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Chartered Financial Analyst (CFA)
CFA Institute
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Mcqs
Past Paper
Muhammad Tayyab Ikhlas
MANAGEMENT SCIENCES
-
Corporate Finance
Short-term loan can be described as having maximum period
A. Less than a year.
B. More than a year.
C. Only half of a year.
D. One and half of a year.
Fani Warraich
MANAGEMENT SCIENCES
-
Corporate Finance
A company is evaluating a project with a positive NPV (Net Present Value) but significant upfront investment. The project also has the flexibility to be abandoned after year 2 if market conditions worsen. How can this flexibility be best incorporated into the capital budgeting decision?
A. Increase the discount rate to account for the project's risk..
B. Conduct a real options analysis to assess the value of the abandonment option. .
C. Ignore the flexibility; a positive NPV justifies the project regardless..
D. Use the IRR (Internal Rate of Return) instead of NPV, as it considers the time value of money..
Fani Warraich
MANAGEMENT SCIENCES
-
Corporate Finance
Company A has a debt-to-equity ratio of 0.5, while Company B has a ratio of 2.0. Which company is likely to have a higher weighted average cost of capital (WACC)?
A. Both companies will have the same WACC if their equity risk premium is equal..
B. Company B, due to the increased financial risk associated with higher leverage. .
C. Company A, as it relies more on equity financing, which is typically more expensive..
D. The answer depends on the current interest rates for debt and equity financing..
Fani Warraich
MANAGEMENT SCIENCES
-
Corporate Finance
A company with strong future growth prospects unexpectedly announces a significant increase in its dividend payout. According to signaling theory, what might this decision signal to investors?
A. The company's management is confident about future profitability and cash flow generation..
B. The increased dividend payout is unrelated to the company's future prospects..
C. The company is experiencing short-term financial difficulties and needs to attract cash..
D. None of the above.
Fani Warraich
MANAGEMENT SCIENCES
-
Corporate Finance
Company X is considering acquiring Company Y. Synergies from the M&A are expected to arise from combining their sales forces. However, significant integration costs are also anticipated. How should these factors be best considered when evaluating the M&A?
A. Focus solely on the cost savings from combining sales forces to assess synergy benefits..
B. Conduct a comprehensive analysis that considers both the synergy benefits and the integration costs..
C. Ignore the integration costs if the projected cost savings from sales force consolidation are high..
D. Synergies from M&A only arise from cost savings, not revenue enhancements..
Fani Warraich
MANAGEMENT SCIENCES
-
Corporate Finance
A company has a debt-to-equity ratio of 2:1 and a cost of debt of 6%. If the tax rate is 30% and the cost of equity is 12%, what is the company's weighted average cost of capital (WACC)?
A. 10.1%.
B. 8.4%.
C. 9.2%.
D. None of the above.
Fani Warraich
MANAGEMENT SCIENCES
-
Corporate Finance
A project has an initial investment of Rs. 100,000 and is expected to generate cash flows of Rs. 30,000 per year for 5 years. What is the project's payback period?
A. 3.67 years.
B. 4.17 years.
C. 5.00 years.
D. 3.33 years.
Fani Warraich
MANAGEMENT SCIENCES
-
Corporate Finance
Which of the following capital budgeting techniques takes into account the time value of money?
A. Payback Period.
B. Net Present Value.
C. Net Present Value.
D. Average run rate.
Fani Warraich
MANAGEMENT SCIENCES
-
Corporate Finance
A company has a beta of 1.2 and the market return is 10%. What is the company's cost of equity using the Capital Asset Pricing Model (CAPM)?
A. 12.4%.
B. 11.2%.
C. 13.2%.
D. 10.4%.
Fani Warraich
MANAGEMENT SCIENCES
-
Corporate Finance
What is the main advantage of using debt financing over equity financing?
