CFA Level 1 Free Practice Test

1. Which of the following statements relating to Z-spread, Option-adjusted spread (OAS) and option cost for callable and putable bonds is/are most likely correct?

I: For callable bonds, Z-spread is greater than OAS and option cost is greater than 0
II: For callable bonds, Z-spread is less than OAS and option cost is greater than 0
III: For putable bonds, Z-spread is less than OAS and option cost is greater than 0

2. Keisha is looking to avoid purchasing power risk as much as possible. She should consider investing in which type of security?

3. The exchange rate between two currencies has decreased to 101.34. The price currency has appreciated by 7.5 percent against the base currency. The initial exchange between the two currencies was closest to:

4. A company had equipment worth USD50 million on 1 January. During the year, they purchased equipment for USD10 million. On 31 December, the equipment account showed USD40 million. All figures are shown at cost, before depreciation.

The amount of equipment sold during the end of the year, at cost, would be closest to:

5. The early 21st century saw a few significant stresses on the stock market. The markets dipped deeper and more quickly than many were expecting might happen.

Which of the following statistical metrics most accurately describes this event?