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CFA Board Exam| Questions and Essays with 100% Verified Answers
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CFA Board Exam| Questions and Essays with100% Verified Answers
Arbitrage - ✔️✔️An opportunity where the return that can be earned without risk is
greater than the risk-free rate; Come from market mispricings;
If uncertain returns can be combined into a portfolio that has certain returns, the
portfolio should not exceed the risk free rate
Arbitrage CDO - ✔️✔️Created by a sponsor seeks to profit from the spread
between the rate earned on the underlying assets and the rate promised to CDO
holders
Arbitrage Free Valuation - ✔️✔️When a bond has each of its cash flows discounted
using a discount rate that is
specific to the maturity of each cash flow; Spot rates used are required rate of
returns on zero coupon bonds maturing at a given time; The value of a bond
based on spot rates must be equal to the value of its parts or there is an arbitrage
opportunity
Arbitrage-Free Treasury Spot Rates - ✔️✔️The rates for different time
periods that correctly value a
Treasury bond; Discount rates for a zero-coupon
bond
Arithmetic Mean - ✔️✔️Average of every period's return
,Arms Index (or TRIN) - ✔️✔️A measure of funds flowing into advancing and
declining stocks; Calculated by (Number of advancing
shares\Number of declining shares) * (Volume of declining shares\Volume of
increasing shares); Greater than 1 indicates money going into declining shares,
the opposite means it's
going into increasing shares
Ascending price (English) auction - ✔️✔️Bidders can bid amounts greater than the
previous bid, and the bidder that first offers the highest bid wins the item and
pays the amount
Asset Backed Securities - ✔️✔️Represent a claim to a portion of a pool of assets
and the return is passed through to investors with
different tranches having different levels of risk and return
Asset Based Models - ✔️✔️Based on the equity value of a firm being the fair market
value of the assets minus the fair market value of the liabilities; Market value and
intangible assets make this difficult
Asset Beta - ✔️✔️= Equity Beta * [1/1 +(Debt/Equity)(1 - Tax Rate)]
Asset Returns and Correlation - ✔️✔️Prefer correlations of asset returns within an
asset class are significantly greater than
correlations of asset class returns
Asset's Carrying Value - ✔️✔️The value reported on the
,financial statements net of
depreciation
Asset's Tax Base - ✔️✔️Amount that will be deducted on the tax return in the
future as economic benefits are realized
Assumptions of Gordon Growth Model - ✔️✔️*Dividends are appropriate to
measure shareholder wealth
*Dividend growth rate and
required return never change
*Required return is greater than the dividend growth rate
Attitude/Rationalization - ✔️✔️A mindset that fraudulent behavior is justified;
Inappropriate ethical standards; Excessive participation by nonfinancial
management in the selection of accounting standards; Violations of laws and
regulations by management or board
members; A management obsession with maintaining or increasing the firm's
stock price or earnings trend; Making commitments to third parties to achieve
aggressive results;
Failing to correct known reportable conditions;
Inappropriately minimizing earnings for tax purposes;
Use of materiality as a basis to justify inappropriate or
questionable accounting methods; Strained relationship between management
and the current or previous auditor
Available for Sale Securities - ✔️✔️Listed at fair value but but
, unrealized gains and loses are not
reported
Average Collection Period - ✔️✔️Average number of days it takes for a customer to
pay its bills; ACP = 365/Receivables Turnover
Average Inventory Period = - ✔️✔️365/Inventory Turnover
Average Revenue < AVC - ✔️✔️Firm should shut down
Auction Process - ✔️✔️When the issuer determines the size and terms of the issue
and several banks bid on the interest rate required to sell it; Lowest interest rate
bid wins the deal
Auditor's Opinions - ✔️✔️+Unqualified opinion
+A qualified opinion
+An adverse opinion
+A disclaimer opinion
Austrian - ✔️✔️Business cycles are caused by the government
Autarky - ✔️✔️Close Economy
Average Revenue > ATC - ✔️✔️Firm should stay in business for long-run
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