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Thread: Free CFA Level 2 practice question bank for June 2011 exam

  1. #1
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    Free CFA Level 2 practice question bank for June 2011 exam

    Team DG is glad to announce that we will provide free CFA Level 2 sample questions everyday from April 4, 2011 till May 10, 2011.

    We are partnering with Knowledge Varsity for this initiative:


    How it will work?

    1. Existing users should login and subscribe to this thread. Some users may be automatically subscribed (depending on your profile settings) and can skip this step.



    2. New users can Register and then login to subscribe to this thread. Click here to learn more.

    3. When you go to the Subscription page, make sure to choose "Daily updates by email" option from the "Notification Type" dropdown. Then click "Add Subscription".



    4. We will post a question everyday and members can discuss the answer in this forum.

    5. We will post the solution and the next question on the following day.

    All the best for your CFA Level 2 prep!

  2. #2
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    Free Level 2 CFA Sample Questions

    Today's Question (Question provided by Knowledge Varsity)

    Q1. Sandeep Gupta, CFA an analyst with Advantage India Capital partner is developing a model for forecasting sales of air conditioners (ACs) for a consumer durable firm. Using R (an open source statistical package) he regresses past years sales (in million rupees) against 3 factors. The factors are:


    • Absolute change in Nominal Gross Domestic Product in Million rupees (GDP)
    • Average temperature during the summer months (in degree Celsius) (T)
    • Prior year sales (PS)



    Sandeep is concerned that there might be conditional heteroskedasticity present. He regresses the residuals against the independent variables on the same data set.
    The R squared of the residuals is 15%.

    Sandeep also find out the Durbin Watson (DW) statistic for the data set, the DW value is 1.2

    Q1. Which of the following is most likely the multiple regression equation?
    A. Sales = -180 + 1.05 PS + 0.00015 * GDP
    B. Sales = -180 + 6.09 * (T) + 1.05 PS + 0.00015 * GDP + Error
    C. Sales = -180 + 3.45 * (T) + 1.05 PS + 0.00015 * GDP + Error

    ================================================== =====================================

  3. #3
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    Q1 Ans B:

    The correct regression equation includes error term and also the coefficient that is obtained from regression, rather than the error.


    ================================================== =====================================
    Today's Question (Questions and answers provided by Knowledge Varsity)

    Q2. Using the same case from Q1, at 95% confidence level which of the slope coefficient is insignificant?

    A. GDP
    B. T
    C. PS

    ================================================== =====================================

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    Q2. Ans C

  5. #5
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    Q2 Ans B:

    Shorter method. The p value of the independent Variable T is 0.1, this implies that the coefficient is significant till significance level of 0.1 or 90% confidence level, which means at 95% confidence level it is insignificant.

    Another method is to find out the T value for each independent variable and then compare with the critical value from the table.

    ================================================== =====================================

    Today's Question (Questions and answers provided by Knowledge Varsity)


    Q3. What is the forecast for the sales, when the following data is known?

    Temperature in Summer = 42 degree Celsius
    Prior year sales = 3000 million Rupees
    Nominal increase in GDP = 6600 billion Rupees (an increase of 15% over the previous year)

    A. 3227 million rupees
    B. 4396 million rupees
    C. 4216 million rupees

    ================================================== =====================================

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    Q3 Ans C:

    Just plug in the values in the regression equation.

    ================================================== =====================================
    Today's Question (Questions and answers provided by Knowledge Varsity)


    Q4. Which of the following is most likely the value of correlation coefficient?

    A. 0.857
    B. 0.734
    C. 0.925

    ================================================== =====================================

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    Q4's ans is C

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    Q4 Ans C:

    First find out R squared which is equal to SSR/SST
    R squared = 6000/7000 = 0.857
    Correlation coefficient is SQRT(R squared) => SQRT(0.857) = 0.925

    ================================================== =====================================
    Today's Question (Questions and answers provided by Knowledge Varsity)


    Q5. Calculate the 95% confidence interval for the intercept term?

    A. -45 to +45
    B. -225 to 135
    C. -277 to -83

    ================================================== =====================================

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    Ans 5: C

    -180 + 45 X 2.145 and -180 - 45 X 2.145

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    Q5 Ans C:

    Here we should use the appropriate T value,
    Alpha = 0.05,2 tail, Df = 14
    T= 2.145

    Confidence Interval = Intercept +/- Error * T = -180 +/- 45 * 2.145 = -180 +/- 96.525
    = -276.525 to -83.475

    ================================================== =====================================
    Today's Question (Questions and answers provided by Knowledge Varsity)


    Q6. Which of the following is most likely to be the adjusted R squared value?

    A. 0.857
    B. 0.826
    C. 0.677

    ================================================== =====================================

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