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

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• 11-03-2011, 10:57 AM
DG Mod
Q29 Ans A:
Just find the PV of these at the 4% rate, can be done using the CF function or individually, CF function would be faster

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

Q30 A project has the following cash flow:-

T=0 CF= -\$100,000
T=1 CF= \$75,000
T=2 CF= \$100,000

If the required rate of return is 20%, the NPV is closest to:-

A. \$31,944
B. \$25,520
C. \$21,780

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• 12-03-2011, 02:59 AM
neetu
Just plugging the values properly in a finance calculator will give answer.
It's A.
• 12-03-2011, 11:43 AM
DG Mod
Q30 Ans A:
Here you should use the CF function of the calculator

CF0 = -\$100,000;
C01= \$75,000;
F01 =1;
C02= \$100,000;
F02 =1 ;
I = 20%
• 13-03-2011, 01:03 PM
Q31 Ans A:

For a left skewed distribution Mean < Median < Mode
For a right skewed distribution Mean >Median >Mode

Leptokurtic distribution has Kurtosis more than 3, whereas Platykurtic has kurtosis less than 3. A mesokurtic distribution has kurtosis of 3 and has excess kurtosis as 0.

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

Q32.A fund manager has generated the following monthly returns in the last year.
-2%, -3%, 4%, 6%, -1%, 9%, 5%, 1%, 10%, 8%

Which of the following is most likely to be the 10th percentile return?

A. -2%
B. -2.9%
C. -3%

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• 13-03-2011, 04:25 PM
ssoffline
isn't the maturity vakue \$100000 here ?
• 13-03-2011, 08:00 PM
ssoffline
Quote:

Q21 Ans B:

Bank discount yield = (D/F)*(360/90) => discount will be equal to 0.75. So the bond is selling at 99.25.

So money market yield = (0.75/99.75)*(360/90) = 3.0227%

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

Q22. A US T-bill has 90 days to maturity and face value \$1,000,000. The market price is \$99,150. The annual money market yield on the bill is approximately:

A. 0.03429
B. 0.00857
C. 0.03400

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isn't the maturity vakue \$100000 here ?
• 13-03-2011, 09:54 PM
Quote:

Originally Posted by ssoffline
isn't the maturity vakue \$100000 here ?

@ssoffline

Thanks for the input. You are right and we have modified it.
http://www.daulatguru.com/finance-fo...ull=1#post1760
• 14-03-2011, 10:36 AM
DG Mod
Q32 Ans B:

Arrange the monthly returns in ascending order
-3% -2% -1% 1% 4% 5% 6% 8% 9% 10%

Ly = (n+1)y/100, here n = 10 and y = 10 (since we want 10th percentile)
Ly= 11*10/100 = 1.1,

So the value will be between 1st and 2nd observation and that will be 0.1 distance from -3%
=> -3% + 0.1(-2-(-3))
=> -3% + 0.1*1%
=> -3%+ 0.1%
=> -2.9%

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

Q33 Two analysts met in a conference on quantitative techniques in investment analysis. They made the following statement :-

Analyst 1 – Time weighted return would produce better performance figure than money weighted return in a scenario when the returns are increasing and the portfolio value is increasing

Analyst 2 – A portfolio which has higher Sharpe ratio implies it will necessarily mean that it will have lower coefficient of variation

With respect to above statements:-
A. Both Analyst 1 and Analyst 2 are in-correct
B. Analyst 1 is correct but not Analyst 2
C. Both Analyst 1 and Analyst 2 are correct

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• 14-03-2011, 11:30 PM
Nidhi Taleja
Ans to 33 is C.
• 15-03-2011, 11:39 AM
DG Mod
Q33 Ans: C –

Money Weighted Return is more than the time weighted return when the returns are increasing and the portfolio value is increasing, because more return is produced for the money invested (money is the weight – more money and more return implies that the performance of the portfolio is better than the time weighted return).

MindIt: Time Weighted Return is preferred than Money Weighted Return as it is not affected by the portfolio value. In most of the cases higher Sharpe ratio will result in lower Coefficient of variation (CV) but this is not always true. As an exception see the following example:-

RFR = 1%, Portfolio A has risk of 21% and return of 10% and Portfolio B has risk of 4% and return of 2%, in this case Sharpe as well as CV is more for A

Portfolio--------Return--------Risk----------Sharpe--------------CV

A--------------------10----------------21--------------0.4286-----------------2.1
B-------------------- 2-----------------4---------------0.25---------------------2

MindIt: we should prefer portfolios having higher Sharpe Ratio (excess return per unit of risk) and Lower Coefficient of Variation (risk per unit of return). In cases of conflict between the two methods we should prefer portfolio having higher Sharpe Ratio.

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

Q 34 A portfolio manager is constructing portfolio of a client, he has estimated that the return of the portfolio will be 15% and the standard deviation would be 10%. The client has specified a minimum return of 5%. What is the probability that the client’s minimum return requirement will not be met, assume that the portfolio return follows normal distribution?

A. 0.16
B. 0.32
C. 0.68

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