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Free CFA-Level-I Exam Braindumps (page: 265)

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PDF with 3963 Questions

What annual deposit would you need to make, beginning in one year, into an account paying 7% per year, compounded annually, in order to have $50,000 in it after 20 years, assuming that the account has nothing in it today?

  1. $1,129.56
  2. $1,219.65
  3. $4,719.65
  4. $1,291.56
  5. $2,191.65

Answer(s): B

Explanation:

On the BAII Plus, press 20 N, 7 I/Y, 0 PV, 50000 FV, CPT PMT. On the HP12C, press 20 n, 7 i, 0 PV, 50000 FV, PMT. Note that the answer will be displayed as a negative number.



An investment of $100 grows in five years to $205. The investor observes that the annual arithmetic rate of return and the geometric rate of return were the same over this period. The annual arithmetic rate of return must be ________.

  1. 4.32%
  2. 15.44%
  3. 17.84%
  4. 13.93%
  5. 8.33%

Answer(s): B

Explanation:

If the annual geometric rate of return is r, then 100 * (1 + r)^5 = 205. This gives r = 15.44%. Note that the only way the mean will be equal to the geometric mean if every year, the stock experienced a return of 15.44% per year.



What is the present value today of these annual cash flows: $1,000, $2,000, $3,000? Assume the first cash flow occurs 1 year from today and an interest rate of 10% per year, compounded annually.

  1. $2,304.67
  2. $2,754.32
  3. $4,815.93
  4. $4,000.00
  5. $4,104.98

Answer(s): C

Explanation:

You could solve this question using 3 different compound interest problems, but it is easier to solve them using the calculator's cash flow functions. On the BAII Plus, press CF 2nd CLRWork 0 ENTER DownArrow 1000 ENTER DownArrow DownArrow 2000 ENTER DownArrow DownArrow 3000 ENTER DownArrow DownArrow 2nd Quit. Then press NPV 10 ENTER DownArrow CPT. On the HP12C, press these keys: 0 BlueShift CFo 1000 BlueShift CFj 2000 BlueShift CFj 3000 BlueShift CFj. Then press 10 i, YellowShift NPV. The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard. Make sure that the BAII Plus has the P/Y value set to 1.



You are given a risk-free rate of 7% per year, a portfolio return of 19% per year, and a standard deviation of portfolio return of 12% per year. What is the Sharpe measure of risk-adjusted performance?

  1. 1.111.
  2. 0.583.
  3. 1.000.
  4. 1.583.

Answer(s): C

Explanation:

The Sharpe measure of risk-adjusted performance is equal to (rbar_p - rbar_f)/sigma_p, where rbar_p is the mean portfolio return, rbar_f is the mean risk-free return, and sigma_p is the standard deviation of portfolio return. In our case, we have (19% - 7%) / 12% = 12/12 = 1.000.






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