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WorksheetsMockTest 3 TE8 ss1
Total questions: 90
Worksheet time: 3hrs 0mins
Name
Class
Date
1.
While waiting in the business class lounge before boarding an airplane, Becca Msafari, CFA, an equity analyst, overhears a conversation by a group of senior managers, including members of the Board, from a large publicly listed bank. The managers discuss staff changes necessary to accommodate their regional expansion plans. Msafari hears several staff names mentioned. Under what circumstances could Msafari most likely use this information when making an investment recommendation to her clients?
a)
A. Under no circumstances.
b)
B. If she does not breach the confidentiality of names of staff.
c)
C. If the discussed changes are unlikely to affect investor perception of the bank.
d)
None
e)
None
2.
Monique Gretta, CFA, is a research analyst at East West Investment Bank. Previously, Gretta worked at a mutual fund management company and has a long-standing client relationship with the managers of the funds and their institutional investors. Gretta often provides fund managers, who work for Gretta’s former employer, with draft copies of her research before disseminating the information to all of the bank’s clients. This practice has helped Gretta avoid several errors in her reports, and she believes it is beneficial to the bank’s clients, even though they are not aware of this practice. Regarding her research, Gretta least likely violated the CFA Institute Code of Ethics and Standards of Professional Conduct because:
a)
A. her report is a draft.
b)
B. this practice benefits all clients.
c)
C. the long-standing client relationships are not disclosed.
d)
None
e)
None
3.
Molly Burnett, CFA, is a portfolio manager for a fund that only invests in environmentally friendly companies. A multinational utility company recently acquired one of the fund’s best performing investments, a wind power company. The wind power company’s shareholders received utility company shares as part of the merger agreement. The utility has one of the worst environmental records in the industry, but its shares have been one of the top performers over the past 12 months. Because the utility pays a high dividend every three months, Burnett holds the utility shares until the remaining two dividends are paid for the year then sells the shares. Burnett most likely violated the CFA Institute Standard of Professional Conduct concerning:
a)
A. suitability.
b)
B. disclosure of conflicts.
c)
C. independence and objectivity.
d)
None
e)
None
4.
Solomon Sulzberg, CFA, is a research analyst at Blue Water Management. Sulzberg’s recommendations typically go through a number of internal reviews before they are published. In developing his recommendations, Sulzberg uses a model developed by a quantitative analyst within the firm. Sulzberg made some minor changes to the model but retained the primary framework. In his reports, Sulzberg attributes the model to both the quantitative analyst and himself. Before the internal reviews of his reports were completed, Sulzberg buys shares in one of the companies. After the internal review is complete he fails to recommend the purchase of the stock to his clients and erases all of his research related to this company. Sulzberg least likely violated the CFA Institute Code of Ethics and Standards of Professional Conduct related to:
a)
A. Record Retention.
b)
B. Misrepresentation.
c)
C. Priority of Transactions.
d)
None
e)
None
5.
Belen Zapata, CFA, is the owner of Kawah Investments. Kawah promises investors returns of up to 12% per year and claims to achieve this by investing in non-investment-grade bonds and other fixed-income instruments. Over the next 12 months, bond market yields reach unprecedented lows, and Zapata finds it impossible to achieve the returns she expected. No investments are ever made by Kawah, and clients are completely paid back all of their original investment. Zapata most likely violated the CFA Institute Standards of Professional Conduct because of the:
a)
A. return of capital.
b)
B. promised returns.
c)
C. investment mandate.
d)
None
e)
None
6.
Q. Which of the following is a correct statement of a member’s or candidate’s duty under the Code and Standards?
a)
A. In the absence of specific applicable law or other regulatory requirements, the Code and Standards govern the member’s or candidate’s actions.
b)
B. A member or candidate is required to comply only with applicable local laws, rules, regulations, or customs, even though the Code and Standards may impose a higher degree of responsibility or a higher duty on the member or candidate.
c)
C. A member or candidate who trades securities in a securities market where no applicable local laws or stock exchange rules regulate the use of material nonpublic information may take investment action based on material nonpublic information.
d)
None
e)
None
7.
