CFA Institute - Mock A

The underlying in a forward rate agreement is most likely a(n): interest rate. growth rate of an equity index. exchange rate.

a. interest rate ya bishhhh

Which of the following most accurately describes a distribution that is more peaked than normal? Leptokurtotic Mesokurtotic Platykurtotic

a. leptokurtotic

when a project can be reliably measured under US GAAP - we use the ________________ method to value revenue

% of completion

IFRS conceptual framework identifies these 2 characteristics that make financial info useful

- faithful representation - relevance

other side of notecard

- pretty self explanatory

When using the _______ inventory method, the ending inventory, the cost of goods sold, and the gross margin are the same under either the perpetual or periodic methods

1. FIFO

When using the ___________ inventory method, the ending inventory, the cost of goods sold, and the gross margin are the same under either the perpetual or periodic methods.

1. FIFO

explain how to find sample std dev

1. find sample mean 2. sum the squares of (value - mean) 3. divide by n-1 4. square root dat bihhhh

The fees on funds of funds are usually ____________. The fund of funds manager charges a fee, and there is a fee charged by each hedge fund.

1. higher

If the p-value is _______ than the specified level of significance, the null hypothesis is rejected.

1. less

According to put-call parity, a _______ call is equal to long put, long asset, short bond.

1. long

Under IFRS, the inventory would be written down to its ________________

1. net realizable value

In financial mathematics, ___________ defines a relationship between the price of a European call option and European put option, both with the identical strike price and expiry, namely that a portfolio of a long call option and a short put option is equivalent to (and hence has the same value as) a single forward contract at this strike price and expiry

1. put-call parity

The use of a perpetual or periodic system makes a difference under ____________ & _____________.

1. weighted average and LIFO

The use of a perpetual or periodic system makes a difference under __________ and ___________ methods

1. weighted average and LIFO.

Which of the following is least likely a requirement of the GIPS standards? Firms are required to: - present a minimum of five years of annual investment performance compliant with the GIPS standards. - include all discretionary, fee-paying portfolios in at least one composite. - have their performance records verified by an independent third party.

C - It is a recommendation but not a requirement that firms obtain independent third-party verification to claim GIPS compliance. Firms are required to include all discretionary, fee-paying portfolios in at least one composite. They must also present a minimum of five years of annual investment performance compliant with the GIPS standards.

The use of estimates in financial reporting is best described as: a. a factor that reduces the understandability of financial statements. b. acceptable despite the risk of manipulation by management. c. avoidable through sophisticated accounting and auditing techniques.

b.

if revenue = 800k variable cost = 400k NI = 140k whats the DTL

DTL = revenue - [variable cost / NI]

P(a|b) = ? bayes

P(A|B) = [P(B|A) * P(A)] / P(B)

Which of the following institutional investors is most likely to have a low tolerance for investment risk and relatively high liquidity needs? Insurance company Defined benefit pension plan Charitable foundation

a. ins co - Insurance companies need to be relatively conservative and liquid, given the necessity of paying claims when due.

what is a convenience yield>

The benefit or premium associated with holding an underlying product or physical good, rather than the contract or derivative product. example would be buying a bale of wheat instead of a future on dat bihhhh

whats the bases formula?

[probability of new even / unconditional probability of the new information] X prior probability of event

Which of the following is not a component of the CFA Institute Code of Ethics? a. Promote financial integrity and seek to prevent and punish abuses in the financial markets. b. Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession. c. Place the integrity of the investment profession and the interests of clients above your own personal interests.

a. Punishing abuse in the financial markets is not one of the six components of the Code of Ethics.

Charlie Mancini, CFA, is the Managing Director for Business Development at SV Financial, (SVF), a large U.S.-based mutual fund organization. Mancini has been under pressure recently to increase revenues. In order to secure business from a large hedge fund manager based in Asia, Mancini recently approved flexible terms for the fund's client agreement. To allow for time zone differences, the agreement permits the hedge fund to trade in all of SVF's mutual funds six hours after the close of U.S. markets, which is prohibited by U.S. regulators. Did Mancini violate any CFA Institute Standards of Professional Conduct? a. Yes, with regard to Fair Dealing and Material Nonpublic Information b. No c. Yes, with regard to Fair Dealing

a. Clients should be treated fairly and impartially according to Standard III(B). In addition, the flexible trading terms allow the hedge fund manager to enrich itself and are a violation of Standard II(A), which concerns trading on material nonpublic information. This situation is also a conflict of interest, and thus a violation of Standard VI(A)-Disclosure of Conflicts.

If an issuer is required to retire a specified portion of the bond's principal each year, the bond most likely: has a sinking fund provision. is callable. is a step-up note.

a. - A sinking fund provision requires retirement of a portion of the bond's principal every year, rather than retirement of the entire issue at maturity.

Bob White is a new CFA charterholder, and he is updating his resume and company biography to reflect this accomplishment. In his bio, he states that he successfully passed all three CFA exams in three consecutive years. On his resume, he adds the following line: "CFA, 2013, CFA Society of Pittsburgh". Are his bio or his resume in violation of the standards regarding referencing the CFA designation and program? a. Yes, his resume is incorrect b. Yes, both his bio and his resume are in violation of the Standards c. No

a. His resume should read CFA, 2013, CFA Institute. The resume is incorrect because it lists the CFA Society of Pittsburgh instead of CFA Institute as the organization associated with the CFA designation.

The process of securitization is least likely to allow banks to: repackage loans into simpler structures. reduce the layers between borrowers and ultimate investors. originate loans.

a. Securitization allows banks to originate (or create) loans and the process results in a reduction in the layers between borrowers and ultimate investors. The loans are repackaged into more complex, not simpler, structures.

Which of the following performance measures most likely relies on systematic risk as opposed to total risk when calculating a risk-adjusted return? Treynor ratio M-squared Sharpe ratio

a. The Treynor ratio measures the return premium of a portfolio versus the risk-free asset relative to the portfolio's beta, which is a measure of systematic risk.

An investor purchases 100 shares of common stock at €50 each and simultaneously sells call options on 100 shares of the stock with a strike price of €55 at a premium of €1 per option. At the expiration date of the options, the share price is €58. The investor's profit is closest to: €600. €900. €400.

a. $600 solve dishit bihhhh

The following information is available for a manufacturing company: $ Millions Cost of ending inventory computed using FIFO 4.3 Net realizable value 4.1 Current replacement cost 3.8 If the company is using International Financial Reporting Standards (IFRS) instead of US GAAP, its cost of goods sold (in millions) is most likely: a. $0.3 lower. b. $0.3 higher. c. the same.

a. .3 lower - Under IFRS, the inventory would be written down to its net realizable value ($4.1 million), whereas under US GAAP, market value is defined as current replacement cost and thus would be written down to its current replacement cost ($3.8 million). The smaller write-down under IFRS will reduce the amount charged to the cost of goods sold compared with US GAAP and result in a lower cost of goods sold of $0.3 million.

