CFA Level 1 Practice Question 23
In case of stock split, which of the below type of index results in change in weight of ALL the constituent securities of an index
a) Price weighted index
b) Unweighted index
c) Market Cap weighted index
CFA Level 1 Practice Question 23
In case of stock split, which of the below type of index results in change in weight of ALL the constituent securities of an index
a) Price weighted index
b) Unweighted index
c) Market Cap weighted index
Ans A: Unweighted index and market cap weighted index are not influenced by the price of the security. Only Price weighted index are influenced. For example in case of 1:2 split the weight of the split security will approximately fall by 50%. The remaining 50% of the erstwhile weight of this security will be distributed across all other remaining constituents, which would result in change in weight for all the securities.
CFA Level 1 Practice Question 24
Mannar Exports Ltd reported a Networth of USD 72.35 mn on 31-Dec-2011. On 31-Dec-2012 the company's networth stood at USD 79.95 mn. Looking in to the cashflow statement of the company an analyst noticed that the company paid a total dividend of USD 3.26 mn in 2012 and there were no issue or buyback of equity during the year. Mannar Export's Dividend payout ratio for the year 2012 is closest to
a) 4.50%
b) 4.01%
c) 30.02%
For those with a target of Level 2 - June 2014 in mind, a new thread has been started
http://www.pagalguy.com/discussions/cfa-level-2-june-2014-25103989
CFA Level 1 Practice Question 25
Below are the details of a sector index. The closing value of market cap weighted index on the previous day is 1457. The value of index at the end of today's session will be closest to
a) 1475.24
b) 1470.85
c) 1436.25
CFA Level 1 Practice Question 25
Below are the details of a sector index. The closing value of market cap weighted index on the previous day is 1457. The value of index at the end of today's session will be closest to
a) 1475.24
b) 1470.85
c) 1436.25
Answer B: Market cap to be determined by previous days price. For each stock market cap/ Total Market cap of index * Stock return will give the return contribution to the index. Sum of these contributions is total retun of index for the day which is 0.95%. Closing value = 1457 *(1+0.95%) = 1470.85
CFA Level 1 Practice Question 26
Rash Ltd reported an EPS of $2.5 for the year 2012. The company's current market cap is $340 mn and Price / share is $17. The company's net worth at the end of 2012 is $200 mn and the company paid no dividends for the year. The Return of equity of the company is closest to
a) 28.57%
b) 25.00%
c) 14.71%
CFA Level 1 Practice Question 26
Rash Ltd reported an EPS of $2.5 for the year 2012. The company's current market cap is $340 mn and Price / share is $17. The company's net worth at the end of 2012 is $200 mn and the company paid no dividends for the year. The Return of equity of the company is closest to
a) 28.57%
b) 25.00%
c) 14.71%
Answer A: Shares OS = 340/17 = 20 mn. Current networth =200 mn; current year profit = 2.5 * 20 (shares OS) = 50. Last year book value = 200-50 €“ 0 (dividend) = 150. Average book value = 175. RoE= profit/ Avg Book value = 50/175= 28.57%
CFA Level 1 Practice Question 27
Sailor Ltd has issued preference share issued at face value of $10. These shares attract a dividend of 7%. Presently these shares are trading at $9.23. The cost of these preference shares is closest to
a) 7.58%
b) 7.00%
c) 6.46%
CFA Level 1 Practice Question 27
Sailor Ltd has issued preference share issued at face value of $10. These shares attract a dividend of 7%. Presently these shares are trading at $9.23. The cost of these preference shares is closest to
a) 7.58%
b) 7.00%
c) 6.46%
Answer A: Price of preference share with no dividend growth = Dividend / Cost of pref capital. 9.23 = 0.7/r; r = 0.7/ 9.23 = 7.58%. Cost of capital need to be calculated on Marginal cost of capital, not issue price.
CFA Level 1 Practice Question 28
Schindler Ltd issued common shares with face value of $10. Presently the share are trading at $25. The company's paid a 20% dividend on the face value of the shares last year. An analyst estimates the cost of equity for Schindler is 14.2%. The estimated growth of Schindler according to Dividend Discount model is close to
a) 4.83%
b) 6.20%
c) 5.74%
CFA Level 1 Practice Question 28
Schindler Ltd issued common shares with face value of $10. Presently the share are trading at $25. The company's paid a 20% dividend on the face value of the shares last year. An analyst estimates the cost of equity for Schindler is 14.2%. The estimated growth of Schindler according to Dividend Discount model is close to
a) 4.83%
b) 6.20%
c) 5.74%
Answer C: DDM Price = D*(1+g)/ (r-g); Last year dividend = 10*20% =$2; so, fo DDM 25 = 2*(1+g)/ (14.2% - g); 2/25 *(1+g) = 14.2% -g; ( 8% + 8%*g) = 14.2% -g ; g+.08g = 14.2% - 8%; 1.08g = 6.2%; g =5.74%
CFA Level 1 Practice Question 29
In Financial marketing Parlance which of the below statement correctly describes the way in which practitioners classify the 'Money Market' and 'Capital Market'
a) Money Market is for trading debt instruments and Capital market is for trading equity instruments
b) Money Market is for short term fund raising and Capital Market is for long term fund raising
c) Money Market is used for raising fresh capital and capital market is used for trading existing issues
hey guys, i am planning to start my cfa lev 1 exam prep , i have already got my material of schweser. i want to know how should i plan my studies so that i can sit for lev 1 exam in dec 2013 (i have to yet register). I have recently joined an mba college and have a work ex of 2.9 years. plz help!!! thanx in advance
CFA Level 1 Practice Question 29
In Financial marketing Parlance which of the below statement correctly describes the way in which practitioners classify the 'Money Market' and 'Capital Market'
a) Money Market is for trading debt instruments and Capital market is for trading equity instruments
b) Money Market is for short term fund raising and Capital Market is for long term fund raising
c) Money Market is used for raising fresh capital and capital market is used for trading existing issues
Answer B: refer Page 15 in curriculum Book 5.
CFA Level 1 Economics Video
Link to the video of our Webinar on Economics for CFA Level I. This 1 hour session discussed a couple of topics from Microeconomics and Macroeconomics.
CFA Level 1 Practice Question 30
Which of the below factors is LEAST likely to contribute to increasing the efficiency of the markets. The National stock exchange of India
a) Decreased the exposure limit for individuals on USD-INR currency position to USD 25,000 from USD 50,000
b) Decreased the maximum brokerage charged on trades from 2.5% to 2.0%
c) Increased the number of securities traded in Futures and Options segment from 250 to 550
CFA Level 1 Practice Question 30
Which of the below factors is LEAST likely to contribute to increasing the efficiency of the markets. The National stock exchange of India
a) Decreased the exposure limit for individuals on USD-INR currency position to USD 25,000 from USD 50,000
b) Decreased the maximum brokerage charged on trades from 2.5% to 2.0%
c) Increased the number of securities traded in Futures and Options segment from 250 to 550
Answer A: decreasing position limits will lead to arbitrage opportunities
CFA Level 1 Practice Question 31
When a person says 'I am long in a put option' then he implies
a) He has sold the right to sell a stock at a specific price
b) He has bought the right to sell a stock at a specific price
c) He has bought the right to buy a stock at a specific price
CFA Level 1 Practice Question 32
Which of the below option correctly lists the following securities in ascending order of their respective risks
i) Ordinary Equity shares
ii) Non convertible bonds
iii) Preference shares
iv) Optionally convertible bonds
v) Callable bonds
a) V,IV, II, III,I
b) V,II,IV,III,I
c) IV,II,V,II,I