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Free CFA-Level-I Exam Braindumps (page: 208)

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PDF with 3963 Questions

What is the chart called when the paired date (the dependent and independent variables) are plotted?

  1. Linear regression
  2. Pie
  3. Bar
  4. Dotted-Swiss
  5. None of these answers

Answer(s): E

Explanation:

This chart is the scatter diagram.



What annual interest rate, compounded annually, is equivalent to 8% per year, compounded semiannually?

  1. 8.04%
  2. 8.16%
  3. 7.82%
  4. 8.09%
  5. 8%

Answer(s): B

Explanation:

Questions of this type are illustrating the concept of an Effective Interest Rate, which is a rate compounded annually that has the same effect as a rate compounded more often than one time a year. As such, a depositor or a creditor is indifferent between them, since they have the same effect. To solve this question, make any deposit and see how much is in the account after one year. The ratio of theending FV to the beginning PV will indicate the annual rate earned. On the BAII Plus, press 2 N, 8 divide 2 = I/Y, 100 PV, 0 PMT, CPT FV. On the HP12C, press 2 n, 8 ENTER 2 divide i, 100 PV, 0 PMT, FV. The number displayed will be 108.16. In other words, after one year, $100 has become $108.16. An interest rate of 8.16%, compounded annually, would cause a $100 deposit to become $108.16 in one year. Choosing an initial deposit of $100 helps a great deal in these situations. Make sure the BAII Plus has the value of P/Y set to 1.



An insurance agent has appointments with four prospective clients tomorrow. From past experience the agent knows that the probability of making a sale on any appointment is 1 out of 5. Using the rules of probability, what is the likelihood that the agent will sell a policy to 3 of the 4 prospective clients?

  1. 0.410
  2. None of these answers
  3. 0.250
  4. 0.026
  5. 0.500

Answer(s): D

Explanation:

This is a binomial probability. The probability of getting r successes out of n trials where the probability of success each trial is p and probability of failure each trial is q (where q = 1-p) is given by: n!(p^r)[q^(n-r)]/r!(n-r)!.
Here n = 4, r = 3,p = 0.20 and q = 0.80. Therefore we have 4!(0.2^3)(0.8^1)/3!1! = 0.026.



An investor has a quarterly compounded required rate of return of 9% per year. How much will he pay for a nine-year ordinary annuity that pays $100 per year?

  1. $599.5
  2. $574.3
  3. $592.6
  4. $594.6

Answer(s): C

Explanation:

The annually compounded rate equals (1 + 9%/4)^4 - 1 = 9.3%. Therefore, the present value of the annuity equals 100/0.093*[1 - 1/1.093^9] = $592.6.






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