A. Reduced financial leverage.
B. Reduced financial risk.
C. Increased financial leverage.
D. Increased financial risk.
Muhammad Tayyab Ikhlas
MANAGEMENT SCIENCES
-
Financial Management
Sources of funds can be increased by
A. Increasing selling prices.
B. decreasing revenues.
C. Increasing expenses.
D. None of these.
Bashir Farooqi
MANAGEMENT SCIENCES
-
Financial Management
Economic resources of a business that are expected to be of benefit in the future are referred to as
A. Assets.
B. Liabilities.
C. Owner's equity.
D. None of these.
Bashir Farooqi
MANAGEMENT SCIENCES
-
Financial Management
An owner investment of land into the business would
A. Increase owner’s equity.
B. Increase withdrawls.
C. Decrease liabilities.
D. None of these.
Muhammad Tayyab Ikhlas
MANAGEMENT SCIENCES
-
Financial Management
Quick Asset includes which of the fallowing
A. Cash.
B. Marketable securities.
C. Debtors.
D. A & B above.
Fani Warraich
MANAGEMENT SCIENCES
-
Investments & Portfolio Management
Which of the following measures assesses the risk-adjusted performance of an investment portfolio?
A. Tracking error.
B. Sharpe ratio.
C. Treynor ratio.
D. Sortino ratio.
Fani Warraich
MANAGEMENT SCIENCES
-
Investments & Portfolio Management
In the context of Modern Portfolio Theory, the efficient frontier represents:
A. The set of portfolios with the highest returns.
B. The set of portfolios with the lowest volatility.
C. The set of portfolios with the highest Sharpe ratio.
D. The set of portfolios with the maximum return for a given level of risk.
Fani Warraich
MANAGEMENT SCIENCES
-
Investments & Portfolio Management
Which of the following is NOT considered a primary characteristic of an efficient market?
A. Low transaction costs.
B. Rapid dissemination of information.
C. No arbitrage opportunities.
D. High trading volumes.
Fani Warraich
MANAGEMENT SCIENCES
-
Investments & Portfolio Management
Which of the following investment styles involves selecting stocks based on their price-to-earnings ratio and other fundamental indicators?
A. Growth investing.
B. Value investing.
C. Momentum investing.
D. Contrarian investing.
Fani Warraich
MANAGEMENT SCIENCES
-
Investments & Portfolio Management
The Capital Asset Pricing Model (CAPM) suggests that the expected return of an asset is primarily influenced by
A. The asset's past returns.
B. The asset's standard deviation.
C. The asset's systematic risk.
D. The asset's unsystematic risk.
Fani Warraich
MANAGEMENT SCIENCES
-
Investments & Portfolio Management
Which of the following measures the sensitivity of an asset's returns to changes in market returns?
A. Alpha.
B. Beta.
C. R-squared.
D. Standard deviation.
Fani Warraich
MANAGEMENT SCIENCES
-
Investments & Portfolio Management
The efficient market hypothesis (EMH) suggests that
A. Markets are always perfectly efficient.
B. Investors can consistently outperform the market.
C. Market prices fully reflect all available information.
D. Market prices are always rational.
Fani Warraich
MANAGEMENT SCIENCES
-
Investments & Portfolio Management
Which of the following represents the risk that can be eliminated through diversification?
A. Systematic risk.
B. Unsystematic risk.
C. Market risk.
D. Interest rate risk.
Fani Warraich
MANAGEMENT SCIENCES
-
Investments & Portfolio Management
Which of the following investment strategies involves holding a mix of assets in a fixed proportion?
A. Active management.
B. Tactical asset allocation.
C. Strategic asset allocation.
D. Strategic Market timing.
Fani Warraich
MANAGEMENT SCIENCES
-
Investments & Portfolio Management
Which of the following measures the dispersion of returns around the mean return of an investment?
A. Alpha.
B. Standard deviation.
C. Beta.
D. R-squared.
Fani Warraich
ECONOMICS
-
Microeconomics
Who is the father of economics?
A. Adam smith.
B. Robbins.
C. Dr. Keynes.
D. None of these.
Janib Khan
ECONOMICS
-
Microeconomics
The branch of economics that deals with the allocation of resources is called ______.