After a firm presents a minimum required number of years of GIPS- compliant performance, the firm must present an additional year of performance each year, building up to a minimum of: a. 10 years of GIPS b. 15 years c. 5 years

a. 10 years After a firm presents a minimum of five years of GIPS-compliant performance, the firm must present an additional year of performance each year, building up to a minimum of 10 years of GIPS-compliant performance.

If the probability for an event Z is 14% (i.e., P(Z) = 14%), the odds for Z are closest to: 0.163. 0.071. 0.123.

a. 16.3% odds are calculated : Odds Event_A = P(Event_A) / [1-P(Event_A)]

QDPizza = 13,500 - 2,020 PPizza + 0.07 I - 0.31 PCola QSPizza = -4,000 + 1,219 PPizza - 91 W QD, QS are the number of pizzas ordered and supplied P, W, I refer to the prices, wage rate and monthly income Related Data Price of a pizza= $5/pizza Aggregate monthly income =$2,050 Price of cola per bottle $1.35/bottle Wage rate paid to pizza personnel = $10 The number of units of excess demand for pizza is closest to: a. 2,072. b. 2,358. c. 1,471.

a. 2072 simple math -> plug and chug

Event X and Event Y are independent events. The probability of X is 0.2 [P(X) = 0.2] and the probability of Y is 0.5 [P(Y) = 0.5]. The joint probability of X and Y, P(XY), is closest to: 0.1. 0.7. 0.3.

a. =0.1 Given that X and Y are independent, their joint probability is equal to the product of their individual probabilities. In this case: P(XY) = P(X)P(Y) = 0.2 × 0.5 = 0.1.

Which of the following statements is most accurate with respect to rebalancing and reconstitution of security market indices? a. Equal-weighted indices require frequent rebalancing. b. A price-weighted index requires rebalancing more than a market-capitalization-weighted index. c. Turnover within an index results from a reconstitution but not from rebalancing.

a. Equal-weighted indices require frequent rebalancing.

A firm's production process requires two factors, labor and capital. The following table illustrates the marginal productivity and cost of each factor at the current level of production. MP of input labor = 120 units $4 per unit labor capital = 120 units $12 per unit capital If MP is the marginal product, which of the following best describes the firm's optimal decision? a. Initially increase the use of labor until its MP/unit cost equals the MP/unit cost of capital b. Simultaneously increase the use of both factors until the MP is maximized c. Initially increase the use of capital until its MP/unit cost equals the MP/unit cost of labor

a. Initially increase the use of labor until its MP/unit cost equals the MP/unit cost of capital The firm should initially use the resource that maximizes output per monetary unit of input cost (i.e., use the resource with the highest MP/Input cost). In this case, it is labor, at 120 units/$4, or 30 units/$1, whereas for capital, it is 120 units/$12, or 10 units/$1 for capital, indicating that a dollar spent on labor is more effective in raising output than a dollar spent on capital. However, as more labor is used, its marginal product will fall and that of capital will rise. Therefore, the optimal output level will rise when the MP/Input cost ratios for both factors are equal.

For which of the following inventory valuation methods is the gross profit margin least likely to be the same under both a perpetual inventory system and a periodic inventory system? a. LIFO b. Specific identification c. FIFO

a. LIFO - The periodic and perpetual systems result in the same inventory and cost of goods sold values (and thus gross profit margin) using both FIFO and specific identification valuation methods but not always under LIFO.

In the context of venture capital financing, seed-stage financing most likely supports: a. product development and/or marketing efforts. b. transformation of an idea into a business plan. c. initial commercial production and sales.

a. Support of product development and/or marketing efforts takes place during seed-stage financing. -

When computing the weighted average cost of capital (WACC) and assuming a fixed-rate non-callable bond is currently selling above par value, the before-tax cost of debt is closest to the: a. yield to maturity. b. current yield. c. coupon rate

a. YTM With a fixed-rate non-callable bond, the before-tax cost of debt is the bond's yield to maturity.

According to the International Financial Reporting Standards (IFRS), which of the following conditions should be satisfied to report revenue from the sale of goods on the income statement? a. Costs can be reliably measured. b. Goods have been delivered to the customer. c. Payment has been received.

a. costs can be reliably measured - The IFRS conditions that should be met to recognize revenue from the sale of goods include that the costs incurred can be reliably measured, that the economic benefits will flow to the entity, and that the significant risks and rewards of ownership have been transferred, which is normally when the goods have been delivered but not always. The actual receipt of any payment is not a condition.

An industry experiencing slow growth, high prices, and volumes insufficient to achieve economies of scale is most likely in the: embryonic stage. mature stage. shakeout stage.

a. embryonic - giveaway would be not enough volumes to achieve economies of scale (which happens early one)

25 of 120 The optimal capital budget for a firm is best described as occurring when the company's marginal cost of capital is: a. equal to the investment opportunity schedule. b. less than the investment opportunity schedule. c. greater than the investment opportunity schedule.

a. equal to the investment opportunity schedule. The optimal capital budget occurs when the marginal cost of capital (MCC) intersects with (is equal to) the investment opportunity schedule (IOS).

According to put-call-forward parity, the difference between the price of a put and the price of a call is most likely equal to the difference between: exercise price and forward price discounted at the risk-free rate. forward price and spot price discounted at the risk-free rate. spot price and exercise price discounted at the risk-free rate.

a. exercise price and forward price discounted at the risk-free rate -

A company that prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) is attempting to produce lighter and longer-lasting batteries for portable electronic devices. The most appropriate accounting treatment for the related costs incurred in this project is to: a. expense costs until technical feasibility has been established. b. expense them as incurred. c. capitalize costs directly related to the development.

a. expense costs until technical feasibility has been established Under IFRS, research and development costs are expensed until certain criteria are met, including that technical feasibility has been established and the company intends to use the developed product.

The return on a commodity index is likely to be different from returns on the underlying commodities because: a. indices are constructed using futures contracts. b. data are subject to survivorship bias. c. assets are not marked to market.

a. indices are constructed using futures contracts - Because commodity indices are constructed using commodity futures and not the underlying commodities, there can be differences between commodity index returns and the returns of the underlying commodities.

There are two forward contracts, contract 1 and contract 2, on the same underlying. The underlying makes no cash payments, does not yield any nonfinancial benefits, and does not incur any storage costs. Contract 1 expires in one year while contract 2 expires in two years. It is most likely that the price of contract 1: is less than the price of contract 2. is equal to the price of contract 2. exceeds the price of contract 2.

a. less than contract 2 - The forward price is the spot price compounded at the risk-free rate over the life of the contract. Since Contract 2 has the longer life, compounding will lead to a larger value.

There are two forward contracts, contract 1 and contract 2, on the same underlying. The underlying makes no cash payments, does not yield any nonfinancial benefits, and does not incur any storage costs. Contract 1 expires in one year while contract 2 expires in two years. It is most likely that the price of contract 1: is less than the price of contract 2. is equal to the price of contract 2. exceeds the price of contract 2.

a. less than price of the longer contract 2 - The forward price is the spot price compounded at the risk-free rate over the life of the contract. Since Contract 2 has the longer life, compounding will lead to a larger value.

Which of the following statements best describes a trial balance? A trial balance is a document or computer file that: a. lists all account balances at a particular point in time. b. contains all business transactions recorded in the order in which they occur. c. shows all business transactions by account.

a. lists all account balances at a particular point in time.

What is the most likely effect on the accounting equation when a company purchases office equipment with cash? No effect on the accounting equation Assets decrease and owners' equity decreases Assets increase and liabilities increase

a. no effect - There would be no effect on the accounting equation because the company has exchanged one asset for another. Cash has decreased and office equipment, a capital asset, has increased.

According to the International Accounting Standards Board's (IASB) Conceptual Framework for Financial Reporting, the two fundamental qualitative characteristics that make financial information useful are best described as: a. relevance and faithful representation. b. understandability and verifiability. c. timeliness and accrual accounting

a. relevance and faithful representation. - Relevance and faithful representation are the two fundamental qualitative characteristics that make financial information useful, according to the IASB Conceptual Framework.

The belief that trends and patterns tend to repeat themselves and are, therefore, somewhat predictable best describes: technical analysis. arbitrage pricing theory. weak-form efficiency.

a. technical analysis

According to the Fisher effect, an increase in expected inflation will most likely increase: a. the nominal interest rate. b. both nominal and real interest rates. c. the real interest rate.

a. the nominal interest rate - The Fisher effect states that the nominal interest rate is the sum of the real rate of interest and the expected rate of inflation over a given time horizon. An increase in expected inflation will result in a higher nominal rate.

A trader who owns shares of a stock currently trading at $100 per share places a "GTC, stop $90, limit $85 sell" order (GTC means good till cancelled). Assuming the specified stop condition is satisfied and the order becomes executed, which of the following statements is most accurate? The trader faces a maximum realized loss of $15. The order becomes a market order when the price falls below $85 and remains valid for execution. The order will be executed at either $90 or $85.

a. trader faces maximum loss of god dam 15 dollars - The order becomes valid when the price falls to, or below, $90. The "limit $85 sell" indicates that the trader is unwilling to sell below $85. Thus, the trader faces a maximum loss of $15 ($100 - $85).

An observation that stocks with above average price-to-earnings ratios have consistently underperformed those with below average price-to-earnings ratios least likely contradicts which form of market efficiency? Weak form Semi-strong form Strong form

a. weak form - The observation that stocks with high above average price-to-earnings ratios have consistently underperformed those with below average price-to-earnings ratios is a cross-sectional anomaly. It is a contradiction to the semi-strong form of market efficiency and strong form market efficiency because all the information used to categorize stocks by their price-to-earnings ratios is publicly available. It is not a contradiction to weak form market efficiency.

The null hypothesis is most likely to be rejected when the p-value of the test statistic: falls below a specified level of significance. is negative. exceeds a specified level of significance.

a. when lower than specified level of significance

The Fisher Effect is...

an economic hypothesis stating that the real interest rate is equal to the nominal rate minus the expected rate of inflation.

look at the picture on the back of this notecard and answer it

answer should be F+H

Which of the following is least likely a component of the "Four Cs of Credit Analysis" framework? Collateral Competition Covenants

b

Compared with an otherwise identical option-free bond, when interest rates fall, the price of a callable bond will: rise more. rise less. fall less.

b - When interest rates fall, the price of the embedded call option increases. The price of a callable bond equals the price of an option-free bond minus the price of the embedded call option. So, the price of the callable bond will not increase as much as an option-free bond because the price of the call option is increasing. As interest rates fall, the bond is more likely to be called, limiting the upside price increase potential.

At the beginning of the year, a company purchased a fixed asset for $500,000 with no expected residual value. The company depreciates similar assets on a straight line basis over 10 years, whereas the tax authorities allow declining balance depreciation at the rate of 15% per year. In both cases, the company takes a full year's depreciation in the first year and the tax rate is 40%. Which of the following statements concerning this asset at the end of the year is most accurate? a. The deferred tax asset is $10,000. b. The temporary difference is $25,000. c. The tax base is $500,000.

b.

Jeffrey Jones passed the Level I CFA examination in 1997 and the Level II examination in 2009. He is not currently enrolled for the Level III examination. According to the CFA Institute Standards of Professional Conduct, which of the following is the most appropriate way for Jones to refer to his participation in the CFA Program? a. Candidate in the CFA Institute CFA Program b. Passed Level II of the CFA examination in 2009 c. Jeffrey Jones, CFA (expected 2014)

b. No designation exists for someone who has passed Level I, Level II, or Level III of the CFA exam, see Standard VII(B). Persons who have passed a certain level of the exam may state that they have completed that level. A person can state he is a candidate only if he is currently enrolled in the CFA Program. It is also an improper reference to use "expected" a part of the designation.

To obtain the spot yield curve, a bond analyst would most likely use the most: a. seasoned and actively traded government bonds. b. recently issued and actively traded government bonds. c. recently issued and actively traded corporate bonds.

b. To obtain the spot yield curve a bond analyst would prefer to use the most recently issued and actively traded government bonds. Such bonds will have similar liquidity as well as fewer tax effects because they will be priced closer to par value.

A company has 100 million shares outstanding. The share price of a company's stock is £15 just prior to announcing a £100 million expansionary investment in a new plant and estimates that the present value of future after-tax cash flows will be £150 million. Analysts, however, estimate the new plant's profitability will be lower than the company's expectations. The company's stock price will most likely: a. drop below £15 per share due to the cannibalization of revenue from the new plant. b. increase by less than £0.50 per share. c. increase by the new plant's net present value per share.

b. just used common sense

Madeline Smith, CFA, was recently promoted to senior portfolio manager. In her new position, Smith is required to supervise three portfolio managers. Smith asks for a copy of her firm's written supervisory policies and procedures but is advised that no such policies are required by regulatory standards in the country where Smith works. According to the Standards of PracticeHandbook, Smith's most appropriate course of action would be to: a. require her firm to adopt the CFA Institute Code of Ethics and Standards of Professional Conduct. b. decline to accept supervisory responsibility until her firm adopts procedures to allow her to adequately exercise such responsibility. c. require the employees she supervises to adopt the CFA Institute Code of Ethics and Standards of Professional Conduct.

b. According to guidance for Standard (IV(C), if a member cannot fulfill supervisory responsibilities because of the absence of a compliance system or because of an inadequate compliance system, the member should decline in writing to accept supervisory responsibility until the firm adopts reasonable procedures to allow the member to adequately exercise such responsibility.

William Wong, CFA, is an equity analyst with Hayswick Securities. On the basis of his fundamental analysis, Wong concludes that the stock of a company he follows, Nolvec Inc., is substantially undervalued and will experience a large price increase. He delays revising his recommendation on the stock from "hold" to "buy" to allow his brother to buy shares at the current price. Wong is least likely to have violated the CFA Institute Standards of Professional Conduct related to: a. priority of transactions. b. reasonable basis. c. duty to clients.

b. There is nothing to suggest that Wong does not have a reasonable basis for his conclusion related to Nolvec, as required by Standard V(A).

Which of the following reports is least likely to be filed with the US SEC? a. Proxy statement b. Annual report c. Form 10-K

b. annual report - The annual report is not a requirement of the SEC.

A small country has a comparative advantage in the production of pencils. The government establishes an export subsidy for pencils to promote economic growth. Which of the following will be the most likely result of this policy? a. As new domestic producers enter the pencils market, supply will increase and domestic prices will decline. b. Although domestic producers will receive a net benefit, the policy will give rise to inefficiencies that cause a deadweight loss to the national welfare. c. The increase in the domestic producer surplus will exceed the sum of the subsidy and the decrease in the domestic consumer surplus.

b. Although domestic producers will receive a net benefit, the policy will give rise to inefficiencies that cause a deadweight loss to the national welfare.

A discrete uniform distribution consists of the following 12 values: -2.5 5.3 6.7 8.8 -4.6 9.2 3.3 8.2 1.4 0.8 -5.3 6.9 On a single draw from the distribution, the probability of drawing a value between -2.0 and 2.0 from the distribution is closest to: 33.33%. 16.67%. 27.59%.

b. 2/12 = 16.whatever percent

Under IFRS which of the following balance sheet presentation formats is most acceptable? Classifying assets and liabilties: a. as monetary vs. non-monetary. b. in liquidity order. c. into operating, investing, and financing categories.

b. A liquidity-based presentation can be used when it provides information that is reliable and more relevant. Entities that typically choose this format include banks.

Under International Financial Reporting Standards (IFRS), which of the following is most likely one of the general features underlying the preparation of financial statements? Understandability Consistency Timeliness

b. Consistency is one of the general features underlying the preparation of financial statements based on IFRS.

High-water marks are typically used when calculating the incentive fee on hedge funds. They are most likely used by clients to: a. claw back the management fees. b. avoid paying twice for the same performance. c. avoid prime brokerage fees.

b. avoid paying twice for the same performance - High-water marks help clients avoid paying twice for the same performance. When a hedge fund's value drops, the manager will not receive an incentive fee until the value of the fund returns to its previous level.

For a forward contract with a value of zero, a situation where the spot price is above the forward price is best explained by high: a. interest rates. b. convenience yield. c. storage costs.

b. convenience yield - If the convenience yield is high, holding the underlying confers large benefits, thus the spot price can exceed the forward price for a forward contract with a value of zero.

Which of the following statements best describes the role of the International Organization of Securities Commissions (IOSCO)? The IOSCO a. is responsible for regulating financial markets of member nations. b. assists in attaining the goal of cross-border cooperation in combating violations of securities laws. c. is the oversight body to which the International Accounting Standards Board (IASB) reports.

b. cross border cooperation and shit The IOSCO is not a regulator of financial markets. Its role is to assist in attaining the goal of uniform regulation and enforcement of international financial standards and in attaining the goal of cross-border cooperation in combating violations of securities and derivative laws.

An expansionary fiscal policy is most likely associated with: a. an increase in government spending on social insurance and benefits. b. crowding out of private investments. c. an increase in capital gains tax rates.

b. crowding out private investments Expansionary policy increases government borrowing, which may divert private sector investment from taking place (resulting in an effect known as crowding out). A rise in capital gain tax rates is a form of contractionary fiscal policy. Rises in government spending on social insurance and benefits is a form of automatic stabilizer and not due to discretionary fiscal expansion.

Which of the following is most likely considered an example of matrix pricing when determining the cost of debt? a. Both the yield-to-maturity and the debt-rating approaches. b. Debt-rating approach only. c. Yield-to-maturity approach only.

b. debt rating The debt-rating approach is an example of matrix pricing.

A company that prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) uses the revaluation model to value land. At the end of the current year, the value of land, newly acquired this year, has increased and will be adjusted on the balance sheet. This land is the only asset in its asset class for revaluation purposes. Which of the following statements is most accurate? In the current period, the revaluation of the land will: a. increase return on sales. b. decrease the debt-to-equity ratio. c. increase return on assets.

b. decrease in the D/E ratio The increase in the value of the land bypasses the income statement and goes directly to a revaluation surplus account in equity, assuming no previous decreases in value in the asset class for revaluation purposes. Equity increases, thereby decreasing the debt-to-equity ratio.

Heidi Katz is a CFA candidate and an analyst at a pension consulting firm. Her father is a major shareholder and managing director at Saturn Partners, a large hedge fund. When assisting in an alternative manager search for a pension client, Katz plans to recommend Saturn's market-neutral strategy because she believes it meets all of the pension plan's criteria. Given this situation, the best course of action for Katz is to: a. disclose the potential conflict to her employer and follow their guidance regarding disclosure of her relationship to the client. b. disclose the potential conflict to the pension client when discussing this recommendation. c. not present this strategy to the client and recommend another strategy.

b. disclose the potential conflict to the pension client when discussing this recommendation. Standard VI (A) requires disclosure of conflicts but does not prohibit members from making recommendations as long at the potential conflicts are appropriately disclosed.

The behavioral bias in which investors tend to avoid realizing losses but rather seek to realize gains is best described as: mental accounting. the disposition effect. the gambler's fallacy.

b. disposition affect

The null hypothesis is most likely to be rejected when the p-value of the test statistic: a. exceeds a specified level of significance. b. falls below a specified level of significance. c. is negative.

b. falls below the specified level of significance

An equity fund manager is considering a market index as the benchmark for his portfolio, and he has the following preferences: the index should have a contrarian effect; shares held by controlling shareholders should be included; dividends should be included in the weighting of constituent securities; and the weights of constituent securities should not be arbitrarily determined by the index provider. Which of the following weightings of indices best meets the fund manager's preferences? Float-adjusted market capitalization Fundamental Equal

b. fundamental - Fundamental weighting satisfies the fund manager's preferences. Fundamental indices use a single measure, such as total dividends, to weight the constituent securities. Fundamentally weighted indices generally will have a contrarian effect, in that the portfolio weights will shift away from securities that have increased in relative value and toward securities that have fallen in relative value whenever the portfolio is rebalanced. All shares are included in a fundamental weighted index.

An accounting document that records transactions in the order in which they occur is best described as a: trial balance. general journal. general ledger.

b. general journal

Accounting standards and reporting requirements that produce meaningful and timely financial disclosures are most critical for achieving which of the following efficiencies associated with a well-functioning financial system? Operational Informational Allocational

b. informationally efficient system

Which of the following most accurately describes a distribution that is more peaked than normal? Platykurtotic Leptokurtotic Mesokurtotic

b. leptokurtotic - A distribution that is more peaked than normal is called leptokurtotic.

A stop-buy order is most likely placed when a trader: wants to limit the loss on a long position. wants to limit the loss on a short position. thinks that the stock is overvalued.

b. limit the loss on a short position

The International Financial Reporting Standards (IFRS) Conceptual Framework identifies fundamental qualitative characteristics that make financial information useful. Which of the following is least likely to be one of these characteristics? a. Faithful representation b. Materiality c. Relevance

b. materiality

The stock of GBK Corporation has a beta of 0.65. If the risk-free rate of return is 3% and the expected market return is 9%, the expected return for GBK is closest to: 3.9%. 10.8%. 6.9%.

c.

Claire Jones, CFA, is an analyst following natural gas companies in the United States. At an industry energy conference, the chief financial officer of Alpine Energy states that the company is interested in making strategic acquisitions. At a separate event, Alpine's head of exploration commented that he is bullish on natural gas production prospects within northeastern Pennsylvania. Jones is aware that Alpine currently has very little exposure to this region. She also knows another company in her universe, Pure Energy, Inc. is based in northeastern Pennsylvania and controls significant assets in the area. Pure Energy is highly leveraged, and Jones believes it will need to raise additional capital or partner with another firm to move to the production phase with their assets. Jones attempts to contact Alpine's chief executive officer with an unrelated question and is told he is unavailable because he is on a business trip to northeastern Pennsylvania. Jones updates her research on Pure Energy and then recommends the stock to Lisa Wong, CFA, a portfolio manager, who purchases significant positions in client accounts. The following week, Pure Energy announces it has entered into an agreement to be purchased by Alpine for a significant premium. Has either Jones or Wong most likely violated standards with regard to the integrity of capital markets? a. Yes, both Jones and Wong have acted on insider information b. No c. Yes, Jones' recommendation is based on insider information

b. no Jones has used the mosaic theory to combine nonmaterial, nonpublic information with material public information.

The non-controlling or minority interests found in the equity section of the balance sheet are best described as the equity interests: a. held by the corporation in other entities which it does not control, but has significant influence. b. of minority shareholders in subsidiaries that have been consolidated. c. of minority shareholders of the corporation who have significant influence, but not control.

b. of minority shareholders in subsidiaries that have been consolidated.

Holding all other characteristics the same, the bond exposed to the greatest level of reinvestment risk is most likely the one selling at: par. a premium. a discount.

b. premium - A bond selling at a premium has a higher coupon rate and, all else being equal, bonds with higher coupon rates face higher reinvestment risk. The reason is that the higher the coupon rate, the more dependent the bond's total dollar return will be on the reinvestment of the coupon payments in order to produce the yield to maturity at the time of purchase.

Monte Carlo simulation is best described as: a restrictive form of scenario analysis. providing a distribution of possible solutions to complex functions. an approach to backtest data.

b. providing a distribution of possible solutions to complex functions. - Monte Carlo simulation provides a distribution of possible solutions to complex functions. The central tendency and the variance of the distribution of solutions give important clues to decision makers regarding expected results and risk.

The economic equilibrium interest rate in a well functioning financial system is most likely determined by: the time consumption preferences of borrowers. the supply and demand of money. central bank policy.

b. supply and demand of money cousin

Which attribute would a private equity firm most likely desire when deciding if a company is particularly attractive as a leveraged buyout target? a. Market value exceeds intrinsic value b. Sustainable cash flow c. Efficient management

b. sustainable cash flows - PE firms typically look for firms with strong cash flows and a significant amount of physical assets

Which attribute would a private equity firm most likely desire when deciding if a company is particularly attractive as a leveraged buyout target? Market value exceeds intrinsic value Sustainable cash flow Efficient management

b. sustainable cash flows - Private equity firms look for companies that have strong cash flows and a significant amount of physical assets. These physical assets can be used as security and borrowed against.

Demand for a good is most likely to be more elastic when: a. a lesser proportion of income is spent on the good. b. the adjustment to a price change takes a longer time. c. the good is a necessity.

b. the adjustment to a price change takes a longer time. The more time that has elapsed since a price change, the more elastic the demand. For example, if gas prices rise, consumers cannot quickly change their mode of transportation but will likely do so in the longer run.

In the binomial model, the difference between the up and down factors best represents the: moneyness of an option. volatility of the underlying. pseudo probability.

b. volatility of the underlying

In the binomial model, the difference between the up and down factors best represents the: a. moneyness of an option. b. volatility of the underlying. c. pseudo probability.

b. volatility of the underlying - The volatility of the underlying is captured in the binomial model by the difference between the up and down factors.

What type of risk most likely affects an investor's ability to buy and sell bonds in the desired amounts and at the desired time? Spread Market liquidity Default

b.? The size of the spread between the bid price and the ask price is the primary measure of market liquidity of the issue. Market liquidity risk is the risk that the investor will have to sell a bond below its indicated value. The wider the bid-ask spread, the greater the market liquidity risk.

The market value of an 18-year zero-coupon bond with a maturity value of $1,000 discounted at a 12% annual interest rate with semi-annual compounding is closest to: $192.86. $130.04. $122.74.

c

A portfolio manager decides to temporarily invest more of a portfolio in equities than the investment policy statement prescribes because he expects equities will generate a higher return than other asset classes. This decision is most likely an example of: rebalancing. strategic asset allocation. tactical asset allocation.

c tact - Tactical asset allocation is the decision to deliberately deviate from the policy exposures to systematic risk factors with the intent to add value based on forecasts of the near-term returns of those asset classes.

118 of 120 A portfolio manager generated a rate of return of 15.5% on a portfolio with beta of 1.2. If the risk-free rate of return is 2.5% and the market return is 11.8%, Jensen's alpha for the portfolio is closest to: 4.34%. 3.70%. 1.84%.

c.

