CFA LEVEL 1 TEST EXAM
QUESTIONS WITH CORRECT
ANSWERS 100% 2024
Allen Jabber invested $400 at the beginning of the last 12 months in the shares of a
mutual fund that paid no dividends. Which Method will he correctly choose to calculate
his average price per share from the monthly share prices?
a) Arithmetic Mean
b) Harmonic Mean
c) Geometric Mean - CORRECT ANSWERS-Harmonic Mean - The harmonic mean of
the 12 purchase prices will be his average price paid per share.
Colonia has 2 political parties, the Wigs and the Wags. If the Wags are elected there is
a 32% probability of a tax increase over the next 4 years. If the Wigs are elected there is
a 60% probability of a tax increase. There is a 20% probability the that the Wags will be
elected. The sum of the (unconditional) probability of a tax increase and the joint
probability that the wigs will be elected and there will be no tax increase is closest to:
a) 55%
b) 70%
c) 85% - CORRECT ANSWERS-86.4% = C
The unconditional probability of a tax increase is: 0.2(0.32) + 0.8(0.6) = 54.4%.
The joint probability that the Wigs will be elected and there will be no tax increase is:
0.8(0.4) = 32%. The sum is: 54.4 + 32 = 86.4%.
An analyst who wants to display the relationship between two variables graphically is
most likely to use:
a) a histogram
b) a scatterplot
c) a frequency polygon - CORRECT ANSWERS-B = Scatterplot
Scatterplots illustrate the relationship between two variables.
Histograms and frequency polygons show the distribution of observations for a single
variable.
Ralph will retire 15 years from today and has saved $121,000 in his investment account
for retirement. He believes he will need 37,000 at the beginning of each year for 25
, Years of retirement, with the first withdrawal on the day he retires. Ralph assumes his
account will earn 8%. The amount he needs to deposit at the beginning of this year and
each of the following 14 Years (15 in all) is closest to:
a) 1350
b) 1450
c) 1550 - CORRECT ANSWERS-B = 1450
Step 1:
Calculate the amount needed at retirement at t = 15, with your calculator in BGN mode.
N = 25, FV = 0, I/Y = 8, PMT = 37,000, CPT PV = -426,564
Step 2:
Calculate the required deposits at t = 0,1,....,14 to result in a time 15 value of 426,564,
with your calculator still in BGN mode.
PV = -121,000, N = 15, I/Y = 8, FV = 426,564, CPT PMT = -$1,457.21
The current price of Bosto shares is $50. Over the coming year, there is a 40%
probability that share returns will be 10%, 40% probability returns will be 12.5%, and a
20% probability share returns will be 30%. Bostos expected return and standard
deviation of returns for the coming year are closest to:
a) E(R) = 15% Standard Dev = 7.58%
b) E(R) = 17.5% Standard Dev = 5.75%
a) E(R) = 17.5% Standard Dev = 7.58% - CORRECT ANSWERS-A
E[R] = (0.4)(10) + (0.4)(12.5) + (0.2)(30) = 15%
Variance = (0.4)(10 − 15)2 + (0.4)(12.5 − 15)2 + (0.2)(30 − 15)2 = 57.5
Standard deviation=√57.5=7.58%
Nikki Ali and Donald Ankard borrowed $15,000 to finance their wedding and reception.
The fully amortizing loan at 11% requires equal payments at the end of each of the next
seven years. The principle portion of the first payment is closest to:
A) 1500
B) 1530
C) 1560 - CORRECT ANSWERS-B
The interest portion of the first payment is simply principal × interest rate = (15,000 ×
0.11) = 1,650.
Using a financial calculator: PV = 15,000, FV = 0, I/Y = 11, N = 7, CPT PMT= $3,183
Principal = payment − interest = 3,183 − 1,650 = 1,533
Which of the following statements about probability distributions is least accurate?
QUESTIONS WITH CORRECT
ANSWERS 100% 2024
Allen Jabber invested $400 at the beginning of the last 12 months in the shares of a
mutual fund that paid no dividends. Which Method will he correctly choose to calculate
his average price per share from the monthly share prices?
a) Arithmetic Mean
b) Harmonic Mean
c) Geometric Mean - CORRECT ANSWERS-Harmonic Mean - The harmonic mean of
the 12 purchase prices will be his average price paid per share.
Colonia has 2 political parties, the Wigs and the Wags. If the Wags are elected there is
a 32% probability of a tax increase over the next 4 years. If the Wigs are elected there is
a 60% probability of a tax increase. There is a 20% probability the that the Wags will be
elected. The sum of the (unconditional) probability of a tax increase and the joint
probability that the wigs will be elected and there will be no tax increase is closest to:
a) 55%
b) 70%
c) 85% - CORRECT ANSWERS-86.4% = C
The unconditional probability of a tax increase is: 0.2(0.32) + 0.8(0.6) = 54.4%.
The joint probability that the Wigs will be elected and there will be no tax increase is:
0.8(0.4) = 32%. The sum is: 54.4 + 32 = 86.4%.
An analyst who wants to display the relationship between two variables graphically is
most likely to use:
a) a histogram
b) a scatterplot
c) a frequency polygon - CORRECT ANSWERS-B = Scatterplot
Scatterplots illustrate the relationship between two variables.
Histograms and frequency polygons show the distribution of observations for a single
variable.
Ralph will retire 15 years from today and has saved $121,000 in his investment account
for retirement. He believes he will need 37,000 at the beginning of each year for 25
, Years of retirement, with the first withdrawal on the day he retires. Ralph assumes his
account will earn 8%. The amount he needs to deposit at the beginning of this year and
each of the following 14 Years (15 in all) is closest to:
a) 1350
b) 1450
c) 1550 - CORRECT ANSWERS-B = 1450
Step 1:
Calculate the amount needed at retirement at t = 15, with your calculator in BGN mode.
N = 25, FV = 0, I/Y = 8, PMT = 37,000, CPT PV = -426,564
Step 2:
Calculate the required deposits at t = 0,1,....,14 to result in a time 15 value of 426,564,
with your calculator still in BGN mode.
PV = -121,000, N = 15, I/Y = 8, FV = 426,564, CPT PMT = -$1,457.21
The current price of Bosto shares is $50. Over the coming year, there is a 40%
probability that share returns will be 10%, 40% probability returns will be 12.5%, and a
20% probability share returns will be 30%. Bostos expected return and standard
deviation of returns for the coming year are closest to:
a) E(R) = 15% Standard Dev = 7.58%
b) E(R) = 17.5% Standard Dev = 5.75%
a) E(R) = 17.5% Standard Dev = 7.58% - CORRECT ANSWERS-A
E[R] = (0.4)(10) + (0.4)(12.5) + (0.2)(30) = 15%
Variance = (0.4)(10 − 15)2 + (0.4)(12.5 − 15)2 + (0.2)(30 − 15)2 = 57.5
Standard deviation=√57.5=7.58%
Nikki Ali and Donald Ankard borrowed $15,000 to finance their wedding and reception.
The fully amortizing loan at 11% requires equal payments at the end of each of the next
seven years. The principle portion of the first payment is closest to:
A) 1500
B) 1530
C) 1560 - CORRECT ANSWERS-B
The interest portion of the first payment is simply principal × interest rate = (15,000 ×
0.11) = 1,650.
Using a financial calculator: PV = 15,000, FV = 0, I/Y = 11, N = 7, CPT PMT= $3,183
Principal = payment − interest = 3,183 − 1,650 = 1,533
Which of the following statements about probability distributions is least accurate?
