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Free CFA-Level-I Exam Braindumps (page: 216)

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PDF with 3963 Questions

You are faced with a counting problem in which you must choose k objects from n total objects. The order of choosing matters. The counting method you should use is:

  1. The binomial formula.
  2. The multinomial formula.
  3. None of these answers is correct.
  4. The permutation rule.

Answer(s): D

Explanation:

We need the general permutation formula, which gives the number of ways that k objects can be chosen from n items, with regard to order. The formula is n_P_k = n! / (n-k)!



How much would an original deposit of $2,500 grow to be after 6 and a half years, if the deposit earns interest at 8.5% per year, compounded monthly?

  1. $4,335.53
  2. $5,541.02
  3. $3,601.34
  4. $10,183.49
  5. $3,570.42

Answer(s): A

Explanation:

On the BAII Plus, press 2500 PV, 0 PMT, 78 N, 8.5 divided by 12 = I/Y, then press CPT FV. On the HP12C, press 2500 PV, 0 PMT, 78 n, 8.5 ENTER 12 divide i, then press FV. The answer will be displayed as a negative number. Make sure that the BAII Plus has the P/Y value set to 1.



If you buy an item and pay for it with 60 monthly payments of $75 that begin next month, what was the cash price today, if interest accrues at 11% per year, compounded monthly?

  1. $4,598.42
  2. $3,544.71
  3. $2,545.29
  4. $3,904.12
  5. $3,449.48

Answer(s): E

Explanation:

The cash price would be the present value of the payments made using the specified interest rate. On the BAII Plus, press 60 N, 11 divide 12 = I/Y, 75 PMT, 0 FV, CPT PV. On the HP12C, press 60 n, 11 ENTER 12 divide i, 75 PMT, 0 FV, PV. Note that the answer will be shown as a negative number. Make sure the BAII Plus has the P/Y value set to 1.



Suppose that stocks A, B, C, and D are independent with respect to their price movement, and have probabilities of increasing of 0.25, 0.50, 0.40, and 0.30. What is the probability that stocks A and C will increase in price, while stocks B and D fail to increase?

  1. 11%.
  2. 2.5%.
  3. 3.5%.
  4. 10%.

Answer(s): C

Explanation:

If events are independent, then the joint probability of them occurring together is just the product of the individual probabilities. So P(AC) = 0.25 * 0.40 = 10%. To this, we multiply the probabilities of B and D failing to increase: 10% * (1 - 0.50)*(1 - 0.30) = 3.5%.






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