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Free CFA-Level-I Exam Braindumps (page: 146)

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PDF with 3963 Questions

If you were to receive $100 per year for the next 10 years, starting today, and the discount rate applicable is 9% per year, what's the value of this stream of cash flows to you?

  1. $700
  2. $600
  3. $678
  4. $642

Answer(s): A

Explanation:

Since you receive one payment today, the stream of cash flow equals $100 plus a 9-year ordinary annuity. The value of the annuity today = (100/0.09)*(1 - 1/(1.09^9)) = 600. Thus, the total value to you is 600+100 = 700.



You have set up a test of a suitably phrased null hypothesis. After analyzing the statistical underpinnings of the test and the stringency requirements you have imposed, you have determined that the probability of rejecting the null hypothesis equals 30%. The probability that you will reject the null hypothesis when it is true is equal to 13% and the probability that you will reject the null hypothesis when it is false is equal to 17%. The significance level of your test equals ________.

  1. 17%
  2. 6%
  3. 30%
  4. 13%

Answer(s): D

Explanation:

The significance level equals the probability of making a Type I error, which is the error of rejecting the null when it is, in fact, true. In this case, this has been given to be equal to 13%.



A study of business faculty at state supported institutions in Ohio revealed that the mean salary for nine months is $52,000 and the standard deviation of the sample is $3,000. The study also showed that the faculty had been employed an average (mean) of 15 years with a standard deviation of 4 years. How does the relative dispersion in the distribution of salaries compare with that of the lengths of service?

  1. Salaries about 6%, service about 27%
  2. Salaries about 100%, service about 50%
  3. Salaries about 2%, service about 6%
  4. None of these answers
  5. Salaries about 42%, service about 81%

Answer(s): A

Explanation:

The coefficient of variation = (s*100)/mean. Salary: 3,000*100/52,000 = 5.7%. Service: 4*100/15 = 26.7%.



Johnny deposited a check he received from his Aunt when he was 10 years old into an account paying 10% per year, compounded monthly. If the original check was for $100, how much does Johnny have in his account today, 50 years later?

  1. $151.43
  2. $5,905.33
  3. $58,304.28
  4. $100.00
  5. $14,536.99

Answer(s): E

Explanation:

There are 600 months in 50 years (50 x 12). On the BAII Plus, press 600 N, 10 divide 12 = I/Y, 100 PV, 0 PMT, CPT FV. On the HP12C, press 600 n, 10 ENTER 12 divide i, 100 PV, 0 PMT, FV. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the value of P/Y set to 1.






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