Bộ câu hỏi luyện thi cfa level 1 kèm Đáp Án có giải thích chi tiết

Bộ câu hỏi luyện thi cfa level 1 kèm Đáp Án có giải thích chi tiết, Bộ câu hỏi luyện thi cfa level 1 kèm Đáp Án có giải thích chi tiết

Exam 1 - CFA Level 1

1/ Q Which of the following is a recommended procedure for compliance with the Standard relating to responsibilities of supervisors? Members should encourage their firms to:

A adopt a code of ethics that addresses general fiduciary concepts

B provide the firm’s clients with a copy of detailed compliance procedures

C commingle the firm’s code of ethics with its detailed compliance procedures

Answer: A

Reason:

• A: Correct CFA Standard IV(C) recommends a code of ethics with fiduciary principles to

guide ethical behavior and support supervisors

• B: Incorrect Sharing detailed compliance procedures with clients is unnecessary and not

A Create a restricted list

B Prohibit the acceptance of gifts

C Appoint a senior compliance officer with oversight responsibilities

Answer: C

Reason:

• A: Correct procedure Creating a restricted list (e.g., for securities with potential conflicts)

is recommended under Standard I(B) – Independence and Objectivity to avoid bias

• B: Correct procedure Prohibiting or limiting gifts is recommended to maintain objectivity

and avoid undue influence

• C: Incorrect Appointing a senior compliance officer is related to Standard IV(C) – Responsibilities of Supervisors, not directly to maintaining independence and objectivity

under Standard I(B)

3/ Q In the CFA Institute Standards of Professional Conduct, Standard III-Duties to Clients most likely includes which of the following subsections?

A Knowledge of the Law

B Performance Presentation

C Independence and Objectivity

Answer: B

Reason:

• A: Incorrect Knowledge of the Law is part of Standard I(A) – Professionalism, not

Standard III

• B: Correct Standard III(B) – Fair Dealing and Standard III(C) – Suitability include

performance presentation as part of duties to clients, ensuring fair and accurate reporting

• C: Incorrect Independence and Objectivity is part of Standard I(B) – Professionalism,

not Standard III

4/ Q Akash Gupta has just finished taking the Level II CFA exam for the second time To protect the integrity of the exam, Gupta is careful not to discuss the exam questions with other candidates Gupta calls his friend, a member, and contrasts his two attempts by highlighting that there were many calculation questions on derivatives in the first instance and none in the second Later, in a public blog on investment education, Gupta shares his strong disagreement regarding CFA Institute shifting to computer-based testing Has Gupta violated the Standards?

A No

B Yes, by highlighting that there were no calculation questions on derivatives in the recent exam

C Yes, by expressing his disagreement in a public blog regarding CFA Institute shifting to computer-based testing

Answer: B

Reason:

• Standard VII(A) – Conduct as Participants in CFA Institute Programs requires

candidates to maintain the integrity and confidentiality of the CFA exam by not disclosing specific exam content, including question types or topics emphasized

• A: Incorrect Gupta’s discussion with his friend about the presence/absence of derivatives

calculation questions reveals specific exam content, violating confidentiality

• B: Correct By highlighting the absence of derivatives calculation questions in the second

exam, Gupta discloses specific exam content, violating Standard VII(A)

• C: Incorrect Expressing disagreement with CFA Institute’s shift to computer-based testing

in a public blog is an opinion and does not disclose confidential exam content or violate any specific CFA Standard

5/ Q A portfolio manager is hired by an executive manager of a trust The duty of loyalty is owed to the:

• A: Incorrect The trustee manages the trust but is not the primary recipient of the duty of

loyalty

• B: Incorrect The executive manager is an intermediary, not the client or beneficiary

• C: Correct The beneficiaries are the individuals for whom the trust is established, and the

portfolio manager must act in their best interests

6/ Q Melissa Kon, CFA, is an equity analyst She recently left her job at Hamm Capital (HC)

to join Eagle Investments (El) Kon obtains the express consent of HC to take one of her historical research reports with her At El, she diligently updates the report and publishes it Afterwards, she re-creates supporting records from sources obtained at HC Has Kon violated the Standards?

A No

B Yes, by publishing the updated research report

C Yes, by re-creating the supporting records from sources obtained at Hamm Capital

Answer: C

Reason:

• Standard IV(A) – Loyalty requires members to respect the property of their former

employer and not use confidential or proprietary information without permission

• A: Incorrect Kon’s actions involve more than just updating the report, as she re-created

records using HC sources

• B: Incorrect Kon had HC’s consent to take and update the research report, so publishing

it after diligent updates does not violate the Standards

• C: Correct Re-creating supporting records from sources obtained at HC without explicit

permission likely involves using proprietary or confidential information, violating

Standard IV(A)

7/ Q Anisha Joshi, CFA, develops a product that selects mutual funds based on historical data Joshi tests her methodology and produces simulated performance results The promotional material for the product does not indicate that the results are simulated Joshi has most likely violated the Standards relating:

A only to fair dealing

B only to performance presentation

C both to fair dealing and to performance presentation

Answer: B

Reason:

• Standard III(B) – Fair Dealing requires members to treat all clients fairly but does not

directly address performance reporting

• Standard III(D) – Performance Presentation requires that performance information be

fair, accurate, and complete, including clear disclosure of simulated or hypothetical results Joshi’s failure to indicate that the results are simulated violates this standard

• A: Incorrect Fair dealing is not directly relevant to undisclosed simulated results

• B: Correct The violation pertains solely to Standard III(D) due to the lack of disclosure

about simulated performance

• C: Incorrect There is no violation of fair dealing, so this option is not applicable

8/ Q A member receives referral fees for recommending third-party services to clients Before entering into an agreement with a new client, which of the following must the member disclose to the new client?

A Flat fees only

B In kind benefits only

C Both flat fees and in-kind benefits

Answer: C

Reason:

• Standard VI(C) – Referral Fees requires members to disclose any compensation,

including flat fees or in-kind benefits, received for recommending third-party services to clients before entering into an agreement This ensures transparency and avoids conflicts

A No

B Yes, the Standard relating to suitability

C Yes, the Standard relating to diligence and reasonable basis

Answer: B

Reason:

• Standard III(C) – Suitability requires members to ensure investments are suitable for

clients’ objectives, constraints, and financial situations Perez believes the committee’s

bond fund is not appropriate for all her clients but invests in it anyway, violating this

standard by not tailoring investments to individual client needs

• A: Incorrect Perez’s action of using an unsuitable fund for all clients violates Standard III(C)

• B: Correct The violation occurs because Perez failed to ensure suitability for her clients

• C: Incorrect Standard V(A) – Diligence and Reasonable Basis is not violated, as Perez

has no reason to question the committee’s research process, and the issue is about suitability, not diligence

10/ Q Suzanna Bermi, CFA, manages portfolios for retail clients A friend asks her if Bermi can provide investment advice in Bermi’s spare time The friend offers a donation to Bermi’s favorite charity in exchange for Bermi’s advice Bermi accepts the offer and starts providing investment advice to her friend immediately after sending an email to her firm’s compliance department about the arrangement, including the fact that she receives no cash payments from her friend Has Bermi most likely violated the Standards?

A No

B Yes, the Standard relating to additional compensation arrangements

C Yes, the Standard relating to communication with clients and prospective clients

non-providing advice Accepting the charitable donation without consent violates Standard

IV(B)

• A: Incorrect Bermi’s failure to obtain prior written consent violates Standard IV(B)

• B: Correct The violation relates to additional compensation arrangements due to lack of

prior employer consent

• C: Incorrect Standard V(B) – Communication with Clients is unrelated, as the issue is

about compensation disclosure, not client communication

11/ Q Which of the following is a violation according to the Standard relating to preservation

of confidentiality?

