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CFA Level 1 - Error Sets question with complete solution graded A+ 2023
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CFA Level 1 - Error Sets question with complete solution graded A+ 20233.Two years from now, a client will receive the first of three annual payments of $20,000 from a small business project. If she can earn 9 percent annually on her investments and plans to retire in six years, how much will the t...

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  • June 15, 2023
  • 73
  • 2022/2023
  • Exam (elaborations)
  • Questions & answers

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  • cfa level 1 error sets question with complete so
  • 3two years from now
  • a client will receive the fi
  • 7suppose you plan to send your daughter to colleg
  • 8a client plans to send a child to college for

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CFA Level 1 - Error Sets question with
complete solution graded A+ 2023

3.Two years from now, a client will receive the first of three annual payments of $20,000 from a small
business project. If she can earn 9 percent annually on her investments and plans to retire in six years,
how much will the three business project payments be worth at the time of her retirement? - correct
answer



7.Suppose you plan to send your daughter to college in three years. You expect her to earn two-thirds of
her tuition payment in scholarship money, so you estimate that your payments will be $10,000 a year for
four years. To estimate whether you have set aside enough money, you ignore possible inflation in
tuition payments and assume that you can earn 8 percent annually on your investments. How much
should you set aside now to cover these payments? - correct answer



8.A client plans to send a child to college for four years starting 18 years from now. Having set aside
money for tuition, she decides to plan for room and board also. She estimates these costs at $20,000 per
year, payable at the beginning of each year, by the time her child goes to college. If she starts next year
and makes 17 payments into a savings account paying 5 percent annually, what annual payments must
she make? - correct answer



9.A couple plans to pay their child's college tuition for 4 years starting 18 years from now. The current
annual cost of college is C$7,000, and they expect this cost to rise at an annual rate of 5 percent. In their
planning, they assume that they can earn 6 percent annually. How much must they put aside each year,
starting next year, if they plan to make 17 equal payments? - correct answer



16.Given a €1,000,000 investment for four years with a stated annual rate of 3% compounded
continuously, the difference in its interest earnings compared with the same investment compounded
daily is closest to:



A. €1.



B. €6.

,C. €455. - correct answer



18.A perpetual preferred stock makes its first quarterly dividend payment of $2.00 in five quarters. If the
required annual rate of return is 6% compounded quarterly, the stock's present value is closest to:



A.$31.



B.$126.



C.$133. - correct answer



22.At a 5% interest rate per year compounded annually, the present value (PV) of a 10-year ordinary
annuity with annual payments of $2,000 is $15,443.47. The PV of a 10-year annuity due with the same
interest rate and payments is closest to:



A. $14,708.



B. $16,216.



C. $17,443. - correct answer



23.Grandparents are funding a newborn's future university tuition costs, estimated at $50,000/year for
four years, with the first payment due as a lump sum in 18 years. Assuming a 6% effective annual rate,
the required deposit today is closest to:



A. $60,699.



B. $64,341.



C. $68,201. - correct answer

,27.Given the following timeline and a discount rate of 4% a year compounded annually, the present
value (PV), as of the end of Year 5 (PV5 ), of the cash flow received at the end of Year 20 is closest to:



A.$22,819.



B.$27,763.



C.$28,873. - correct answer



28.A client invests €20,000 in a four-year certificate of deposit (CD) that annually pays interest of 3.5%.
The annual CD interest payments are automatically reinvested in a separate savings account at a stated
annual interest rate of 2% compounded monthly. At maturity, the value of the combined asset is closest
to:



A.€21,670.



B.€22,890.



C.€22,950. - correct answer



3.If the firm can only accept one project, to maximize shareholder wealth, the firm is most likely to
select:

A. Project A.

B. Project B.

C. Project C. - correct answer



9.An investor performs the following transactions on the shares of a firm.

At t = 0, she purchases a share for $1,000.

At t = 1, she receives a dividend of $25 and then purchases three additional shares for $1,055 each.

, At t = 2, she receives a total dividend of $100 and then sells the four shares for $1,100 each.

The money-weighted rate of return is closest to:

A. 4.5%.

B. 6.9%.

C. 7.3%. - correct answer



10.Which return measure over the three-year period is negative?

A. Geometric mean return

B. Time-weighted rate of return

C. Money-weighted rate of return - correct answer



11.At the beginning of Year 1, a fund has $10 million under management; it earns a return of 14% for the
year. The fund attracts another $100 million at the start of Year 2 and earns a return of 8% for that year.
The money- weighted rate of return is most likely:

A. less than the time-weighted rate of return.

B. the same as the time-weighted rate of return.

C. greater than the time-weighted rate of return. - correct answer



14.A 123-day T-bill with a maturity value of $100,000 is priced at $99,620. The bill's effective annual yield
is closest to:

A. 0.38%.

B. 1.12%.

C. 1.14%. - correct answer



1.Which of the following groups best illustrates a sample?

A. The set of all estimates for Exxon Mobil's FY2015 EPS

B. The FTSE Eurotop 100 as a representation of the European stock market

C. UK shares traded on 13 August 2015 that also closed above £120/share on the London Stock Exchange
- correct answer

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