CFA Level 1 Free Practice Test

1. 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?

2. Joyce Price issues weekly investment reports. Joyce looks for trends and commonalities within the research community. She then presents the findings as her own research and doesn’t cite any sources. Joyce gives them to her boss, Soojung Yu, CFA. Soojung peer-reviews the reports and does not mention anything about citing sources.

Has Soojung most likely violated the Standards?

3. The standard deviation of the market portfolio is 0.2. The beta of a company with standard deviation 0.6 and market correlation of 0.4 is closest to:

4. The market values of a firm’s capital are given below:

Total debt: USD7 million
Outstanding preferred stock: USD2 million
Outstanding common stock: USD12 million
Before-tax cost of debt: 8%
Before-tax cost of common equity: 12%
Before-tax cost of preferred stock: 9%

Assuming company’s marginal tax rate is 35%, what is the weighted average cost of capital (WACC) for the firm?

5. 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: