Cisco®
CompTIA
Checkpoint
ISC
EC-Council
EXIN
Fortinet
ITIL®
Juniper
Microsoft
VMware
Avaya
SAP
Google
Salesforce
Amazon
Palo Alto Networks
ISC2
Splunk®
ServiceNow®
All Vendors
  2. Home
  3. Exams
  4. Test Prep
  5. CFA-Level-I

CFA-Level-I: CFA® Level I Chartered Financial Analyst
Free Practice Exam Questions (page: 73)
Updated On: 2-Jan-2026

Page 73 of 496
PDF with 3963 Questions

Karen Callaway is an investor in the 35% tax bracket. She is evaluating a tax-exempt municipal security with a tax-exempt yield of 4.5%. What is the taxable equivalent yield (TEY) of the municipal security?

  1. 2.9%.
  2. 6.9%.
  3. 12.9%.

Answer(s): C

Explanation:



Ron Logan, CFA, is a bond manager. He purchased $50 million in 6.0% coupon Southwest Manufacturing bonds at par three years ago. Today, the bonds are priced to yield 6.85%. The bonds mature in nine years. Identify the most accurate statement regarding the pricing and yield of these bonds.

  1. The bonds are trading at a discount, and the yield to maturity (YTM) has increased since purchase.
  2. The bonds are trading at a premium, and the yield to maturity (YTM) has decreased since purchase.
  3. The bonds are trading at a discount and the yield to maturity (YTM) has decreased.

Answer(s): A



Steve Brown is questioned by his superior about the commonly cited criticisms and benefits of the derivatives market. Which of Brown's statements regarding the criticisms and benefits of derivative markets is most likely correct?

  1. Derivatives markets are often criticized for being too risky and illiquid for all but the most knowledgeable investors.
  2. Derivatives benefit financial markets due to the price discovery and risk management functions they provide.
  3. Derivatives benefit financial markets by generating high fees for dealers wilting to make a market in these securities.

Answer(s): B



Two portfolio managers at an investment management firm are discussing option strategies for their clients' portfolios. The first manager is considering a covered call strategy on Consolidated Steel Inc. (CSI). The manager states that the strategy is attractive since it will increase the expected returns from the anticipated appreciation in CSI, while reducing the downside risk. The second manager is considering a protective put strategy on Millwood Lumber Company (MLC). The manager states that the protective put strategy will allow his investors to retain an infinite profit potential while limiting potential losses to an amount equal to the initial stock price minus the put premium. Determine whether the comments made by the first and second manager are correct.

  1. Only the first manager is incorrect.
  2. Only the second manager is incorrect.
  3. Both the first manager and the second manager are incorrect.

Answer(s): C



An investor takes a long position in a corn futures contract. Initial margin on the contract is 10% of the contract value and maintenance margin is half of the initial margin. If, at the beginning of the second trading day for the contract, the investor receives a margin call, it is least likely that:

  1. variation margin is greater than maintenance margin.
  2. the final trade from the previous day is greater than the contract price.
  3. the average of the last few trades from the previous day is less than the contract price.

Answer(s): B



Anne Quincy took the short side of a forward contract on the S&P 500 Index three months ago in an attempt to hedge short-term changes in her index portfolio. The contract had a term of six months at the purchase date, a contract price of $ 1,221 and Mason Inc. as the counterparty. Quincy is now considering unwinding her short position using either a three-month Mason Inc. contract with a price of $1,220, a three-month JonesCo contract with a price of S1,219, or a three-month Redding Company contract with a price of $1,218. If Quincy wants to minimize credit risk, which of the following should she do? Take the long position in the contract with:

  1. JonesCo.
  2. Mason Inc.
  3. Redding Company.

Answer(s): B



An analyst is evaluating a European call option with a strike price of 25 and 219 days to expiration. The underlying stock is currently trading for $29, and the analyst thinks that by the option expiration date the stock will be valued at $35. If the risk-free rate is 4.0%, what is the lower bound on the value of this option?

  1. $0
  2. $4.00
  3. $4.58.

Answer(s): C



Party A enters into a plain vanilla 1-year interest rate swap agreement with Bank B in which he will make fixed- rate payments in exchange for receiving floating-rate payments based on LIBOR plus 100 basis points. Assume that payments are made quarterly in arrears based on a 360-day year. The fixed rate on the swap is 6.5%. The current interest rates on 90, 180, 270, and 360-day LIBOR are 5.2%, 5.5%, 5.8%, and 6.0%, respectively. If the notional principal is SI00 million, what will Party A's net cash flow at the end of the first quarter equal?

  1. -$675,000
  2. -$75,000
  3. +$75,000

Answer(s): B



Viewing page 73 of 496
Viewing questions 577 - 584 out of 3963 questions



Post your Comments and Discuss Test Prep CFA-Level-I exam prep with other Community members:

CFA-Level-I Exam Discussions & Posts