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 feels it meets all of the pension plan’s criteria. Given this situation, the best course of action for Katz is to:
a)
A. not present this strategy to the client and recommend another strategy.
b)
B. disclose the potential conflict to the pension client when discussing this recommendation.
c)
C. disclose the potential conflict to her employer and follow their guidance regarding disclosure of her relationship to the client.
d)
None
e)
None
8.
Q. Anderb, a portfolio manager for XYZ Investment Management Company—a registered investment organization that advises investment firms and private accounts—was promoted to that position three years ago. Bates, her supervisor, is responsible for reviewing Anderb’s portfolio account transactions and her required monthly reports of personal stock transactions. Anderb has been using Jonelli, a broker, almost exclusively for brokerage transactions for the portfolio account. For securities in which Jonelli’s firm makes a market, Jonelli has been giving Anderb lower prices for personal purchases and higher prices for personal sales than Jonelli gives to Anderb’s portfolio accounts and other investors. Anderb has been filing monthly reports with Bates only for those months in which she has no personal transactions, which is about every fourth month. Which of the following is most likely to be a violation of the Code and Standards?
a)
A. Anderb failed to disclose to her employer her personal transactions.
b)
B. Anderb owned the same securities as those of her clients.
c)
C. Bates allowed Anderb to use Jonelli as her broker for personal trades.
d)
None
e)
None
9.
Tamlorn Mager, CFA, is an analyst at Pyallup Portfolio Management. CFA Institute recently notified Mager that his CFA Institute membership was suspended for a year because he violated the CFA Code. A hearing panel also came to the same conclusion. Mager subsequently notified CFA Institute that he does not accept the sanction or the hearing panel’s conclusion. Which of the following actions by Mager is most consistent with the CFA Institute Standards of Professional Conduct Program?
a)
A. Presenting himself to the public as a CFA charterholder.
b)
B. Providing evidence for his position to an outside arbitration panel.
c)
C. Using his CFA designation upon expiration of the suspension period.
d)
None
e)
None
10.
From the point of view of an investor, unethical behavior by investment professionals can most likely lead to which of the following?
a)
A. Increased willingness to accept risk
b)
B. Rise in the demand for investments
c)
C. Demand for a higher return
d)
None
e)
None
11.
Elliott Johnson, CFA, a portfolio manager at Childress Investment Management, a mid-size asset management firm, actively uses social media to discuss his firm’s outlook on the market and the stocks its analysts cover. He frequently posts on the firm’s Facebook page, his personal Twitter account, and the firm’s password-protected website. Which of the following would most likely result in Johnson violating CFA Institute Standard III(B): Fair Dealing?
a)
A. His tweet, “I’ll be recommending approval for this acquisition to the Investment Committee!”
b)
B. His post on the firm’s website listing companies reporting earnings over the next week, including consensus expectations versus the firm’s analysts’ expectations
c)
C. His post on Facebook following the quarterly reporting period to the firm’s clients giving the firm’s expectation regarding economic growth for the next 12 months
d)
None
e)
None
12.
According to the Global Investment Performance Standards (GIPS®), which of the following is not a part of the verification process? Testing whether the:
a)
A. firm has implemented policies and procedures compliant with all the composite maintenance requirements.
b)
B. verification is undertaken by the compliance department in the absence of a third party.
c)
C. firm’s processes and procedures are designed to calculate results in compliance with GIPS standards.
d)
None
e)
None
13.