Which of the following is least likely to be directly reflected in the returns on a commodity index? Roll yield Changes in the futures prices of commodities in the index Changes in the spot prices of underlying commodities

c. - Commodity index returns reflect the changes in future prices and the roll yield. Changes in the underlying commodity spot prices are not reflected in a commodity index.

If Investor A has a lower risk aversion coefficient than Investor B, will Investor B's optimal portfolio most likely have a higher expected return on the capital allocation line? a. No, because Investor B has a higher risk tolerance b. Yes c. No, because Investor B has a lower risk tolerance

c. - Investor B has a higher risk aversion coefficient, which means a lower risk tolerance and a lower expected return on the capital allocation line.

Consider a five-year option-free bond that is priced at a discount to par value. Assuming the discount rate does not change, one year from now the value of the bond will most likely: stay the same. decrease. increase.

c. - The bond is priced below its par value but will be worth exactly par value at maturity. Over time, assuming a stable discount rate, the value of the bond must rise so that it is equal to par at maturity. That is, the price is "pulled to par."

A BBB rated corporation wishes to issue debt to finance its operations at the lowest cost possible. If it decides to sell a pool of receivables into a special purpose vehicle (SPV), its primary motivation is most likely to: allow the corporation to retain a first lien on the assets of the SPV. receive a guaranty from the SPV to improve the corporation's credit rating. segregate the assets into a bankruptcy-remote entity for bondholders.

c. A key motivation for a corporation to establish a SPV is to separate it as a legal entity. In the case of bankruptcy for the corporation, the SPV is unaffected because it is not a subsidiary of the corporation. Given this arrangement, the SPV can achieve a rating as high as AAA and borrow at lower rates than the corporation.

Which of the following statements is most accurate with respect to the jurisdiction underlying financial reporting? a. The requirement to prepare financial reports in accordance with specified accounting standards is the responsibility of standard-setting bodies. b. Regulatory authorities are typically private sector, self-regulated organizations. c. Standard-setting bodies have authority because they are recognized by regulatory authorities.

c. Standard-setting bodies have authority because they are recognized by regulatory authorities.

If a bank wants the ability to retire debt prior to maturity in order to take advantage of lower borrowing rates, it most likely issues a: convertible bond. putable bond. callable bond.

c. - Callable bonds give issuers the ability to retire debt prior to maturity. The most compelling reason for them to do so is to take advantage of lower borrowing rates.

Fundamental Asset Managers claims compliance with the CFA Institute Global Investment Performance Standards (GIPS) and manages both discretionary and non-discretionary accounts. When constructing a single composite for Fundamental, Juma Dzuya includes all discretionary, fee-paying accounts with both value and growth strategies. Does the composite constructed by Dzuya most likely meet the criteria of the GIPS standards? a. yes b. No, because non-discretionary accounts are not included c. No, because of non-similar investment strategies

c. A composite must include all actual fee-paying, discretionary portfolios managed in accordance with the same investment mandate, objective, or strategy (Standard IV-Composites). By including both the value and growth portfolios, the composite is made up of portfolios with different investment mandates or strategies.

The Global Investment Performance Standards least likely require: a. non-fee-paying portfolios to be excluded in the returns of appropriate composites. b. composites to be defined according to similar investment objectives and/or strategies. c. nondiscretionary portfolios to be included in composites.

c. Composites (Standard IV - Composites) must be defined according to similar investment objectives and/or strategies. Terminated portfolios must be included in the historical returns of appropriate composites, and only fee-paying portfolios are to be included in composites. Non-discrectionary portfolios must not be included in a firm's composites.

According to the Global Investment Performance Standards (GIPS), firms must do all of the following except: a. adhere to certain calculation methodologies and make specific disclosures along with their performance. b. comply with all requirements of the GIPS standards, such as updates, guidance statements, and clarifications. c. provide investors with a comprehensive view of their performance only in terms of returns.

c. Firms must provide investors with a comprehensive view of their performance in terms of risk and returns, not just returns.

Darden Crux, CFA, a portfolio manager at SWIFT Asset Management Ltd., (SWIFT) calls a friend to join him for dinner. The friend, a financial analyst at Cyber Kinetics (CK), declines the invitation and explains she is performing due diligence on Orca Electronics, a company CK is about to acquire. After the phone call, Crux searches the Internet for any news of the acquisition but finds nothing. After verifying that Orca is on SWIFT's approved stock list, Crux purchases Orca's common stock and call options for selective SWIFT clients. Two weeks later, CK announces its intention to acquire Orca. The next day, Crux sells all of the Orca securities, giving the fund a profit of $3 million. What action should Crux most likely have taken to avoid violating any CFA Institute Standards of Professional Conduct? a. Purchase the stock and call options for all clients. b. Trade only after analyzing the stock diligently and thoroughly. c. Refuse to trade based on the information.

c. Members/candidates who possess material nonpublic information that could affect the value of an investment should not act or cause others to act on the information as stated in Standard II(A). Crux traded on the material information that Orca is about to be acquired by Cyber Kinetics. The information is non-public because it is not publicly available, which was verified when Crux researched Orca on the Internet and found nothing about the acquisition.

According to the CFA Institute Code of Ethics and Standards of Professional Conduct, trading on material nonpublic information is least likely to be prevented by establishing: a. personal trading limitations. b. firewalls. c. selective disclosure.

c. Selective disclosure occurs when companies discriminate in making material nonpublic information public. Corporations that disclose information on a limited basis create the potential for insider-trading violations. See Standard II(A).

During an on-site company visit, Marsha Ward, CFA, accidentally overheard the chief executive officer of Stargazer, Inc. discussing the company's tender offer to purchase Dynamica Enterprises, a retailer of Stargazer products. According to the CFA Institute Standards of Professional Conduct, Ward most likely cannot use the information because: a. she does not have a reasonable and adequate basis for taking investment action. b. it was overheard and might be considered unreliable. c. it relates to a tender offer.

c. Trading on the information is restricted given that it relates to a tender offer; it is clearly material, nonpublic information as stated in Standard II(A).

At the start of the current year, Company A, which reports using US GAAP, sold a piece of land to Company B for $10 million. The land cost $6 million. Company B made a $2 million down payment with the remaining balance to be paid over the next five years. Over the course of the year, it has been determined that there is significant doubt about the ability and commitment of Company B to complete all payments. In the current year, Company A would most likely report a profit related to the sale of the land of: a. $4 million using the accrual method. b. $2 million using the cost recovery method. c. $0.8 million using the installment method.

c. $0.8 million using the installment method - Because of the uncertainty about collection of the remaining payments, it would not be appropriate to use the accrual method. Under the installment method, the portion of the total profit that is recognized in each period is determined by the percentage of the total sales price for which the seller has received cash. Company A will recognize 2/10 × $4 million = $0.8 million. Although the cost recovery method could have been used in this situation, the reported profit would be $0.

