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    Mentor, Knowledge Varsity ratankv's Avatar
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    Free CFA Level 1 Practice Questions for December 2012 exam

    Team DG and Knowledge Varsity is glad to announce that we will provide some free CFA Level 1 sample questions till November 29, 2012.

    We had started a similar initiative for the June 2011 exam, please see link below
    June 2011 Question

    Knowledge Varsity will be providing fresh set of CFA Level 1 sample questions.

    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.

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



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

    5. We will then post the solution and the next question.

    All the best for your CFA Level 1 prep!

  2. #2
    Mentor, Knowledge Varsity ratankv's Avatar
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    Question #1

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

    Q1. An investor, plan to retire at the age of 60. He expects to live till the age of 90. He is currently aged 25. He invests the first payment in the account today and invests for 35 years (that is total of 35 investment done). The retirement account earns 12% per annum. Assume that he would like to withdraw $30,000 per year starting from the point when he turns 60 for 30 years, find out the approximate amount he should deposit in his retirement account every year? Here assume, that the investor doesn't leave any money for their heirs.

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    [QUOTE=ratankv;2947]================================================== ===============================================
    Today's Question (Questions and answers provided by Knowledge Varsity)

    Q1. An investor, plan to retire at the age of 60. He expects to live till the age of 90. He is currently aged 25. He invests the first payment in the account today and invests for 35 years (that is total of 35 investment done). The retirement account earns 12% per annum. Assume that he would like to withdraw $30,000 per year starting from the point when he turns 60 for 30 years, find out the approximate amount he should deposit in his retirement account every year? Here assume, that the investor doesn

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    It will be A.

    Thanks DG & Knowledge Varsity Team for helping & guiding us.

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    Mentor, Knowledge Varsity ratankv's Avatar
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    Q1 Answer is A

    Check the Video Solution Q#1 below:



    Text Solution for Question #1 is below

    This is a complex problem involving 2 series of cash flows. Please find the timeline in the pic below/attachment.


    In these type of problems, we need to come up with a common point.
    If we take the middle point as common point, that will be the best.
    So, we can find out the PV of the cash inflows at T = 59; Using that, we can find out the PV at T=60; and then we can compute the PMT for the series of cash outflows. Let’s do step by step calculation
    Step 1: Find out the PV at T = 59
    Keep the calculator in the END mode, the 2nd series of cash flows from T=60 to T=89 looks like ordinary annuity and the PV will come one period before the first cash flow.
    FV = 0; I/Y =12; N=30; PMT =$30,000; PV = ?
    CPT-> PV => PV = $241,655.19
    Step 2:Find out the PMT. Here you have to note that the FV of the investment would be equal to the present value that we have found out.
    FV = PV59 = $241,655.19; PV = $0; N = 35; I/Y =12; PMT = ?
    CPT -> PMT =>PMT = -$559.82
    So, the investor needs to deposit $559.82 every year for 35 years, in order to get $30,000 every year when he retires.

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    Mentor, Knowledge Varsity ratankv's Avatar
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    Question #2

    Today's Question (Questions and answers provided by Knowledge Varsity)
    ================================================== ================================================== ============
    Q2. A Firm's EPS was $5 in 2002, In year 2008 the EPS was $14. Find the compounded annual growth rate (CAGR) of the EPS.
    A. 15.85 %
    B. 18.7 %
    C. Can

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    I guess that the answer for Q 18 shud be 'A'.

    Ratan Sir:- Plz share the answer for Q-18. Also, we r looking for new questions as well.

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    CFA is a Finance course and this course enables a student how to invest in a firm, how to maintain or increase your return, how to be tax efficient etc. The person having CFA degree can judge where to invest and how to find out the value of company.
    Last edited by mark.1; 15-10-2012 at 01:04 PM.

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    When an investment manager’s client instructs the manager to use the client’s brokerage to purchase goods or services for the client, this is known as;

    A. Horizontal brokerage and does not violate any fiduciary duty
    B. Directed brokerage and does not violate any fiduciary duty
    C. Straight brokerage and does not violate any fiduciary duty

    Answer: B

    Explanation
    It is known as directed brokerage and does not violate any fiduciary duty, because brokerage is an asset of the client and the brokerage is used to benefit that client, not the manager, such practice does not violate fiduciary duty.

    site to practice cfa level 1 practice exam and cfa level 1 mock exams
    Last edited by george22; 01-05-2014 at 02:30 AM.

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    Quote Originally Posted by george22 View Post
    When an investment manager’s client instructs the manager to use the client’s brokerage to purchase goods or services for the client, this is known as;

    A. Horizontal brokerage and does not violate any fiduciary duty
    B. Directed brokerage and does not violate any fiduciary duty
    C. Straight brokerage and does not violate any fiduciary duty

    Answer: B

    Explanation
    It is known as directed brokerage and does not violate any fiduciary duty, because brokerage is an asset of the client and the brokerage is used to benefit that client, not the manager, such practice does not violate fiduciary duty.

    site to practice cfa level 1 practice exam and cfa level 1 mock exams
    Thanks George. Will you post more CFA Level 1 practice questions here?

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