1.
Alexandra Zagoreos, CFA, is the head of a government pension plan. Whenever Zagoreos hires amoney management firm to work with the pension plan, she finalizes the deal over dinner at a nice restaurant. At these meals, Zagoreos also arranges for the money manager to provide her payments equal to 10% of the management fee the manager receives from the pension plan. Zagoreos keeps half of the payments for her own use and distributes the remainder as cash incentives to a handful of her most trusted staff. Zagoreos least likely violated which of the following CFA Institute Code of Ethics and Standards of Professional Conduct?
A.
B.
Loyalty, Prudence and Care.
C.
Additional Compensation Arrangements.
2.
Rachel Kelly, 24 years old, is planning for retirement. Kelly’s annual consumption expenditures are currently $30,000. She assumes her consumption expenditures will increase with the rate of inflation, and she expects the average inflation rate is 3% until she retires at the age of 68.Given a life expectancy of 93 years and constant expenditures in retirement, the amount Kelly must accumulate by her retirement date, assuming an 8% rate of return on her retirement account, is closest to:
3.
If the distribution of the population from which the samples are drawn is positivelyskewed, and given that the sample size is large, the sampling distribution of the samplemeans is most likely:
A.
To have a mean smaller than the mean of the entire population.
B.
To have a variance equal to that of the entire population.
C.
Approximately normally distributed.
4.
An analyst gathered the price‐earnings ratios (P/E) for the firms in the S&P 500 and then ranked the firms from highest to lowest P/E. She then assigned the number 1 to the group with the lowest P/E ratios, the number 2 to the group with the second lowest P/E ratios, and so on. The measurement scale used by the analyst is best described as:
5.
When an analyst is unsure of the underlying population distribution, which of the following is least likely to increase the reliability of parameter estimates?
A.
Use of point estimates rather than confidence intervals
B.
Increase in the sample size
C.
Use of the t‐distribution rather than the normal distribution to establish confidence intervals
6.
Which of the following least likely describes an unstable market equilibrium ?
A.
The supply curve is less steeply sloped than the demand curve.
B.
Excess supply will tend to drive prices down.
C.
Prices that differ from equilibrium values tend to move further away from equilibrium.
7.
Two‐dimensional demand and supply curves are drawn under which of the following assumptions?
A.
All variables but own price and quantity are held constant.
B.
All variables but quantity are held constant.
C.
Own price is held constant.
8.
All else equal, if the elasticity of demand and the elasticity of supply both increase, which of the following is most likely?
A.
Consumer surplus will increase and producer surplus will increase
B.
Consumer surplus will decrease and producer surplus will decrease.
C.
Consumer surplus will decrease and producer surplus will increase.
9.
In principle and in practice, rent ceilings are most likely to:
A.
Prevent the housing market from operating in the social interest.
B.
C.
10.
A per‐unit tax on items sold that is paid by the seller will most likely result in the:
A.
Demand curve shifting vertically upward
B.
Demand curve shifting vertically downward.
C.
Supply curve shifting vertically upward.
11.
Which of the following statements best illustrates the difference between a Giffen good and a Veblen good?
A.
The substitution effect for each is in opposite directions.
B.
The Veblen good alone has a positively sloped demand curve.
C.
The Giffen good alone is an inferior good.
12.
An economic forecasting firm has estimated the following equation from historical databased on the neoclassical growth model:Potential output growth = 1.5 + 0.72 X Growth of labor + 0.28 X Growth of capitalThe intercept (1.5) in this equation is best interpreted as:
A.
The long‐run sustainable growth rate.
B.
Above trend historical growth that is unlikely to be sustained.
C.
The growth rate of total factor productivity.
13.
Oligopolistic pricing strategy most likely results in a demand curve that is:
14.
In the Ricardian trade model, a country captures more of the gains from trade if:
A.
The terms of trade are closer to its partner's autarkic prices than to its autarkic prices.
B.
The terms of trade are closer to its autarkic prices than to its partner's autarkic prices.
C.
It produces all products while its trade partner specializes in one good.
15.
An example of an expense classification by function is:
16.
Apex Consignment sells items over the internet for individuals on a consignment basis. Apex receives the items from the owner, lists them for sale on the internet, and receives a 25 percent commission for any items sold. Apex collects the full amount from the buyer and pays the net amount after commission to the owner. Unsold items are returned to the owner after 90 days. During 2006, Apex had the following information: Total sales price of items sold during 2006 on consignment was €2,000,000, How much revenue should Apex report on its 2006 income statement?
17.
The initial measurement of goodwill is most likely affected by:
A.
The fair value of the acquirer's assets and liabilities.
B.
The acquired company's book value.
C.
An acquisition's purchase price.
18.
A U.S. investor has purchased a tax-exempt 5-year municipal bond at a yield of 3.86%, which is 100 basis points less than the yield on a 5-year option-free U.S. Treasury. If the investor's marginal tax rate is 32%, then the taxable-equivalent yield and the yield ratio are closest to:Taxable Equivalent Yield Yield Ratio2.620.792.621.265.680.795.681.26
19.
Which of the following is an appropriate method of computing free cash flow to thefirm?
A.
Deduct both after‐tax interest payments and capital expenditures from operating cashflows.
B.
Add operating cash flows to capital expenditures and deduct after‐tax interest payments.
C.
Add operating cash flows to after‐tax interest payments and deduct capital expenditures.
20.
Assume U.S. GAAP applies unless otherwise noted. All else equal, the net profit marginfor a company will be highest if, for new depreciable assets, that company uses:
A.
High salvage value estimates and long average lives.
B.
High salvage value estimates and short average lives
C.
Low salvage value estimates and long average lives.
21.
A company, which prepares its financial statements in accordance with IFRS uses the revaluation model to value land. At the end of the current year the value of the land has increased and will be adjusted on the balance sheet. Which of the following statements is most accurate? In the current period the revaluation of the land will:
A.
Increase return on assets.
B.
C.
Decrease the debt to equity ratio.
22.
Degree of operating leverage is best described as a measure of the sensitivity of:
A.
Fixed operating costs to changes in variable costs.
B.
Net earnings to changes in sales.
C.
Operating earnings to changes in the number of units produced and sold.
23.
The following information is available about a manufacturing company: $ million Cost of ending inventory computed using FIFO 4.3 Net realizable value 4.1 Current replacement cost 3.8 Compared to U.S. GAAP, the company's gross profit ($ millions) computed under IFRS is most likely:
24.
Compared to its market‐value‐weighted counterpart, a fundamentally weighted indexwill least likely have a:
25.
Calculate the 2009 return on equity (ROE) of a stable company using the following data: Total sales £2,500,000, Net income £2,000,000, Beginning of year total assets £50,000,000, Beginning of year total liabilities £35,000,000, Shares outstanding at end of 2009 1,000,000, Price per share at the end of 2009 £20.