A Members share details relating to former clients with third party service providers

B Members convey to clients that not all firm-sponsored resources may be appropriate for communicating confidential information

C When allowed under the law, members share confidential client information to defend themselves in an investigation by the CFA Institute Professional Conduct Program

Answer: A

Reason:

• Standard III(E) – Preservation of Confidentiality requires members to keep client

information confidential unless legally required to disclose or with client consent

• A: Correct Sharing former clients’ details with third parties without permission violates

A By making full disclosure to both companies

B By receiving written permission from the local company

C By signing confidentiality agreements with both companies

Answer: B

Reason:

• Standard VI(A) – Disclosure of Conflicts requires members to disclose and obtain

consent for activities that could create conflicts of interest As a board member, Badawi’s work for a competitor could impair his independence

• A: Incorrect Disclosure alone is insufficient; written consent from the local company is

required

• B: Correct Obtaining written permission from the local company ensures compliance with

conflict disclosure

• C: Incorrect Confidentiality agreements do not address the conflict of interest

13/ Q David Kertz, CFA, a portfolio manager, is considering investing in a small cap firm

he stopped following three years ago due to poor trading liquidity Based on published stock exchange data, the company’s trading liquidity has improved considerably Kertz arranges

to obtain some third-party research reports on the firm He assesses the assumptions used, determines the rigor of the analysis, and the reports’ published dates Which of the following additional actions should Kertz most likely undertake next to meet the Standards?

A Consider the validity of the published trading liquidity data

B Evaluate the independence of the third-party recommendations

C Determine if each third party analyst’s opinion reflects their firm’s recommendation

Answer: B

Reason:

• Standard V(A) – Diligence and Reasonable Basis requires members to ensure a

reasonable basis for investment decisions, including evaluating the independence of party research

third-• A: Incorrect Validating liquidity data is relevant but secondary to ensuring research

independence

• B: Correct Evaluating the independence of third-party recommendations ensures unbiased

analysis

• C: Incorrect Whether an analyst’s opinion aligns with their firm’s recommendation is less

critical than independence

14/ Q While waiting in the business class lounge before boarding an airplane, Becca Msafari, CFA, an equity analyst, overhears a conversation by a group of senior managers, including members of the Board, from a large publicly listed bank The managers discuss staff changes necessary to accommodate their regional expansion plans Msafari hears several staff names mentioned Under what circumstances could Msafari most likely use this information when making an investment recommendation to her clients?

A Under no circumstances

B If she does not breach the confidentiality of names of staff

C If the discussed changes are unlikely to affect investor perception of the bank

Answer: A

Reason:

• Standard II(A) – Material Nonpublic Information prohibits using material nonpublic

information for investment decisions The discussion about staff changes and expansion plans is likely material and nonpublic

• A: Correct Msafari cannot use this information under any circumstances, as it violates Standard II(A)

• B: Incorrect Avoiding staff names does not negate the use of material nonpublic

information

• C: Incorrect Determining materiality is irrelevant if the information is nonpublic

15/ Q A member is developing allocation procedures for block trades and new issues According to the recommended procedures for compliance with the Standard relating to fair dealing, the member’s allocation procedures should involve:

A prohibiting consideration of advanced interest when allocating trades for new issues

B bundling orders on a first-in, first-out basis for efficiency as appropriate for the asset class

C giving client accounts participating in a block trade execution prices corresponding to order arrival time

Answer: A

Reason:

• Standard III(B) – Fair Dealing requires fair and equitable treatment in trade allocations

Considering advanced interest for new issues could favor certain clients, violating fairness

• A: Correct Prohibiting advanced interest ensures equitable allocation

• B: Incorrect FIFO bundling may not ensure fairness across clients

• C: Incorrect Execution prices should be the same for all clients in a block trade, not based

on order arrival

16/ Q Which of the following is most accurate according to the Standard relating to knowledge of the law? Members are required to:

A dissociate from client activities they believe are unethical

B have detailed knowledge of all the laws that could potentially govern their activities

C report potential violations of the Code and Standards committed by fellow members to the CFA Institute Professional Conduct Program

Answer: A

Reason:

• Standard I(A) – Knowledge of the Law requires members to comply with laws and

dissociate from unethical or illegal client activities

• A: Correct Dissociating from unethical client activities is required

• B: Incorrect Members must understand applicable laws but not have detailed knowledge

of all potential laws

• C: Incorrect Reporting violations to CFA Institute is encouraged but not required

