Cisco
CompTIA
ISC
EC-Council
EXIN
Fortinet
ITIL
Juniper
Microsoft
VMware
Avaya
SAP
Google
NVIDIA
Salesforce
Amazon
Palo Alto Networks
ISC2
Splunk
ServiceNow
All Vendors
  2. Home
  3. Exams
  4. Test Prep
  5. CFA-Level-I

Test Prep CFA-Level-I Exam
CFA® Level I Chartered Financial Analyst (Page 150 )

Updated On: 11-Jan-2026
Page 150 of 793
PDF with 3963 Questions

Mark King, CFA, is valuing Nacho Inc., a food distributor. Nacho is currently selling for $28 per share and has a 3.0% dividend yield. The risk-free rate is 4%, and the expected return on the market is 8%. King has calculated Nacho's beta to be 1.25. Based on King's analysis, Nacho stock's intrinsic value is $30 per share. King should:

  1. invest in Nacho shares.
  2. not invest in Nacho shares because the required rate of return is less than the expected rate of return.
  3. not invest in Nacho shares because the required rate of return is greater than the expected rate of return.

Answer(s): A



An analyst uses a temporary supernormal growth model to value a common stock. The company paid a $2 dividend last year. The analyst expects dividends to grow at 15% each year for the next three years and then to resume a normal rate of 7% per year indefinitely. The analyst estimates that investors require a 12% return on the stock. The value of this common stock is closest to:

  1. $48.
  2. $53.
  3. $71.

Answer(s): B



Douglas Morin is discussing market efficiency with some college students who are visiting his firm. Morin states that market efficiency would increase if the cost of trading decreases, if the cost of information decreases, and if arbitrageurs had less capital. Morin is least likely to be correct in his opinion about:

  1. the cost of trading
  2. the cost of information
  3. arbitrageurs

Answer(s): C



You have a 3-year investment horizon. You can buy a 10% semi annual coupon, 10 year bond for $1,000. You estimate you can reinvest the coupons at 12% and sell the bond in 3 years time for $1,050. Based on this information, what is your horizon return?

  1. 9.5%
  2. 10.0%
  3. 11.5%
  4. 13.5%

Answer(s): C

Explanation:

1.Find the FV of the coupons and interest on interest:
n = 3(2)=6; i = 12/2 = 6; PMT = 50; compute FV =348.77
2. Determine the value of the bond at the end of 3 years: given = 1,050.00 1,398.77
3. Equate FV (1398.77) with PV (1000) over 3 years (n=6); compute i = 5.75(2) = 11.5%



Consider a bond that pays an annual coupon of 5 percent and that has three years remaining until maturity. Assume the term structure of interest rates is flat at 6 percent. How much does the bond price change over the next twelve-month interval if the term structure of interest rates does not change?

  1. 0.84.
  2. -0.84.
  3. -0.56.
  4. 0.00.

Answer(s): A

Explanation:

The bond price change is computed as follows: Bond Price Change = New Price ­ Old Price = (5/1.06 + 105/1.062) - 5/1.06 + 5/1.062 + 105/1.063 = 0.84.



Viewing page 150 of 793
Viewing questions 746 - 750 out of 3963 questions



Post your Comments and Discuss Test Prep CFA-Level-I exam prep with other Community members:

CFA-Level-I Exam Discussions & Posts