20 of 120 A company has an equity beta of 1.4 and is 60% funded with debt. Assuming a tax rate of 35%, the company's asset beta is closest to: a. 1.01. b. 0.98. c. 0.71.

c. 0.71 Note: 60% debt financing is equivalent to a debt-to-equity ratio of 1.50 = 0.60/(1 - 0.60). βAsset = βEQ × {1/[1 + (1 - t)D/E)]} = 1.4/[1 + (1 - 0.35) × 1.5] = 0.7089.

A financial contract offers to pay €1,200 per month for five years with the first payment made immediately. Assuming an annual discount rate of 6.5%, compounded monthly the present value of the contract is closest to: €63,731. €61,330. €61,663.

c. 61,663 cuz BGN mode (pmt made at start of yr 1) n = 12 x 5 years = 60 i/y = 6.5%/12 months = .541% pmt = -1200 CPT PV = 61,663

Consumer surplus is best described as: a. at times positive and at other times negative. b. always less than or equal to zero. c. always greater than or equal to zero.

c. always greater than or equal to zero Consumer surplus arises when a consumer pays less for a good than the maximum price that she or he was willing to pay for it. Consumer surplus is the value (or marginal benefit) of a good minus the price paid for it, summed over the quantity bought. Because no consumer will (willingly) pay a price greater than the marginal value or benefit, consumer surplus is always positive.

Convenience yield is best described as a nonmonetary benefit of holding a(n): forward contract. option contract. asset.

c. asset

For portfolio managers of passive funds, market indices are least useful as: proxies to measure systematic risk. tools to develop exchange-traded funds for non-accessible markets. benchmarks for portfolio performance attribution.

c. benchmarks - market indexes are most useful as benchmarks for actively traded funds ya bishhhh

Fund Return Year 1Positive Year2 Negative Portfolio Money-Weighted Rate of Return Investor A 7.5% Investor B 8.2% Given the information in the table, which of the following is least likely to be an explanation for the difference between the two money-weighted rates of return? Investor A increased the investment in the fund at the end of year 1 whereas investor B did not make any additions or withdrawals. Investor B decreased the investment in the fund at the end of year 1 whereas investor A did not make any additions or withdrawals. The investors invested different amounts at inception and afterward did not make any additions or withdrawals.

c. c is least likely - The money-weighted rate of return (MWR) is sensitive to the additions and withdrawals of funds in a portfolio over the course of an investment. If, at inception, investor A and B invest amounts of different size in the same fund but then neither add nor withdraw any cash for two years, they will obtain exactly the same MWR. In contrast, if investor A increases the investment in the fund at the end of year 1 and investor B does not make any additions or withdrawals, then Investor A will have a lower MWR than investor B because in year 2 the fund underperformed with respect to year 1. By the same token, if investor B decreases the investment at the end of year 1 and investor A does not make any additions or withdrawals, then investor B will have a higher MWR than investor A because she decreased the investment before an underperforming year.

In futures markets, contract performance is most likely guaranteed by: the futures exchanges. regulatory agencies. clearing houses.

c. clearinghouses

In generating an estimate of a population parameter, a larger sample size is most likely to improve the estimator's: unbiasedness. efficiency. consistency.

c. consistency - A consistent estimator is one for which the probability of estimates close to the value of the population parameter increases as the sample size increases. Unbiasedness and efficiency are properties of an estimator's sampling distribution that hold for any size sample.

A company that prepares its financial statements using International Financial Reporting Standards (IFRS) wrote down its inventory value by €20,000 at the end of Year 1. In Year 2, prices increased, and the same inventory at the end of the year was worth €30,000 more than its value at the end of the prior year. Which of the following statements is most accurate? In Year 2, the company's cost of sales: a. decreased by €30,000. b. was unaffected. c. decreased by €20,000.

c. decreased by 20k - Under IFRS, the recovery of a previous write-down is limited to the amount of the original write-down (€20,000) and is reported as a decrease in the cost of sales.

A company's asset beta is 1.2 based on a debt-to-equity ratio (D/E) of 50%. If the company's tax rate increases, the associated equity beta will most likely: a. decrease. b. remain unchanged. c. increase.

c. increase

The advantages to an investor owning convertible preference shares of a company most likely include: an opportunity to receive additional dividends if the company's profits exceed a pre-specified level. preference dividends that are fixed contractual obligations of the company. less price volatility than the underlying common shares.

c. less price volatility

Which of the following statements best describes a trial balance? A trial balance is a document or computer file that: a. contains all business transactions recorded in the order in which they occur. b. shows all business transactions by account. c. lists all account balances at a particular point in time.

c. lists all account balances at a particular point in time. - A trial balance is a document that lists account balances at a particular point in time.

Using put-call parity, a long call can best be replicated by going: long the put, short the asset and long the bond. short the put, long the asset and short the bond. long the put, long the asset and short the bond.

c. long put, long asset, short of the bond

According to behavioral finance, observed overreaction in securities markets most likely occurs because of: gambler's fallacy. disposition effect. loss aversion.

c. loss aversion

Which of the following least likely describes an advantage of investing in hedge funds through a fund of funds? A fund of funds may provide investors with: access to due diligence expertise. access to managers who can negotiate better redemption terms. lower fees because of economies of scale.

c. lower fees cuz of economies of scale - usually higher fees yo

Which of the following is least likely to be a general feature underlying the preparation of financial statements within the International Financial Reporting Standards (IFRS) Conceptual Framework? a. Accrual basis b. Materiality c. Matching

c. matching is not a feature of preparation of financial statements - The IFRS Conceptual Framework specifies a number of general features underlying the preparation of financial statements, including materiality and accrual basis. Matching is not one of those general features; it is a general principle of expense recognition.

The non-controlling or minority interests found in the equity section of the balance sheet are best described as the equity interests: a. of minority shareholders of the corporation who have significant influence, but not control. b. held by the corporation in other entities which it does not control, but has significant influence. c. of minority shareholders in subsidiaries that have been consolidated.

c. of minority shareholders in subsidiaries that have been consolidated. - Non-controlling interests found in the equity section represent the equity interests of minority shareholders in non-wholly-owned subsidiaries that have been consolidated.

