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The CFA is the most brutal exam in the world of finance - here's what the questions look like

The CFA is the most brutal exam in the world of finance - here's what the questions look like

QUESTION — A portfolio of securities representing a given security market, market segment, or asset class is best described as a:

QUESTION — Colin Gifford, CFA, is finalizing a monthly newsletter to his clients, who are primarily individual investors. Many of the clients’ accounts hold the common stock of Capricorn Technologies. In the newsletter, Gifford writes, “Based on the next six month's earnings of $1.50 per share and a 10% increase in the dividend, the price of Capricorn's stock will be $22 per share by the end of the year.” Regarding his stock analysis, the least appropriate action Gifford should take to avoid violating any CFA Institute Standards of Professional Conduct would be to:

A) Separate fact from opinion.

B) Include earnings estimates.

C) Identify limitations of the analysis.

QUESTION — Cost–push inflation is least likely to be affected by an increase in:

A) Employee wages

B) Finished goods prices

C) Commodity prices

QUESTION — Labour markets are best described as a type of:

A) Capital market.

B) Goods market.

C) Factor market.

QUESTION — A corporation issues five-year fixed-rate bonds. Its treasurer expects interest rates to decline for all maturities for at least the next year. She enters into a one-year agreement with a bank to receive quarterly fixed-rate payments and to make payments based on floating rates benchmarked on three-month Libor. This agreement is best described as a:

A) Futures contract.

B) Forward contract.

C) Swap

QUESTION — An industry characterised by rising volumes, improving profitability, falling prices, and relatively low competition among companies is most likely in which of the following life-cycle stages?

A) Growth

B) Mature

C) Embryonic

QUESTION — To evaluate the potential effect of an innovative and unique type of business transaction on financial statements, an analyst's best approach is to:

A) Monitor the actions of standard setters and regulators

B) Gain an understanding of the transaction’s economic purpose.

C) Consider the approach taken for "new" transactions that arose in the past.

ANSWER — B

"By understanding the economic purpose of a transaction and applying the conceptual framework, an analyst may be able to evaluate the potential effect on financial statements, even in the absence of specific standards."