A. Econometrics.
B. Macroeconomics .
C. Microeconomics.
D. All of these.
Sumera Nawaz
ECONOMICS
-
Microeconomics
Which of the following factors does NOT influence the demand for a good?
A. Price of related goods.
B. Income of consumers.
C. Future expectations.
D. Cost of production.
Sumera Nawaz
ECONOMICS
-
Microeconomics
If the demand for a product increases while its supply remains constant, what will happen to the equilibrium price and quantity?
A. Price will decrease and quantity will increase.
B. Price will increase and quantity will decrease.
C. Price and quantity will both increase.
D. Price and quantity will both decrease.
Sumera Nawaz
ECONOMICS
-
Microeconomics
Which of the following statements about elasticity of demand is true?
A. Unitary elastic demand indicates that quantity demanded does not change with a change in price.
B. Elastic demand curves are usually steeper than inelastic demand curves.
C. Inelastic demand means consumers are very sensitive to price changes.
D. Elasticity measures the responsiveness of quantity demanded to a change in price.
Sumera Nawaz
ECONOMICS
-
Microeconomics
Which of the following events would lead to a decrease in the equilibrium price of oranges?
A. A decrease in consumer income.
B. An increase in the price of apples (a substitute for oranges).
C. A decrease in the number of orange producers.
D. A decrease in the price of orange juice (a complement to oranges).
Sumera Nawaz
ECONOMICS
-
Microeconomics
If demand is perfectly elastic, what is the value of price elasticity of demand?
A. -1.
B. Infinity.
C. 0.
D. 1.
Sumera Nawaz
ECONOMICS
-
Microeconomics
When is the price elasticity of supply perfectly inelastic?
A. When the percentage change in quantity supplied is zero for any change in price.
B. When the quantity supplied is infinitely responsive to changes in price.
C. When the quantity supplied does not change at all in response to a change in price.
D. When the price remains constant regardless of changes in quantity supplied.
Sumera Nawaz
ECONOMICS
-
Microeconomics
If both supply and demand increase but the increase in supply is larger, what will happen to equilibrium price and quantity?
A. Price and quantity will both increase.
B. Price and quantity will both decrease.
C. Price will decrease and quantity will increase.
D. Price will increase and quantity will decrease.
Sumera Nawaz
ECONOMICS
-
Microeconomics
Which of the following is an example of a substitute good?
A. Peanut butter and jelly.
B. Tea and coffee.
C. Butter and margarine.
D. Butter and bread.
Sumera Nawaz
ECONOMICS
-
Microeconomics
Which of the following would lead to a rightward shift of the supply curve?
A. Improvement in technology.
B. Increase in production costs.
C. Increase in the price of a complementary good.
D. Increase in the number of suppliers.
Sumera Nawaz
ECONOMICS
-
Microeconomics
If the price elasticity of demand for a good is less than 1, the demand is considered
A. Elastic.
B. Unitary elastic.
C. Inelastic.
D. Perfectly elastic.
Fani Warraich
ECONOMICS
-
Macroeconomics
Macroeconomics distinguishes between the real economy and the
A. Black economy.
B. Monetary economy.
C. Virtual economy.
D. Normative economy.
Fani Warraich
ECONOMICS
-
Macroeconomics
Until the First World War, the prices
A. Showed a procyclical trend.
B. fluctuated up and down with high magnitudes but no trend.
C. Showed a countercyclical trend.
D. Trendless.
Sumera Nawaz
ECONOMICS
-
Macroeconomics
Which of the following is NOT included in the calculation of Gross Domestic Product (GDP)?
A. Value of intermediate goods used in production.
B. Transfer payments such as social security benefits.
C. Corporate profits earned by multinational companies headquartered in the country.
D. Government spending on public infrastructure.
Sumera Nawaz
ECONOMICS
-
Macroeconomics
Which of the following measures is used to adjust Gross Domestic Product (GDP) for inflation?
