CFA Level 1 Free Practice Test

1. You are provided with the following information on a non-callable, non-convertible preferred stock:

Face value: GBP65.00
Annual dividend: GBP6.35
Maturity: Perpetual
Embedded options: None
Required rate of return: 8.75%

The intrinsic value of this stock is closest to:

2. The commodity market initially grew due to producers desiring a hedging vehicle. Recently institutions like pension plans and hedge funds have looked to commodities as a way to diversify and grow, respectively.

Which of the following least describes the impact this institutional money has had:

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. Which of the following statements relating to obstacles to efficient allocation of resources is/are most likely incorrect?

I: Price ceilings set below the equilibrium price lead to shortages, bribery, poor quality and black marketeering.
II: Subsidies decrease equilibrium quantities and lead to dead weight losses from overproduction.
III: Production quotas decrease equilibrium quantities and lead to dead weight losses from underproduction.

5. A portfolio manager has a tight tracking error of 50 basis points. The manager expects to be within this tracking error for a given quarter 85% of the time.

If that expectation is correct and each quarter is independent, the probability that the manager is within the tracking error for at least 7 of the next 8 quarters is closest to: