# Free CFA Level 1 Practice Questions for June 2013 exam

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• 13-02-2013, 11:08 AM
Simplilearn
Free CFA Level 1 Practice Questions for June 2013 exam
Simplilearn is glad to announce that it will provide some free CFA Level 1 sample questions from February 14 till March 14th, 2013.

Chartered Financial Analyst (CFAÂ®) is a globally acknowledged certification offered by the CFA Institute. This coveted credential is offered to finance and investment professionals who prove their expertise and knowledge on finance and investment tools by qualifying the CFAÂ® exam.

Simplilearn provides both Classroom and Online training for CFA Level 1.
• 14-02-2013, 02:15 AM
Daulat Guru
Team DG is glad to announce that Simplilearn will start an initiative from February 14, 2013 to provide free CFA Level 1 practice questions.

Simplilearn is a leading provider of a suite of professional certification courses that address unique learning needs of working professionals. They have trained over 50,000 aspirants across 145+ countries, including those from the world's leading Fortune 500 companies.

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.

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

5. The solution and the next question will be posted on the following day.

All the best for your CFA Level 1 prep!
• 14-02-2013, 12:34 PM
Simplilearn
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.

• 14-02-2013, 05:42 PM
varinder
The correct answer is option A.
• 14-02-2013, 07:11 PM
naveen
Quote:

Originally Posted by varinder
The correct answer is option A.

Agree with varinder. It'll be A.
• 15-02-2013, 04:11 PM
Simplilearn
The correct option is A
A positively skewed distribution is one with a long tail to the right hand side, that is there is a small probability of a very high value. For a positively skewed distribution mean>median>mode
• 15-02-2013, 04:13 PM
Simplilearn
Question of the day: 15th Feb,2013

Which of the following is least likely to be true?

A) Price -weighted indices are downward biased due to the effect of stock splits.
B) Market Cap weighted indices tend to be biased towards price movements of higher priced stocks.
C) Float Adjusted Market Cap weighted indices tend to be biased towards higher market capitalized stocks.
• 15-02-2013, 11:56 PM
anita123
I think the answer is C...but not sure.
• 16-02-2013, 06:44 PM
Simplilearn
The correct option is B
Value-weighted indices tend to be biased towards price movements of higher market capitalized stocks.
• 16-02-2013, 06:45 PM
Simplilearn
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
• 17-02-2013, 02:01 AM
naveen
Quote:

Originally Posted by Simplilearn
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.
• 17-02-2013, 05:30 PM
Simplilearn
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.
• 17-02-2013, 05:34 PM
Simplilearn
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.
• 18-02-2013, 02:06 AM
Sriram Raju
Quote:

Originally Posted by Simplilearn
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
• 18-02-2013, 10:53 AM
Ash123
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
• 18-02-2013, 04:23 PM
naveen
Quote:

Originally Posted by Ash123
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

Mean is greater than or equal to median >= mode
• 18-02-2013, 08:32 PM
Simplilearn
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).
• 18-02-2013, 08:33 PM
Simplilearn
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
• 19-02-2013, 01:19 AM
anita123
Quote:

Originally Posted by Simplilearn
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.
• 19-02-2013, 06:36 PM
Simplilearn
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.
• 19-02-2013, 06:37 PM
Simplilearn
Question of the day: 19th Feb,2013

All of the following are characteristics of a well functioning securities market EXCEPT:

A)Internal information efficiency which can lead to variable and higher transaction costs.
B)It would provide timely and accurate information and transaction data.
C)It would provide liquidity (marketability, price continuity. and depth).
• 20-02-2013, 12:14 AM
Sriram Raju
Quote:

Originally Posted by Simplilearn
Question of the day: 19th Feb,2013

All of the following are characteristics of a well functioning securities market EXCEPT:

A)Internal information efficiency which can lead to variable and higher transaction costs.
B)It would provide timely and accurate information and transaction data.
C)It would provide liquidity (marketability, price continuity. and depth).

The transaction costs should be lower with information efficiency.
Ans: A
• 22-02-2013, 10:16 AM
Simplilearn
The correct option is A
Internal efficiency is a characteristic of a welt-functioning securities market. However, this should lead to the lowest possible transaction cost not higher costs.
• 22-02-2013, 10:17 AM
Simplilearn
Question of the day: 22nd Feb,2013

Portfolios located to the right of the market portfolio on the capital market line are:

A)Lending portfolios.
B)Low-risk portfolios.
C)Leveraged portfolios.
• 22-02-2013, 06:28 PM
Simplilearn
The correct option is C
The only way an investor can achieve a portfolio to the right of the market portfolio is to borrow at the risk-free rate and invest the proceeds in the market portfolio;100% of the investor's wealth plus the borrowed funds are invested in the market portfolio.
• 23-02-2013, 10:12 AM
Simplilearn
Question of the day: 23rd Feb,2013

Suppose that the probability of A is 0.30 and the probability of B is 0.40, if A and B are independent events, what is the probability of A or B?

A)0.58
B)0.7
C)0.12
• 23-02-2013, 10:41 AM
neetu
Quote:

Originally Posted by Simplilearn
Question of the day: 23rd Feb,2013

Suppose that the probability of A is 0.30 and the probability of B is 0.40, if A and B are independent events, what is the probability of A or B?

A)0.58
B)0.7
C)0.12

Two events, A and B, are independent if the fact that A occurs does not affect the probability of B occurring.

When two events, A and B, are independent, the probability of both occurring is:
P(A and B) = P(A) Â· P(B)

• 23-02-2013, 06:59 PM
Sriram Raju
Great explanation Neetu!
• 25-02-2013, 09:49 AM
Simplilearn
The correct option is A
Since A and B are independent events P(AB) = P(A)*P(B) = 0.30 x 0.40 = 0.12, so P(A or B) = P(A) + P(B) - P(AB) = 0.30+0.40-0.12=0.58.
• 25-02-2013, 09:51 AM
Simplilearn
Question of the day: 25th Feb,2013

Mr. Good, CFA, is fund manager at Great Fund. Mr. Good notices in Great Fund's marketing material that the value of the assets under management in the fund is listed at a higher than actual value. The Marketing Manager of the fund justifies that the discrepancy is minor and the material when printed was correct. To avoid violating the CFA Institute Standards of Professional Conduct, Mr. Good should least likely take which of the following actions?

A)Report the discrepancy to the Professional Conduct Program of CFA Institute.
B)Provide correct information to his clients.
C)Ask the marketing manager to correct the information at the earliest.
• 25-02-2013, 03:09 PM
naveen
Quote:

Originally Posted by Simplilearn
Question of the day: 25th Feb,2013

Mr. Good, CFA, is fund manager at Great Fund. Mr. Good notices in Great Fund's marketing material that the value of the assets under management in the fund is listed at a higher than actual value. The Marketing Manager of the fund justifies that the discrepancy is minor and the material when printed was correct. To avoid violating the CFA Institute Standards of Professional Conduct, Mr. Good should least likely take which of the following actions?

A)Report the discrepancy to the Professional Conduct Program of CFA Institute.
B)Provide correct information to his clients.
C)Ask the marketing manager to correct the information at the earliest.

• 26-02-2013, 10:02 AM
Simplilearn
The correct option is A
Standard I(A) applies when members and candidates know or should know that their conduct may contribute to a violation. Member or candidate must dissociate, or separate, from the illegal or unethical activity. Steps to dissociate from unethical activities include attempting to stop the behavior by bringing it to the attention of the employer.
If first step fails than step away and dissociate from the activity. Inaction combined with continuing association may be construed as participation or assistance in the illegal or unethical conduct. Disclosure may be prudent under certain circumstances. Member or candidate may consult legal or compliance officer for guidance (it is not an option here).
• 26-02-2013, 10:03 AM
Simplilearn
Question of the day: 26th Feb,2013

An investor holding equities believes share prices will rise but wants protection in case the market falls. What is the most suitable option position?

A)Purchase a call option
B)Write a call option
C)Purchase a put option
• 27-02-2013, 12:42 AM
anita123
Quote:

Originally Posted by Simplilearn
Question of the day: 26th Feb,2013

An investor holding equities believes share prices will rise but wants protection in case the market falls. What is the most suitable option position?

A)Purchase a call option
B)Write a call option
C)Purchase a put option

Put option gives the right to sell. So answer is C.
• 27-02-2013, 10:09 AM
Simplilearn
The correct option is C
The investor wants to hedge the risk of equities falling in value. Purchasing the option will allow him / her to sell shares at a pre-agreed price should the prices fall.
• 27-02-2013, 10:10 AM
Simplilearn
Question of the day: 27th Feb,2013

According to the classical view of fiscal policy, a decrease in aggregate demand will be followed by:

A)A rise in prices, and an increase in aggregate supply so that GDP (measured by quantity) is maintained at the same level
B)A fall in prices, and an increase in aggregate supply so that GDP (measured by quantity) is maintained at the same level
C)A fall in prices, and an increase in aggregate supply so that GDP (measured by quantity) is permanently maintained at a lower level
• 27-02-2013, 11:31 AM
Nidhi Taleja
Quote:

Originally Posted by Simplilearn
Question of the day: 26th Feb,2013

According to the classical view of fiscal policy, a decrease in aggregate demand will be followed by:

A)A rise in prices, and an increase in aggregate supply so that GDP (measured by quantity) is maintained at the same level
B)A fall in prices, and an increase in aggregate supply so that GDP (measured by quantity) is maintained at the same level
C)A fall in prices, and an increase in aggregate supply so that GDP (measured by quantity) is permanently maintained at a lower level

This is tough...probably A :confused:
• 27-02-2013, 11:39 PM
Sriram Raju
Quote:

Originally Posted by Nidhi Taleja
This is tough...probably A :confused:

B) A fall in prices, and an increase in aggregate supply so that GDP (measured by quantity) is maintained at the same level
• 28-02-2013, 10:07 AM
Simplilearn
The correct option is B
Classicists argue that changes to aggregate demand do not affect the actual level of output.
• 28-02-2013, 10:09 AM
Simplilearn
Question of the day: 28th Feb,2013

The price elasticity of demand for a product tends to be small (less elastic) when

A)product is inferior good.