Q. Townsend was recently appointed to the board of directors of a youth golf program that is the local chapter of a national not-for-profit organization. The program is beginning a new fund-raising campaign to expand the number of annual scholarships it provides. Townsend believes many of her clients make annual donations to charity. The next week in her regular newsletter to all clients, she includes a small section discussing the fund-raising campaign and her position on the organization’s board.
a)
A. Townsend did not violate the Code and Standards.
b)
B. Townsend violated the Code and Standards by soliciting donations from her clients through the newsletter.
c)
C. Townsend violated the Code and Standards by not getting approval of the organization before soliciting her clients.
d)
None
e)
None
14.
According to the GIPS® standards, a verification report confirms all of the following except whether:
a)
A. specific composite presentations are accurate.
b)
B. a firm has complied with all firm-wide composite construction requirements.
c)
C. processes and procedures are designed to calculate and present performance results in compliance with the GIPS standards.
d)
None
e)
None
15.
Which of the following is not a component of the CFA Institute Code of Ethics?
a)
A. Promote financial integrity and seek to prevent and punish abuses in the financial markets.
b)
B. Place the integrity of the investment profession and the interests of clients above their own personal interests.
c)
C. Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession.
d)
None
e)
None
16.
In countries where new local laws relating to calculation and presentation of investment performance conflict with GIPS® standards, firms that have claimed GIPS compliance should most likely:
a)
A. stop claiming GIPS compliance.
b)
B. follow local laws, continue to claim GIPS compliance, and disclose conflicts.
c)
C. continue to claim GIPS compliance, disclosing non-compliance with new laws.
d)
None
e)
None
17.
Which of the following statements concerning the Global Investment Performance Standards (GIPS®) is most likely correct?
a)
A. Clients or prospective clients benefit from the GIPS standards because the historical track record of compliant firms is accurate and precise.
b)
B. The GIPS standards eliminate the need for in-depth due diligence by investors.
c)
C. Compliance with the GIPS standards enhances the credibility of investment management firms.
d)
None
e)
None
18.
Q. A firm that does not adopt the GIPS standards could mischaracterize its overall performance by presenting a performance history:
a)
A. that includes terminated portfolios.
b)
B. composed of a single top-performing portfolio.
c)
C. for an investment mandate over all periods since the firm’s inception.
d)
None
e)
None
19.
Q. Which of the following statements is a stated purpose of disclosure in Standard VI(C)–Referral Fees?
a)
A. Disclosure will allow the client to request discounted service fees.
b)
B. Disclosure will help the client evaluate any possible partiality shown in the recommendation of services.
c)
C. Disclosure means advising a prospective client about the referral arrangement once a formal client relationship has been established.
d)
None
e)
None
20.
Performance that is not compliant with the GIPS® standards is most likely allowed to be linked with performance that is compliant with the GIPS standards in which of the following scenarios?
a)
A. Wrap fee composite for a firm whose claim of compliance began on 1 January 2006.
b)
B. Real estate pooled fund for a firm whose claim of compliance began on 1 January 2010.
c)
C. Large-cap equity composite for a firm whose claim of compliance began on 1 January 2001.
d)
None
e)
None
21.
Q. An investment management firm has been hired by ETV Corporation to work on an additional public offering for the company. The firm’s brokerage unit now has a “sell” recommendation on ETV, but the head of the investment banking department has asked the head of the brokerage unit to change the recommendation from “sell” to “buy.” According to the Standards, the head of the brokerage unit would be permitted to:
a)
A. Increase the recommendation by no more than one increment (in this case, to a “hold” recommendation).
b)
B. Place the company on a restricted list and give only factual information about the company.
c)
C. Assign a new analyst to decide if the stock deserves a higher rating.
d)
None
e)
None
22.
Norman Bosno, CFA, acts as an outside portfolio manager to a Sovereign Wealth Fund. Raphel Palmeti, a Fund official, approaches Bosno to interest him in investing in Starlite Construction Company. He tells Bosno if he approves a two million dollar investment in Starlite by the Fund, Bosno will receive a “bonus” that will make him wealthy. Palmeti also adds if Bosno decides not to invest, he will lose the Fund account. After doing a quick and simple analysis, Bosno determines the investment is too risky for the Fund. If Bosno agrees to make the investment, what Standard is least likely to be violated?
a)
A. Loyalty, Prudence, and Care
b)
B. Diligence and Reasonable Basis
c)
C. Additional Compensation Arrangements
d)
None
e)
None
23.
