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
Answer B: Long in an option means buying an option. Put option implies right to sell. The person has bought the right to sell.
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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
Answer C: The optionally convertible bond gives option of converting the bond in to shares to the buyer and hence if share price increases he can convert else he can choose to redeem the bond. This makes option IV less risky than ordinary bonds. The callable bond gives issuer the right to call the bond which makes it more risky than ordinary bond. A preference share is more risky than bonds and ordinary share possesses highest risk in the list.
CFA Level 1 Practice Question 33
Which of the below indices has the highest chance of suffering from representation bias
a) Hedge fund indices
b) Bond indices
c) Global Equity Indices
CFA Level 1 Practice Question 33
Which of the below indices has the highest chance of suffering from representation bias
a) Hedge fund indices
b) Bond indices
c) Global Equity Indices
Answer A: Hedge funds report their performance only to specific index managers and hence the underlying representation in each index will be biased.
CFA Level 1 Practice Question 34
Which of the below type of industry classification would MOST likely suffers from the disadvantage of possibility of frequent change in grouping
a) Product based classification
b) Business cycle sensitivity based classification
c) Statistical classification
Hello everyone,
I am appearing for CFA in dec 2013.I have got schweser notes CFA 2013 from my senior.I want to know whether this is the latest one or anything else has come up for Dec 2013 exam.
hello everyone,
i am planning to apply for next year syllabus changes rite?
CFA Level 1 Practice Question 35
Which of the below criteria is MOST likely to make Raze ltd incomparable with Braz Ltd for the purpose of Peer Valuation
a) Both Raze Ltd and Braz Ltd produce and sell Steel and Copper.
b) Raze Ltd derives 30% of its revenue from steel and the remaining from Copper while Braz limited derives 40% of its revenue from copper and the rest from Steel.
c) Raze Ltd does retail sales of the metals through stores owned by the parent company and Braz ltd does retails sales through a wholly owned subsidiary
CFA Level 1 Practice Question 34
Which of the below type of industry classification would MOST likely suffers from the disadvantage of possibility of frequent change in grouping
a) Product based classification
b) Business cycle sensitivity based classification
c) Statistical classification
Answer C: Statistical classification is done based on correlation of share price movement in the past. Hence it may change frequently. The other classifications are unlikely to change frequently
CFA Level 1 Practice Question 35
Which of the below criteria is MOST likely to make Raze ltd incomparable with Braz Ltd for the purpose of Peer Valuation
a) Both Raze Ltd and Braz Ltd produce and sell Steel and Copper.
b) Raze Ltd derives 30% of its revenue from steel and the remaining from Copper while Braz limited derives 40% of its revenue from copper and the rest from Steel.
c) Raze Ltd does retail sales of the metals through stores owned by the parent company and Braz ltd does retails sales through a wholly owned subsidiary
Answer: B. The proportion of the revenues is different which makes them incomparable. The sale through subsidiary does not matter as on consolidated basis both companies will be same (all other things remaining the same)
CFA Level 1 Practice Question 36
Ram bought one share of Sokia Ltd at Rs.2900 through leveraged buying. The initial margin for the position is 30% and Maintenance margin is 25%. The percentage price drop in sokia's share price which will result in margin call for Ram is closest to
a) 5.00%
b) 6.67%
c) 7.82%
CFA Level 1 Practice Question 37
Which of the below statements about Swaps is MOST likely incorrect. Swaps
a) Are equivalent of series of forward contracts entered at the same time and expire at various times in the future.
b) May or may not involve a clearing house for settlement
c) Are equivalent to buying a put option and selling a call option.
CFA Level 1 Practice Question 36
Ram bought one share of Sokia Ltd at Rs.2900 through leveraged buying. The initial margin for the position is 30% and Maintenance margin is 25%. The percentage price drop in sokia's share price which will result in margin call for Ram is closest to
a) 5.00%
b) 6.67%
c) 7.82%
Answer B: Margin call price = (Purchase price €“ Initial Margin)/ (1-Mainteneance margin)
Price = 2900
Initial margin = 2900*30% = 870
M.Margin = 25%
Margin call price = (2900- 870) / (1-25%) = 2707.
Price drop % = 2707/ 2900 -1 = 6.67%
CFA Level 1 Practice Question 37
Which of the below statements about Swaps is MOST likely incorrect. Swaps
a) Are equivalent of series of forward contracts entered at the same time and expire at various times in the future.
b) May or may not involve a clearing house for settlement
c) Are equivalent to buying a put option and selling a call option.
Answer C: Forward contract is equivalent to writing a put and longing a call. The statement also does not mention anything about series of options. Also only series of forward contract make a swap.
CFA Level 1 Practice Question 38
Which of the below is NOT a difficulty in constructing a fixed income index
a) The constituent securities cease to exist after maturity.
b) The fixed income market is a dealer driven market
c) The values of securities will be selectively disclosed to the index managers.
guys I am completely amateur to this exam.But wanted to attempt this in the near future.SO could some one please tell me the basic things, how one have to apply to this exam and the amount of money one should pay for the exam????
THank u in advance
what study material you guys refer too ?
Hi,