The least likely reason thata security analyst needs to understand the accounting process is to: a. aid in the assessment of management's judgment in accruals and valuations. b. make adjustments to reflect items not reported in the financial statements. c. prevent earnings manipulation by management.

c. prevent earnings manipulation by management. - Understanding the accounting process may assist an analyst in identifying earnings manipulation, but it will not prevent the manipulation of earnings by management. It is important for an analyst to understand the accounting process so that they can make adjustments for items not reported and aid in the assessment of management's judgment of accruals and valuations.

In a period of rising prices, when compared with a company that uses weighted average cost for inventory, a company using FIFO will most likely report higher values for its: a. debt-to-equity ratio. b. inventory turnover. c. return on sales.

c. return on sales In periods of rising prices, FIFO results in a higher inventory value and a lower cost of goods sold and thus a higher net income. The higher net income increases return on sales. The higher reported net income also increases retained earnings and thus results in a lower debt-to-equity ratio, not a higher one. The combination of higher inventory and lower cost of goods sold (CGS) decreases inventory turnover (CGS/Inventory).

The belief that trends and patterns tend to repeat themselves and are, therefore, somewhat predictable best describes: a. arbitrage pricing theory. b. weak-form efficiency. c. technical analysis.

c. technical analysis

Ross Nelson, CFA, manages accounts for high-net-worth clients, including his own family's account. He has no beneficial ownership in his family's account. Because Nelson is concerned about the appearance of improper behavior in managing his family's account, when his firm purchases a block of securities, Nelson allocates to his family's account only those shares that remain after his other client accounts have their orders filled. The fee for managing his family's account is based on his firm's normal fee structure. According to the Standards of Practice Handbook, Nelson's best course of action with regard to management of his family's account would be to: a. remove himself from any direct involvement by transferring responsibility for this account to another investment professional in the firm. b. treat the account like other employee accounts of the firm. c. treat the account like other client accounts.

c. treat them like any other client Nelson has breached his duty to his family by treating them differently from other clients. They are entitled to the same treatment as any other client of the firm. Nelson should treat his family's account like any other client account as stated in Standard III (B) related to Fair Dealing and Standard VI (B) related to Priority of Transactions.

In 2013, a software company recorded unearned revenue related to a software license that it will recognize as revenue during 2014. Ignoring income taxes, the recognition of the software revenue in 2014 will most likely result in 2014 cash from operations being: higher. lower. unchanged.

c. unchanged - The company received the cash in 2013 when it recorded the unearned revenue, and it increased cash from operations in that year. In 2014, the revenue is earned, but there is no cash exchanged and thus no effect on the cash from operations, ignoring taxes.

Regarding a company's production function, both labor costs and capital costs are best described as: a. fixed in the long run. b. variable in the short run. c. variable in the long run.

c. variable in the long run In the short run, a company can vary the quantity of labor, but the quantity of capital is fixed. In the long run, a firm can vary both the quantity of labor and the quantity of capital.

Nicholas Bennett, CFA, is a trader at a stock exchange. Another trader approached Bennett on the floor of the exchange and verbally harassed him about a poorly executed trade. In response, Bennett pushed the trader and knocked him to the ground. After investigating the incident, the exchange cleared Bennett from any wrongdoing. Which of the following best describes Bennett's conduct in relation to the CFA Institute Code of Ethics or Standards of Professional Conduct? Bennett: a. violated both the standard relating to professionalism and integrity of capital markets. b. did not violate any of the Code of Ethics or Standards of Professional Conduct. c. violated the standard relating to professionalism.

c. violated the standard relating to professionalism.

Consider two bonds that are identical except for their coupon rates. The bond that will have the highest interest rate risk most likely has the: coupon rate closest to its market yield. lowest coupon rate. highest coupon rate.

c? - A lower coupon rate means that more of the bond's value comes from repayment of face value, which occurs at the end of the bond's life.

when a project can NOT be reliably measured under US GAAP - we use the _________________ method to value revenue

completed contract

US GAAP requites that when long term projects costs cannot be reliably measured, the ________________ method is used

completed contract method

under US GAAP, market value is defined as ...

current replacement cost

gross margin is...

difference between COGS and sales divided by sales

At the start of a month, a retailer paid $5,000 in cash for candies. He sold $2,000 worth of candies for $3,000 during the month. The most likely effect of these transactions on the retailer's accounting equation for the month is that assets will: a. be unchanged. b. decrease by $2,000. c. increase by $1,000.

easy peezy c. just work it out assets = liabililties + equity Buying $5,000 of candies will decrease cash by $5,000 and increase inventory by $5,000. Selling $2,000 of candies for $3,000 will decrease inventory by $2,000 and increase either cash (if cash is collected in the same accounting period) or accounts receivable (if sold on credit) by $3,000. The combined effect is an increase of $1,000 in assets.

if i gave u a bunch of numbers like fixed cost, var cost, total units, total investment, opportunity cost, how would u give me the economic profit?

find accounting profit first and then find the economic profit which = accounting profit - implicit costs

for skewed to the left, the median is _________ than the mean

greater than

operating margin is...

gross margin - (other expenses as a % of sales) = operating margin

A company issues new 20-year $1,000 bonds with a coupon rate of 6.2% payable semiannually at an issue price of $1,030.34. Assuming a tax rate of 28%, the firm's annual after-tax cost of debt (%) is closest to: a. 4.28 b. 5.94 6. 4.46

i knew this ---- The annual after-tax cost of debt is the after tax annual yield to maturity (YTM). Find the YTM by using a financial calculator as follows: Present value (PV) = -1,030.34; Future value (FV) = 1,000; N = 40 (20 × 2); Payment (PMT) = 31 (0.062 × 1,000 × ½); compute i. i = 2.97 semiannually. Annually, YTM = 2.97 × 2 = 5.94. Therefore, the associated after-tax value = 0.0428 = 0.0594 × (1 - 0.28).

distribution with excess kurtosis is....

leptokurtotic

for skewed to the right, the median is ___________ than the mean

less than

platykurtotic is...

lower than normal kurtosis

if someone invests 1,550,000 into a business, what is the implicit cost if the r_f rate is 12.5%

multiply .125 times the $1,550,000 to find out your opportunity cost of returns ya fuker

whats the diff of sample standard deviation and population?

n-1 for sample and n in denominator for the population

does operating margin take into account interest expense as a % of sales?

no u idiot

US GAAP requires long term contracts that can be measured reliably should be accounted for using the...... method

percentage of completion method

know about put call forward parity and put call parity please

please!!!

A company's data are provided in the following table: Cost of debt = 10% Cost of equity = 16% Debt-to-equity ratio (D/E)=50% Tax rate = 30% The weighted average cost of capital (WACC) is closest to: 13.0%. 14.0%. 11.5%.

should include the after tax cost of debt

normal kurtosis is ________

three

mesokurtosis has _______ kurtosis

zero excess