Which of the following situations most likely helps to explain why the GIPS® standards were created?
a)
A. Firms were including only top performing funds to represent their performance history.
b)
B. Asset managers were including the performance of all portfolios, including those no longer managed in their performance history.
c)
C. Consistency among fund managers were needed when making investment performance presentations.
d)
None
e)
None
24.
Q. Ward is scheduled to visit the corporate headquarters of Evans Industries. Ward expects to use the information he obtains there to complete his research report on Evans stock. Ward learns that Evans plans to pay all of Ward’s expenses for the trip, including costs of meals, hotel room, and air transportation. Which of the following actions would be the best course for Ward to take under the Code and Standards?
a)
A. Accept the expense-paid trip and write an objective report.
b)
B. Pay for all travel expenses, including costs of meals and incidental items.
c)
C. Accept the expense-paid trip but disclose the value of the services accepted in the report.
d)
None
e)
None
25.
Raymond Ortiz, CFA, provides investment advice to high-net-worth investors. Ortiz has just completed an analysis of Continental Wheat, a manufacturer of wheat-based food products. He rated the company a long-term hold for investors seeking growth and income. Ortiz’s analysis included a review of the company’s management team, financial data, pro forma financial positions, dividends and dividend policy, and a comparison of Continental with its competitors. Although he does not tell anyone, five years ago, Ortiz worked for and managed the commodities derivatives trading unit of Continental. As part of his compensation at Continental, he received stock, which he still owns. Based upon his research, Ortiz recommends Continental to clients who have a moderate risk tolerance. Two weeks later Continental announces its quarterly earnings are 30% less than a year ago. Consequently, shares of Continental drop by 50%. Ortiz most likely violated the CFA Institute Code of Ethics and Standards of Professional Conduct related to his stock:
a)
A. research.
b)
B. ownership.
c)
C. recommendation.
d)
None
e)
None
26.
Q. Fiduciary duty is a standard most likely to be upheld by members of a(n):
a)
A. employer.
b)
B. profession.
c)
C. not-for-profit body.
d)
None
e)
None
27.
Q. Which statement about a manager’s use of client brokerage commissions violates the Code and Standards?
a)
A. A client may direct a manager to use that client’s brokerage commissions to purchase goods and services for that client.
b)
B. Client brokerage commissions should be used to benefit the client and should be commensurate with the value of the brokerage and research services received.
c)
C. Client brokerage commissions may be directed to pay for the investment manager’s operating expenses.
d)
None
e)
None
28.
After noting positive changes in the aggregate index of coincident economic indicators, an increase in the ratio of consumer installment debt to income would most likely help confirm that an expansion is:
a)
A. forthcoming.
b)
B. underway.
c)
C. ending.
d)
None
e)
None
29.
If the stated annual interest rate is 20% and the frequency of compounding is monthly, the effective annual rate (EAR) is closest to:
a)
A. 20%.
b)
B. 21%.
c)
C. 22%.
d)
None
e)
None
30.
Q. Like many technology companies, TechnoTools operates in an environment of declining prices. Its reported profits will tend to be highest if it accounts for inventory using the:
a)
A. FIFO method.
b)
B. LIFO method.
c)
C. weighted average cost method.
d)
None
e)
None
31.
Q. Innovative Inventions, Inc. needs to raise €10 million. If the company chooses to issue zero-coupon bonds, its debt-to-equity ratio will most likely:
a)
A. rise as the maturity date approaches.
b)
B. decline as the maturity date approaches.
c)
C. remain constant throughout the life of the bond.
d)
None
e)
None
32.
