» CFA 1 – 10 questions

The financial leverage ratio of a firm, whose total debt ratio is 54% and debt-to- equity is 1.15, is closest to:

0.47

0.62

2.13

Nelly devotes her budget each week to both beans and beef. Beans are an inferior good costing $1 per can. A pound of beef, a normal good, costs $5. As Nelly's income increases from $50 to $75 per week, her consumption of beans will most likely:

Decreases

Increase

Remain constant

Venture capital most commonly refers to:

Privatizing public firms

Minority investing in mature capital

Financing for start-ups

Mathew Chambers manages individual accounts, including his father’s, at Harvey Securities. During a Sunday lunch at a restaurant with his friend Neil Rojas, Chambers noticed the directors of Navarro Motors sitting at the adjacent table. Rojas stated, “I believe Navarro has hired a new CEO as the firm is undertaking many positive amendments in its production process”. On Monday Chambers noticed a $1 increase in Navarro’s share price and purchased 500 shares for his father’s account. Chambers least likely violated:

Standard V-A ‘Diligence and Reasonable Basis’.

Standard VI-B ‘Priority of Transactions’.

Standard II-A ‘Material Non-public Information’.

What is most likely the definition of a Special Purpose Vehicle (SPV)?

A type of asset-backed security that is secured by a mortgage or collection of mortgages.

A subsidiary company with an asset/liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt.

A structured financial product that pools together cash flow-generating assets and repackages this asset pool into discrete tranches that can be sold to investors.

Reginald Fuller manages institutional portfolios on behalf of BDY Advisors. Fuller also manages an account of a trust company named SOTO Trust. The trust offered Fuller a $50,000 cash gift if he succeeded in achieving a 20% return this year. The best practice for Fuller includes:

refusing the offer of SOTO trust to avoid a conflict of interest with his employer.

accepting the offer and achieving the target without compromising his objectivity towards other clients.

making an immediate written report to his employer specifying the$50,000 cash offer proposed by the trust

What is the most likely result of a decrease in the risk-free rate of return on put and call option prices?

Put option prices will decrease and call option prices will increase.

Put and call prices will increase.

Put option prices will increase and call option prices will decrease.

Which of the following is least accurately considered a firm's factor of production?

Materials

Customers

Land

You are given: Price of corn today: $7.00 per bushel 1-year corn future: $8.00 per bushel Which of the following terms most accurately describes this environment?

Contango

Inverted

Backwardation

The expected P/E ratio of a stock is 10, and the actual P/E ratio is 10.8. What can we say about the stock?

The stock is undervalued.

The stock is overvalued.

We can not say anything about the stock.

CFA 1 - 10 Questions