E(X |S_n) * P(S_n). Here, E(X) is the expected change in GNP. S_1 is the event that oil prices rise, and S_2 is the event that oil prices fall. Therefore, E(X) = 0.51 * (- 1%*80% + 0.5%*20%) + 0.49 * (3%*75% - 0.5%*25%) = 0.68%, an expansion.



If you already have $500 in a savings account, how much must you deposit 4 years from now in order to have $5,000 in 8 years, assuming the account earns interest at 10% per year, compounded annually?

  1. $4,500.00
  2. $732.05
  3. $2,683.02
  4. $3,415.07
  5. $2,332.54

Answer(s): C

Explanation:

The way to approach this question is to find the PV today of the $5,000 amount, determine the difference between this PV and the existing $500 amount in the account, and then move this difference out to the 4 year from now point. On the BAII Plus, press 8 N, 10 I/Y, 0 PMT, 5000 FV, CPT PV. Then press + 500 =. Then press PV, 4 N, CPT FV to see the answer. On the HP12C, press 8 n, 10 i, 0 PMT, 5000 FV, PV. Then press 500 +.
Then press PV, 4 n, FV to see the answer. Make sure the BAII Plus has the P/Y value set to 1.



The joint probability of events A and B occurring equals 0.11. The probability of neither A nor B occurring equals 0.64. If P(A) equals 0.24, the probability of B occurring equals ________.

  1. 0.46
  2. 0.29
  3. 0.51
  4. 0.23

Answer(s): D

Explanation:

We are given that P(neither A nor B) = 0.64, P(A and B) = 0.11 and P(A) = 0.24. The probability of neither A nor B occurring equals one minus the probability of either A or B occurring i.e. P(neither A nor B) = 1 - P(A or B).
Thus, P(A or B) = 1 - P(neither A nor B) = 1 - 0.64 = 0.36.
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) = 0.36 - 0.24 + 0.11 = 0.23.






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