Q. Given a portfolio of five stocks, how many unique covariance terms, excluding variances, are required to calculate the portfolio return variance?
a)
A. 10
b)
B. 20
c)
C. 25
d)
None
e)
None
33.
Q. Which of the following statements regarding a one-tailed hypothesis test is correct?
a)
A. The rejection region increases in size as the level of significance becomes smaller.
b)
B. A one-tailed test more strongly reflects the beliefs of the researcher than a two-tailed test.
c)
C. The absolute value of the rejection point is larger than that of a two-tailed test at the same level of significance.
d)
None
e)
None
34.
Q. Which of the following would best explain an increase in receivables turnover?
a)
A. The company adopted new credit policies last year and began offering credit to customers with weak credit histories.
b)
B. Due to problems with an error in its old credit scoring system, the company had accumulated a substantial amount of uncollectible accounts and wrote off a large amount of its receivables.
c)
C. To match the terms offered by its closest competitor, the company adopted new payment terms now requiring net payment within 30 days rather than 15 days, which had been its previous requirement.
d)
None
e)
None
35.
Accounts payable are:
a)
A. amounts a company owes its vendors for purchase of goods and services.
b)
B. financial liabilities owed by a company through a formal loan agreement.
c)
C. reported in a different section of the balance sheet from notes payable due in one year.
d)
None
e)
None
36.
None
a)
A. The p-value indicates the probability of making a Type II error.
b)
B. The lower the p-value, the weaker the evidence for rejecting the H0.
c)
C. The p-value is the smallest level of significance at which H0 can be rejected.
d)
None
e)
None
37.
Which of the following statements about balance sheets is most accurate? For balance sheets prepared under:
a)
A. IFRS, a classified balance sheet must present current assets before non-current assets.
b)
B. US GAAP, intangibles must be valued at historical cost.
c)
C. IFRS, a commercial real estate company should use a liquidity based presentation.
d)
None
e)
None
38.
None
a)
A. normal.
b)
B. substitutes.
c)
C. complements.
d)
None
e)
None
39.
None
a)
A. 3,000 .
b)
B. 3,150 .
c)
C. 3,300 .
d)
None
e)
None
40.
A company with a tax rate of 40% sold a capital asset with a net book value of $500,000 for $570,000 during the year. Which of the following amounts related to the asset sale will most likely be reported as a line item on its income statement for the year?
a)
A. $570,000 .
b)
B. $42,000 .
c)
C. $70,000 .
d)
None
e)
None
41.
Q. A decrease in a country’s total imports is most likely caused by:
a)
A. an increase in the pace of domestic GDP growth.
b)
B. a cyclical downturn in the economies of primary trading partners.
c)
C. persistent currency depreciation relative to primary trading partners.
d)
None
e)
None
42.
If all of the assets and liabilities are listed on the balance sheet broadly in order of how easily they can be converted into cash, the presentation format is best described as:
a)
A. liquidity based.
b)
B. current/non-current.
c)
C. classified.
d)
None
e)
None
43.
None
a)
A. €79,370 .
b)
B. €80,730 .
c)
C. €76,330 .
d)
None
e)
None
44.
Q. A correlation of 0.34 between two variables, X and Y, is best described as:
a)
A. changes in X causing changes in Y.
b)
B. a positive association between X and Y.
c)
C. a curvilinear relationship between X and Y.
d)
None
e)
None
45.
Q. A prolonged period of an official interest rate very close to zero without an increase in economic growth most likely suggests:
a)
A. quantitative easing must be limited to be successful.
b)
B. there may be limits to the effectiveness of monetary policy.
c)
C. targeting reserve levels is more important than targeting interest rates.
d)
None
e)
None
46.
None
a)
A. 116 .
b)
B. 148 .
c)
C. 160 .
d)
None
e)
None
47.