A. Real GDP.
B. Nominal GDP.
C. Gross National Product (GNP).
D. Net Domestic Product (NDP).
Sumera Nawaz
ECONOMICS
-
Macroeconomics
If Gross Domestic Product (GDP) is $10 trillion and Gross National Product (GNP) is $11 trillion, what is the value of net factor income from abroad (NFIA)?
A. $1 trillion.
B. -$1 trillion.
C. Insufficient information to determine.
D. $0 trillion.
Sumera Nawaz
ECONOMICS
-
Macroeconomics
Which of the following transactions would be included in the calculation of Gross Domestic Product (GDP)?
A. A household purchases a used car from another household.
B. A company produces a new software program for internal use.
C. A government purchases military equipment from a foreign country.
D. A household pays tuition fees for their child's education at a private school.
Sumera Nawaz
ECONOMICS
-
Macroeconomics
Which of the following is NOT a component of the expenditure approach to calculating Gross Domestic Product (GDP)?
A. Consumption.
B. Investment.
C. Net exports.
D. All of the above are components of the expenditure approach.
Sumera Nawaz
ECONOMICS
-
Macroeconomics
If a country's Gross Domestic Product (GDP) is $500 billion and its population is 100 million, what is the country's GDP per capita?
A. $50,000.
B. $5,000.
C. $5 million.
D. $500.
Sumera Nawaz
ECONOMICS
-
Macroeconomics
Which of the following is an example of a transfer payment?
A. Corporate profits.
B. Social security benefits.
C. Investment in new machinery.
D. Purchase of stocks and bonds.
Sumera Nawaz
ECONOMICS
-
Macroeconomics
Which of the following is NOT a limitation of Gross Domestic Product (GDP) as a measure of economic welfare?
A. It does not adjust for inflation.
B. It does not include the underground economy.
C. It does not consider non-market activities.
D. It does not account for the distribution of income.
Sumera Nawaz
ECONOMICS
-
Macroeconomics
In the circular flow of income, which sector consists of households?
A. Government sector.
B. Business sector.
C. Financial sector.
D. Household sector.
Sumera Nawaz
ECONOMICS
-
Macroeconomics
If a country's Gross Domestic Product (GDP) is $800 billion and its Gross National Product (GNP) is $750 billion, what is the value of net factor income from abroad (NFIA)?
A. $50 billion.
B. -$50 billion.
C. $0 billion.
D. Insufficient information to determine.
Fani Warraich
MANAGEMENT SCIENCES
-
Ethical & Professional Standards & Responsibilities
An analyst at a financial firm receives a non-public tip about an upcoming merger from a friend who works at the target company. According to the CFA Institute Standards of Professional Conduct, how should the analyst proceed?
A. Buy shares in the target company before the merger is publicly announced to benefit from the insider information..
B. Share the information with clients, ensuring they have the opportunity to invest before the news becomes public..
C. Report the information to their supervisor and the firm's compliance department, and refrain from trading on it..
D. Disclose the information to a reputable financial news outlet to ensure a level playing field for all investors..
Fani Warraich
MANAGEMENT SCIENCES
-
Ethical & Professional Standards & Responsibilities
A portfolio manager receives a gift from a client valued at $200 after achieving substantial returns for the client’s portfolio. According to the CFA Institute Standards, how should the portfolio manager handle this situation?
A. Accept the gift and thank the client, as the value is less than $500 and considered reasonable..
B. Accept the gift, but report it to their employer in accordance with the firm's policies on gifts and entertainment..
C. Politely decline the gift to avoid any appearance of a conflict of interest or preferential treatment..
D. Return the gift and inform the client that accepting gifts violates the CFA Institute's ethical standards..
Fani Warraich
MANAGEMENT SCIENCES
-
Ethical & Professional Standards & Responsibilities
Which of the following best describes a requirement for firms to comply with GIPS standards?
A. Firms must present all individual performance figures to clients, including those that are hypothetical or back-tested..
