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Thread: Free CFA Level 1 Practice Questions for June 2013 exam

  1. #11
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    Quote Originally Posted by Simplilearn View Post
    Question of the day: 16th Feb,2013

    Which of the following is true of a European call option?

    A)The buyer has the right to buy the underlying up to the maturity date
    B)The seller may be obliged to sell the underlying only at maturity
    C)The seller is obliged to buy the underlying only at maturity
    Call option means the right to buy the underlying.
    European means that the right can be exercised only at maturity.

    So it is B.

  2. #12
    The correct option is B
    The answer in A describes an American style option. European options may be exercised on their expiry dates only. Consequently, the seller will be obliged to deliver the underlying asset if the holder exercises their right to buy on that date.

  3. #13
    Question of the day: 17th Feb,2013

    Mr. Good, CFA provides investment advice on alternative investments. Mr. Good advertises in large financial services publications to attract clients. Because the client base for the institutions that Mr. Good serves is large, he is comfortable stating in the ads that thousands of his clients have benefited from his advice. Does Good's advertisement most likely violate any CF A Institute Standards of Professional Conduct?

    A)No.
    B)Yes, related to Misrepresentation.
    C)Yes, related to Communication with Clients.

  4. #14
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    Quote Originally Posted by Simplilearn View Post
    Question of the day: 17th Feb,2013

    Mr. Good, CFA provides investment advice on alternative investments. Mr. Good advertises in large financial services publications to attract clients. Because the client base for the institutions that Mr. Good serves is large, he is comfortable stating in the ads that thousands of his clients have benefited from his advice. Does Good's advertisement most likely violate any CF A Institute Standards of Professional Conduct?

    A)No.
    B)Yes, related to Misrepresentation.
    C)Yes, related to Communication with Clients.
    He can mention thousands of clients but quantifying the benefit may be difficult.
    Ans: B

  5. #15
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    Question of the day: 14th Feb,2013

    Which of the following is least likely to be true for a positively skewed distribution?

    A) The mode will be greater than the median and the mean will be greater than the median.
    B) The mean will be greater than the median and the mean will be greater than the mode.
    C) The mean will be greater than the median and the median will be greater than the mode.


    means > median > mode
    Isnt this interpreted as Mean is greater than the median and median is greater than the mode.
    Option (C) above!

    Option (A) will be something like this:
    Mode > Median
    Mean > Median

  6. #16
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    Quote Originally Posted by Ash123 View Post
    Question of the day: 14th Feb,2013

    Which of the following is least likely to be true for a positively skewed distribution?

    A) The mode will be greater than the median and the mean will be greater than the median.
    B) The mean will be greater than the median and the mean will be greater than the mode.
    C) The mean will be greater than the median and the median will be greater than the mode.


    means > median > mode
    Isnt this interpreted as Mean is greater than the median and median is greater than the mode.
    Option (C) above!

    Option (A) will be something like this:
    Mode > Median
    Mean > Median
    I agree with your analysis.
    Mean is greater than or equal to median >= mode

  7. #17
    The correct option is B
    Client base is made up of a small number of large institutions so stating in the advertisement that his client base is a larger number is a misrepresentation and a violation of Standard I(C).

  8. #18
    Question of the day: 18th Feb,2013

    Which of the following effects on reinvestment risk will greater maturity and greater coupon rate have respectively?

    A)Lower, lower
    B)Lower, higher
    C)Higher, higher

  9. #19
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    Quote Originally Posted by Simplilearn View Post
    Question of the day: 18th Feb,2013

    Which of the following effects on reinvestment risk will greater maturity and greater coupon rate have respectively?

    A)Lower, lower
    B)Lower, higher
    C)Higher, higher
    Greater maturity means longer period -> so risk will be higher
    Only option C seems possible.

  10. #20
    The correct option is C
    Longer maturities leave greater exposure to interest rate changes. High coupons mean that more of the return is being generated by coupons which will require reinvestment.

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