Perkiomen Kinzua, a seasoned auditor, is auditing last year’s transactions for Conemaugh Corporation. Unfortunately, Conemaugh had a very large number of transactions last year, and Kinzua is under a time constraint to finish the audit. He decides to audit only the small subset of the transaction population that is of interest and to use sampling to create that subset. Q. The most appropriate sampling method for Kinzua to use is:
a)
A. judgmental sampling.
b)
B. systematic sampling.
c)
C. convenience sampling.
d)
None
e)
None
48.
None
a)
A. –1.0597.
b)
B. –0.0242.
c)
C. –0.0081.
d)
None
e)
None
49.
None
a)
A. $25,700 .
b)
B. $26,702 .
c)
C. $27,826 .
d)
None
e)
None
50.
None
a)
A. –3.00
b)
B. 3.09.
c)
C. 0.70.
d)
None
e)
None
51.
None
a)
A. the long-run sustainable growth rate.
b)
B. the growth rate of total factor productivity.
c)
C. above-trend historical growth that is unlikely to be sustained.
d)
None
e)
None
52.
Q. Analysts should treat deferred tax liabilities that are expected to reverse as:
a)
A. equity.
b)
B. liabilities.
c)
C. neither liabilities nor equity.
d)
None
e)
None
53.
When rolling two six-sided dice and summing their outcomes, which of the following sums is most likely to occur?
a)
A. Nine
b)
B. Five
c)
C. Six
d)
None
e)
None
54.
Given stable aggregate supply, which of the following changes in aggregate demand is most likely to cause economic expansion?
a)
A. An increase in corporate income tax
b)
B. An increase in foreign currency per unit of domestic currency
c)
C. An increase in capacity utilization
d)
None
e)
None
55.
Q. A company’s profitability for a period would best be evaluated using the:
a)
A. balance sheet.
b)
B. income statement.
c)
C. statement of cash flows.
d)
None
e)
None
56.
Q. Suppose a painting is produced and sold in 2018 for £5,000. The expenses involved in producing the painting amounted to £2,000. According to the sum-of-value-added method of calculating GDP, the value added by the final step of creating the painting was:
a)
A. £2,000.
b)
B. £3,000.
c)
C. £5,000.
d)
None
e)
None
57.
None
a)
A. $800,000 .
b)
B. $855,000 .
c)
C. $825,000 .
d)
None
e)
None
58.
In an issuer’s financial statements, reported interest expense for a bond is computed using the:
a)
A. bond’s coupon rate.
b)
B. market rate of interest.
c)
C. effective interest rate.
d)
None
e)
None
59.
Q. When preparing an income statement, which of the following items would most likely be classified as other comprehensive income?
a)
A. A foreign currency translation adjustment
b)
B. An unrealized gain on a security held for trading purposes
c)
C. A realized gain on a derivative contract not accounted for as a hedge
d)
None
e)
None
60.
Q. An increase in sample size is most likely to result in a:
a)
A. wider confidence interval.
b)
B. decrease in the standard error of the sample mean.
c)
C. lower likelihood of sampling from more than one population.
d)
None
e)
None
61.
Q. Under which section of a manufacturing company’s cash flow statement are the following activities reported? Item 1: Purchases of securities held for trading/ Item 2: Purchases of securities held for investment
a)
A. Both items are investing activities.
b)
B. Only Item 1 is an operating activity.
c)
C. Only Item 2 is an operating activity.
d)
None
e)
None
62.
None
a)
A. Test 1 only
b)
B. Test 2 only
c)
C. Both Test 1 and Test 2
d)
None
e)
None
63.
If a central bank reduces the money supply, this move will most likely lead to a:
a)
A. rise in nominal interest rates and a decline in aggregate price level.
b)
B. rise in nominal interest rates and a rise in aggregate price level.
c)
C. decline in nominal interest rates and a rise in aggregate price level.
d)
None
e)
None
64.
