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CFA-Level-I: CFA® Level I Chartered Financial Analyst
Free Practice Exam Questions (page: 74)
Updated On: 2-Jan-2026

Page 74 of 496
PDF with 3963 Questions

Krissy Steele, CFA, manages money for high net worth individuals. Steele develops unique investment policies for all of her clients and uses various investment funds to construct portfolios. However, Steelehas been

reluctant to use hedge funds. Which of the following statements made by Steele is least likely to be correct?

  1. The volatility of historical returns associated with hedge fund indexes understates their true risk level.
  2. Hedge fund returns are normally distributed.
  3. Published information on hedge fund returns is based on incomplete historical data.

Answer(s): B



When compared to a traditional mutual fund, an ETF will most likely offer:

  1. better risk management
  2. less portfolio transparency
  3. higher exposure to capital gains distribution taxes.

Answer(s): A



An investor purchases oil commodity futures contracts worth $25 million and an equal amount of 10-year Treasury notes with an interest rate of 3.5%. Assuming that oi! prices rise by 10% and the price of the notes remains unchanged, the total return of the position after three months is closest to:

  1. $2,500,000
  2. $2,600,000
  3. $2,700,000

Answer(s): C



Archie Boone, CFA, is the managing director at Hoffman Advisors, an alternative investment management company. Boone is reviewing the work of a real estate analyst and finds that in calculating net operating income (NOI) for a property, the analyst has understated vacancy by $3,000, overstated depreciation expense by $4,000, overstated insurance expense by $4,000, and understated interest expense by $2,000. If Boone corrects the analyst's estimates of NOI for all these items, the updated estimate will:

  1. increase by $1,000 as the restatement of vacancy will be partially offset by the restatement of insurance expense.
  2. increase by $1,000 as the restatement of depreciation expense will be partially offset by the restatement of vacancy.
  3. decrease by $1,000 as the restatement of insurance expense will be more than offset by the restatement of vacancy and interest expense.

Answer(s): A



An investor purchased a stock for $60 a share using margin from his broken If the initial margin requirement is 40%, and the maintenance margin requirement is 20%, which of the following best describes the price at which a margin call will initially be triggered?

  1. Below $30.
  2. Below $45.
  3. Below $48.

Answer(s): B



In a rebuttal to comments made by Dilbertico's fundamental analyst, Keith Howard states that future changes in stock prices cannot be predicted based on a company's institutional ownership. State which form of the efficient market hypothesis (EMH) Howard's statement supports and also state a type of empirical study which tests that form of the EMH.

  1. Weak form of the EMH and trading rulestest.
  2. Semistrong form of the EMH and trading rules test.
  3. Semistrong form of the EMH and event study.

Answer(s): C



Bart Wiggum believes the current level of the S&P 500 index reflects all public information. To convince his supervisor of his hypothesis, Wiggum has downloaded a daily price series for the S&P 500 index for the period 1950 to 2007. Which of the following tests can be used to test Wiggum's belief about public information?

  1. Runs test.
  2. Autocorrelation test.
  3. Earnings surprise test.

Answer(s): C



The constant-growth dividend discount valuation model states that the fair price of a share of common equity is determined by dividing next period's forecasted dividend by the difference between the cost of equity capital and the firm's long-term sustainable growth rate. Using this relationship, the cost of equity capital can alternatively be stated as:

  1. D/V + g.
  2. RFR-(+ RFR).
  3. expected growth rate of dividends minus required rate of return.

Answer(s): A



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