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Free CFA-Level-I Exam Braindumps (page: 201)

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PDF with 3963 Questions

What simple annual interest rate would cause a $120 deposit to grow to $125 in 6 months?

  1. 25%
  2. 7.89%
  3. 4.17%
  4. 3.14%
  5. 8.33%

Answer(s): E

Explanation:

To solve this question, we have to rearrange the simple interest formula, I=PRT so that the R is by itself. Note that the I (interest) is equal to 5 (125 - 120). Note also that the time component T of the formula is 6/12. On the BAII Plus, press 5 divide 120 divide 6 x 12 = to see the answer. On the HP12C, press 5 ENTER 120 divide 6 divide 12 x to see the answer.



What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$20,000>, Year 1:
$15,000, Year 2: $5,000, Year 3: $7,500? (Note that the <> are used to indicate a negative number).

  1. 20.49%
  2. 21.17%
  3. 23.12%
  4. 18.32%
  5. 25.51%

Answer(s): B

Explanation:

On the BAII Plus, press CF 2nd CLRWork 20000 +/- ENTER DownArrow 15000 ENTER DownArrow DownArrow 5000 ENTER DownArrow DownArrow 7500 ENTER DownArrow DownArrow 2nd Quit. Then press Irr CPT. On the HP12C, press these keys: 20000 CHS BlueShift CFo 15000 BlueShift CFj 5000BlueShift CFj 7500 BlueShift CFj Then press YellowShift Irr. The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard.



Stock A is highly volatile while stock B has low volatility. The difference between the arithmetic and geometric rates of return will be:

  1. same for both stocks, since the difference is not dependent on volatility.
  2. larger for stock A or stock B, depending on their riskiness.
  3. larger for stock A.
  4. larger for stock B.

Answer(s): C

Explanation:

The mean and the geometric mean are equal when volatility in the rate of return is zero. For a non- zero volatility, the mean exceeds the geometric mean and the difference is larger the higher the volatility.



There are 10 rolls of film in a box and 3 are defective. Two rolls are to be selected, one after the other. What is the probability of selecting a defective roll followed by another defective roll?

  1. 1/120, or about 0.0083
  2. 1/15, or about 0.07
  3. None of these answers
  4. 1/4, or 0.25
  5. 1/2, or 0.50

Answer(s): B

Explanation:

The probability of selecting a defective roll in the first selection is 3/10. The probability of choosing another defective roll is 2/9. So 3/10*2/9 = 6/90 = 1/15.






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