CFA Level 1 practice questions

0 of 10 answered

1. Question 1 of 10Ethical & Professional Standards

   If, for each additional unit of a variable input, the increases in output become smaller, which of the following correctly identifies the concept?

   ADiminishing marginal productivity.BDiminishing marginal utility.CIncreasing marginal utility.DIncreasing marginal productivity.
2. Question 2 of 10Financial Statement Analysis

   With the presence of a negative externality, which of the following would internalize (or correct) the externality?

   AA government subsidy.BA government tax.CA lower price.DA higher level of output.
3. Question 3 of 10Equity Investments

   An investment project costing $500 today will generate profits of $500 in year five and year ten. If the discount rate is 10%, what is the project’s NPV?

   A−$3B−$27C$3D$500
4. Question 4 of 10Fixed Income

   Bale Co. incurred $100,000 of acquisition costs related to the purchase of the net assets of Dixon Co. The $100,000 should be

   AAllocated on a pro rata basis to the nonmonetary assets acquired.BCapitalized as part of goodwill and tested annually for impairmentCCapitalized as an other asset and amortized over five years.DExpensed as incurred in the current period
5. Question 5 of 10Corporate Issuers

   When a country has a balance of trade deficit

   Ait must make up the difference by shipping gold to its creditors.Bits exports exceed its imports.Cits currency will appreciate.Dits imports exceed its exports.
6. Question 6 of 10Economics

   "Economic theory is applicable only to a capitalist society." Evaluate.

   AEconomic theory is applicable to any system of competitionBEconomic theory cannot be applied to socialist societiesCEconomic theory is irrelevant to communist systemsDEconomic theory is only applicable to capitalist systems
7. Question 7 of 10Quantitative Methods

   What is the value of the tax shield if the value of the firm is $5 million, its value if unlevered would be $4.78 million, and the present value of bankruptcy and agency costs is $360,000?

   A$140,000B$220,000C$360,000D$580,000
8. Question 8 of 10Alternative Investments

   How would fiscal and monetary policymakers combine spending tax and monetary policy to fight a recessionary gap while avoiding large budget deficits? SPENDING POLICY     TAX POLICY     MONETARY POLICY

   AHigher spending     Lower taxes     Sell Treasury securitiesBLower spending     Higher taxes     Buy Treasury securitiesCLower spending     Lower taxes     Increasing the reserve ratioDHigher spending     Higher taxes     Lowering the discount rate
9. Question 9 of 10Derivatives

   An auditor is selecting prenumbered purchase orders for testing an entity's internal control activities related to their proper approval before office equipment is ordered. The auditor is matching random numbers with the purchase order numbers to determine which purchase orders to inspect. If a random number matches a voided purchase order the auditor ordinarily would replace the voided purchase order with another if the voided purchase order

   ARepresents office equipment ordered and never received.BHas been properly voided in the normal course of business.CRepresents office equipment ordered and canceled before being processed by the vendor.DHas been electronically deleted from the purchase order file.
10. Question 10 of 10Portfolio Management

    A CPA prepares income tax returns for a client. After the client signs and mails the returns, the CPA discovers an error. According to Treasury Circular 230, the CPA must

    ADocument the error in the workpapers.BPrepare an amended return within 30 days of the discovery of the error.CPromptly advise the client of the error.DPromptly resign from the engagement and cooperate with the successor accountant.