None
a)
A. 1.1889%.
b)
B. 1.8043%.
c)
C. 3.2835%.
d)
None
e)
None
65.
Q. For financial assets classified as available for sale, how are unrealized gains and losses reflected in shareholders’ equity?
a)
A. They are not recognized.
b)
B. They flow through retained earnings.
c)
C. They are a component of accumulated other comprehensive income.
d)
None
e)
None
66.
Q. Which of the following events can be represented as a Bernoulli trial?
a)
A. The flip of a coin
b)
B. The closing price of a stock
c)
C. The picking of a random integer between 1 and 10
d)
None
e)
None
67.
Q. An auditor determines that a company’s financial statements are prepared in accordance with applicable accounting standards except with respect to inventory reporting. This exception is most likely to result in an audit opinion that is:
a)
A. adverse.
b)
B. qualified.
c)
C. unqualified.
d)
None
e)
None
68.
A Europe-based telecommunications provider follows International Financial Reporting Standards (IFRS) and capitalizes new product development costs. During 2014, it spent €25 million on new product development and reported an amortization expense related to a prior year’s new product development of €10 million. The company’s cash flow from operations was €290 million. An analyst is comparing the European company with a US-based telecommunications provider and has decided to adjust its financial statements to US GAAP. Under US GAAP, ignoring tax effects, the cash flow from operations for the European company would be closest to:
a)
A. €265 million.
b)
B. €290 million.
c)
C. €275 million.
d)
None
e)
None
69.
None
a)
A. Value investors
b)
B. Growth investors
c)
C. Market-oriented investors
d)
None
e)
None
70.
None
a)
A. 63.3%.
b)
B. 91.2%.
c)
C. 96.8%.
d)
None
e)
None
71.
Q. Which of the following is not a constraint on the financial statements according to the Conceptual Framework?
a)
A. Understandability.
b)
B. Benefit versus cost.
c)
C. Balancing of qualitative characteristics.
d)
None
e)
None
72.
None
a)
A. 23 .
b)
B. in excess of 24.
c)
C. 21 .
d)
None
e)
None
73.
Q. Which of the following is a potential problem with interpreting a correlation coefficient?
a)
A. Outliers
b)
B. Spurious correlation
c)
C. Both outliers and spurious correlation
d)
None
e)
None
74.
Q. Which valuation tool is recommended to be used if the goal is to make comparisons of three or more variables over time?
a)
A. Heat map
b)
B. Bubble line chart
c)
C. Scatter plot matrix
d)
None
e)
None
75.
Q. When making a decision about investments involving a statistically significant result, the:
a)
A. economic result should be presumed to be meaningful.
b)
B. statistical result should take priority over economic considerations.
c)
C. economic logic for the future relevance of the result should be further explored.
d)
None
e)
None
76.
Q. In an industry comprised of three companies, which are small-scale manufacturers of an easily replicable product unprotected by brand recognition or patents, the most representative model of company behavior is:
a)
A. oligopoly.
b)
B. perfect competition.
c)
C. monopolistic competition.
d)
None
e)
None
77.
Q. Oil Exploration LLC paid $45,000 in printing, legal fees, commissions, and other costs associated with its recent bond issue. It is most likely to record these costs on its financial statements as:
a)
A. an asset under US GAAP and reduction of the carrying value of the debt under IFRS.
b)
B. a liability under US GAAP and reduction of the carrying value of the debt under IFRS.
c)
C. a cash outflow from investing activities under both US GAAP and IFRS.
d)
None
e)
None
78.
Q. Financial reports of the lowest level of quality reflect:
a)
A. fictitious events.
b)
B. biased accounting choices.
c)
C. accounting that is non-compliant with GAAP.
d)
None
e)
None
79.
