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Free CFA-Level-I Exam Braindumps (page: 274)

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PDF with 3963 Questions

A derivative security pays $100 if the Dow Jones Industrial Average shows a 15% return over the next year and does not pay anything of the return is lower. If the security costs $45 and its expected return is 30%, what's the probability that the Dow Jones return will exceed 15%?

  1. 39.87%
  2. 58.51%
  3. 41.49%
  4. 61.22%

Answer(s): B

Explanation:

If p is the probability of the Dow Jones return exceeding 15%, then the expected total return on the derivative security is (p * 100 + (1-p)*0)/45 = 2.222p. Since the expected return is given to be 30%, we get 2.22p = 1.3.
Therefore, p = 1.3/2.222 = 58.51%



A bottling company offers three kinds of delivery services-instant, same day and within five days. The profit per delivery varies according to the kind of delivery. The profit for an instant delivery is less than the other kinds because the driver has to go directly to a grocery store with a small load and return to the bottling plan. To find out what effect each type of delivery has on the profit picture, the company has made the following tabulation based on deliveries for the previous quarter.

Type of Number of Deliveries Profit per Delivery
Delivery During the Quarter
Instant 100 $70
Same day 60 $100
Within five days 40 $160

What is the weighted mean profit per delivery?

  1. $97
  2. $72
  3. $142
  4. None of these answers
  5. $100

Answer(s): A

Explanation:

(100*70)+(60*100)+(40*160) = 1940. Mean is 1940/200 = 97



How much must you deposit today in order to withdraw $1,500 in 1 year, $400 in 2 years and $1,500 in 4 years, assuming your money earns 6% per year, compounded annually?

  1. $2,771.03
  2. $2,821.95
  3. $2,959.23
  4. $3,029.49
  5. $404.92

Answer(s): C

Explanation:

Solve this question by working 3 compound interest problems. On the BAII Plus, press 1 N, 6 I/Y, 0 PMT, 1500 FV, CPT PV, which yields $1,415.09. Then press STO 1. Then press 2 N, 400 FV, CPT PV, which yields $356.00. Then press + RCL 1 = STO 1. Then press 4 N, 1500 FV, CPT PV, which yields $1,188.14. Then press + RCL 1 = to see the answer. On the HP12C, press 1 n, 6 i, 0 PMT, 1500 FV, PV. Then press STO 1. Then press 2 N, 400 FV, PV. Then press RCL 1 + STO 1. Then press 4 n, 1500 FV, PV. Then press RCL 1 + to see the answer. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the P/Y value set to 1.



A normally distributed variable has a mean of 45. If 95% of the observations on the variable fall between 30 and 60, the standard deviation of the variable is approximately ________.

  1. 7.50
  2. 30.3
  3. insufficient information
  4. 15.0

Answer(s): A

Explanation:

95% of the observations on a normally distributed variable lie within about two standard deviations of the mean.
The standard deviation is then (45-30)/2 = 7.5.






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