» CFA 1 – 10 questions

When a company finances share repurchases with cash:

leverage increases, shareholders’ equity decreases and assets remain unchanged.

assets and shareholders’ equity decrease and leverage increases.

assets and shareholders’ equity decrease and leverage remains - unchanged.

The probability that the Eurozone economy will grow this year is 18%, and the probability that the European Central Bank (ECB) will loosen its monetary policy is 52%. Assuming that the joint probability that the Eurozone economy will grow and the ECB will loosen its monetary policy is 45%, then the probability that either the Eurozone economy will grow or the ECB will loosen its the monetary policy is closest to:

25%.

11%.

42.12%.

Which of the following characteristics is unique to the fee structure of private equity funds? 2

Management fees are paid on invested capital.

The Genral Partner earns an incentive fee at the same time as investors receive their initial investment back.

The clawback provision ensures the safe return of an investor's initial investment as well as his/her right to receive profit.

Investors have the tendency to be:

more risk averse when faced with potential gains.

less risk averse when faced with potential losses.

less risk averse when faced with potential gains.

By entering into a currency swap both parties:

are exposed to less counterparty risk because principal amounts are exchanged at the beginning and end of the swap.

have to borrow funds at relatively higher interest rates compared to borrowing directly from their banks.

make payments in different currencies and in different notional amounts.

Which fo the following best describes a stockholder's claim to a company's assets under bankruptcy?

First claim

Residual claim

No claim

According to the Standards of Practice Handbook, which of the following statements is most likely correct regarding priority of transactions?

should pre-clear their participation in IPOs.

are not permitted to undertake personal transactions in accounts for which they are a beneficial owner.

should not be permitted to trade for three days before and one day after placing a client's trade.

Convexity plays a stronger role in interest rate risk for:

small changes in interest rates.

large changes in interest rates.

all interest rate changes equally.

Bonds issued by special purpose vehicles most likely have a higher credit ratings than their sponsor's unsecured bonds because they:

are backed by collateral.

have a shorter maturity.

pay a higher coupon rate.

Anita Vizquel, CFA, is a sole practitioner providing investment advisory services. Based on extensive and ongoing research, Vizquel believes that Viatex Brokerage provides the best execution at a competitive price and she uses the firm for the majority of her clients' trades. In recognition of her loyalty, Viatex provides Vizquel with soft dollar commissions in the form of research reports that Vizquel finds very relevant for some, but not all, of her clients. Has Vizquel violated the CFA Standards?

No

Yes, by accepting research reports that do not benefit all of her clients

Yes, by using Viatex for the majority of her client's trades

CFA 1 - 10 Questions