Q. Comte Industries issues $3,000,000 worth of three-year bonds dated 1 January 2015. The bonds pay interest of 5.5% annually on 31 December. The market interest rate on bonds of comparable risk and term is 5%. The sales proceeds of the bonds are $3,040,849. Under the straight-line method, the interest expense in the first year is closest to:
a)
A. $150,000 .
b)
B. $151,384 .
c)
C. $152,042 .
d)
None
e)
None
80.
The most appropriate statement about financial ratio analysis is that it has limited use as an analytical tool for:
a)
A. providing insights into microeconomic relationships within a company that help analysts project earnings.
b)
B. evaluating management.
c)
C. comparing companies that use different accounting methods.
d)
None
e)
None
81.
On 1 January, a corporation issues ten-year notes with a face value of €10,000,000 and with annual interest payments made each 31 December. The coupon rate is 2.0 percent, and the effective interest rate is 3.0 percent. Using the effective interest rate method, the amortized discount at the end of year 1 is closest to:
a)
A. €74,409 .
b)
B. €274,409 .
c)
C. €82,035 .
d)
None
e)
None
82.
Q. Jill Batten is analyzing how the returns on the stock of Stellar Energy Corp. are related with the previous month’s percentage change in the US Consumer Price Index for Energy (CPIENG). Based on 248 observations, she has computed the sample correlation between the Stellar and CPIENG variables to be −0.1452. She also wants to determine whether the sample correlation is significantly different from zero. The critical value for the test statistic at the 0.05 level of significance is approximately 1.96. Batten should conclude that the statistical relationship between Stellar and CPIENG is:
a)
A. significant, because the calculated test statistic is outside the bounds of the critical values for the test statistic.
b)
B. significant, because the calculated test statistic has a lower absolute value than the critical value for the test statistic.
c)
C. insignificant, because the calculated test statistic is outside the bounds of the critical values for the test statistic.
d)
None
e)
None
83.
Which of the following most accurately describes how to standardize a random variable X?
a)
A. Subtract the mean of X from X, and then divide that result by the standard deviation of the standard normal distribution.
b)
B. Divide X by the difference between the standard deviation of X and the standard deviation of the standard normal distribution.
c)
C. Subtract the mean of X from X, and then divide that result by the standard deviation of X.
d)
None
e)
None
84.
Q. Which of the following can be measured directly?
a)
A. Potential GDP
b)
B. Labor productivity
c)
C. Total factor productivity
d)
None
e)
None
85.
A gourmet pizza restaurant did very well in the first six months it was open, with tables full and waiting lines during peak periods. The owner realized that if the table turnover rate were higher, he could serve more dinners every evening and increase profits. He added two servers, and both revenues and profits increased. Adding an additional two servers, however, did not increase revenues and profits proportionately, because the serving staff now had to wait longer for the kitchen to cook the orders. Which of the following best describes the problem the restaurant is experiencing and the potential solution? The restaurant is experiencing diminishing returns to:
a)
A. labor and should expand the kitchen capacity.
b)
B. capital and should expand the kitchen capacity.
c)
C. labor and should reduce the number of servers.
d)
None
e)
None
86.
A subset of a population is best described as a:
a)
A. statistic.
b)
B. sample.
c)
C. conditional distribution.
d)
None
e)
None
87.
The difference between what a company owns and what it owes is best described as:
a)
A. market value.
b)
B. working capital.
c)
C. shareholders’ equity.
d)
None
e)
None
88.
None
a)
A. Relationship 3
b)
B. Relationship 1
c)
C. Relationship 2
d)
None
e)
None
89.
One of the notable differences between IFRS and US GAAP when dealing with income tax is best illustrated by the fundamental treatment of:
a)
A. non-deductible goodwill.
b)
B. the revaluation of property, plant, and equipment.
c)
C. temporary differences between the carrying amount and tax base of assets and liabilities.
d)
None
e)
None
90.
Q. A market structure with relatively few sellers of a homogeneous or standardized product is best described as:
a)
A. oligopoly.
b)
B. monopoly.
c)
C. perfect competition.
d)
None
e)
None
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