B. Firms must adhere to the specific performance calculation and presentation standards prescribed by GIPS..
C. Firms are required to verify their GIPS compliance through a third-party auditor every year..
D. Firms must ensure that all employees receive GIPS training annually..
Fani Warraich
MANAGEMENT SCIENCES
-
Ethical & Professional Standards & Responsibilities
A financial advisor discovers that a junior analyst in their team has inadvertently shared a client’s confidential information with a third party. According to the CFA Institute's Standards of Professional Conduct, what should the financial advisor do first?
A. Terminate the junior analyst’s employment immediately to prevent further breaches..
B. Inform the client about the breach and take steps to mitigate any potential damage..
C. Report the incident to their compliance department and follow the firm's protocols for handling such breaches..
D. Contact the third party and request them to delete or return the confidential information..
Sumera Nawaz
ECONOMICS
-
Managerial Economics
What is the main reason for a firm to engage in price discrimination?
A. To increase production efficiency.
B. To maximize revenue by capturing consumer surplus.
C. To reduce advertising costs.
D. To comply with government regulations.
Sumera Nawaz
ECONOMICS
-
Managerial Economics
When should a firm continue producing in the short run even if it is incurring losses?
A. When fixed costs are greater than variable costs.
B. When total revenue covers variable costs but not fixed costs.
C. When total costs exceed total revenue.
D. When the market price is below average total cost.
Sumera Nawaz
ECONOMICS
-
Managerial Economics
Where is the optimal point of production for a firm operating under perfect competition in the long run?
A. Where marginal cost equals marginal revenue.
B. Where average total cost is minimized.
C. Where marginal cost equals average total cost.
D. Where marginal cost equals average total cost.
Sumera Nawaz
ECONOMICS
-
Managerial Economics
How to determine the profit-maximizing output level for a monopolist?
A. By setting price equal to marginal cost.
B. By equating marginal cost to average total cost.
C. By equating marginal revenue to marginal cost.
D. By setting price equal to average total cost.
Sumera Nawaz
ECONOMICS
-
Managerial Economics
Which factor can lead to economies of scale in production?
A. Increased regulatory compliance costs.
B. Higher input prices due to limited suppliers.
C. Bulk purchasing of raw materials at a discounted rate.
D. Decreased managerial efficiency.
Fani Warraich
ECONOMICS
-
Managerial Economics
Which pricing strategy involves setting a high initial price for a new or innovative product to "skim" segments of the market willing to pay the higher price?
A. Penetration Pricing.
B. Price Skimming.
C. Dynamic Pricing.
D. Cost-Plus Pricing.
Fani Warraich
ECONOMICS
-
Managerial Economics
How to determine the optimal capital structure for a firm according to the Modigliani-Miller theorem without taxes?
A. By minimizing the cost of equity.
B. By maximizing the debt ratio.
C. By ensuring the capital structure does not affect firm value.
D. By balancing equity and debt financing to minimize the weighted average cost of capital (WACC).
Fani Warraich
ECONOMICS
-
Managerial Economics
Why is the kinked demand curve model used in oligopoly markets?
A. To explain the existence of price rigidity.
B. To illustrate price discrimination.
C. To show the effects of economies of scale.
D. To demonstrate product differentiation.
Fani Warraich
ECONOMICS
-
Managerial Economics
What is the primary characteristic of a Nash Equilibrium in game theory?
A. One player dominates the game.
B. Players have no incentive to change their strategies.
C. Total payoff is maximized for all players.
D. All players cooperate to achieve the best outcome.
Fani Warraich
ECONOMICS
-
Managerial Economics
When analyzing a firm's cost structure, what does the term "economies of scope" refer to?
A. Cost savings achieved by increasing production of a single product.
B. Cost advantages obtained by producing a variety of products.
C. The reduction in marginal cost as output increases.
D. The increased cost due to the complexity of producing multiple products.
Contributor(5)
Fani Warraich
Janib Khan
Bashir Farooqi
Muhammad Tayyab Ikhlas
Sumera Nawaz
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