17/ Q Ekta Prakash, CFA, works as an investment advisor for TXM Investments (TXM) Prakash advises a client to transfer $150,000 from a tax-deferred investment account to TXM’s multi-cap fund Prakash discloses to her client that withdrawals from the tax- deferred account will attract a penalty of $15,000 but assures the client that the cost can be recovered through better investment returns from TXM’s fund Prakash has violated the Standard(s) relating to:

A only misrepresentation

B only loyalty, prudence, and care

C both misrepresentation and loyalty, prudence, and care

Answer: C

Reason:

• Standard V(C) – Misrepresentation prohibits guaranteeing investment returns, as

Prakash does by assuring recovery of the penalty

• Standard III(A) – Loyalty, Prudence, and Care requires acting in the client’s best

interest Recommending a transfer with a significant penalty without justifying its suitability may violate this standard

• A: Incorrect Both standards are violated, not just misrepresentation

• B: Incorrect Both standards are violated, not just loyalty

• C: Correct Prakash’s actions violate both Standard V(C) and Standard III(A)

18/ Q Pia Nilsson is a sole proprietor investment advisor An economic recession has reduced the number of clients she advises and caused revenues to decline As a result, Nilsson has not paid her CFA Institute membership dues for the past two years When a national financial publication recently interviewed Nilsson, she indicated that up until two years ago she had been a CFA charterholder and a CFA Institute member in good standing In addition, she stated the completion of the CFA Program enhanced her portfolio management skills and enabled her to achieve superior returns on behalf of her clients Which of Nilsson’s following actions most likely violated the CFA Institute Standards of Professional Conduct?

A Nonpayment of CFA Institute membership dues

B Attributing her superior returns to participation in the CFA Program

C Indicating that being a CFA charterholder has enhanced her portfolio management skills

Reason:

• Standard VII(C) – Reference to CFA Institute prohibits misrepresenting the benefits of

the CFA designation, including guaranteeing superior performance Attributing superior returns directly to the CFA Program is a misrepresentation

• A: Incorrect Nonpayment of dues results in lapsed membership but does not violate a

Standard

• C: Incorrect Stating the CFA Program enhanced her skills is factual and permissible 19/ Q According to the Standard related to communication with clients and prospective clients, members must:

A only distinguish between fact and opinion in the presentation of investment analyses

B only promptly disclose material and nonmaterial changes in the investment processes they use

to select securities

C both distinguish between fact and opinion in the presentation of investment analyses and promptly disclose material and nonmaterial changes in the investment processes they use to select securities

Reason:

• Standard V(B) – Communication with Clients and Prospective Clients requires

members to distinguish between fact and opinion in investment analyses and disclose material changes in investment processes Nonmaterial changes are not explicitly required

• A: Correct Distinguishing fact from opinion is a key requirement

• B: Incorrect Only material changes need prompt disclosure

• C: Incorrect Nonmaterial changes are not required to be disclosed

20/ Q According to the Standards, transaction-based manipulation includes:

A acquiring a dominant position in a derivative to exploit the price of a related underlying

B taking an aggressive investment position in a security with an intent to exploit market inefficiencies

C issuing an overly optimistic projection of a security’s value to induce trading by other market participants

Reason:

• Standard II(B) – Market Manipulation includes transaction-based manipulation, such

as dominating a derivative to manipulate the underlying asset’s price

• A: Correct This is a clear example of transaction-based manipulation

• B: Incorrect Exploiting market inefficiencies is not manipulation

• C: Incorrect Overly optimistic projections are information-based manipulation, not

transaction-based

21/ Q Which of the following statements is accurate according to the GIPS standards? Statement 1 A firm must perform verification to claim compliance with the GIPS standards Statement 2 Verification ensures accuracy of specific composite presentations

Statement 3 Verification is performed with respect to an entire firm

• GIPS Standards: Verification assesses a firm’s policies and procedures for GIPS

compliance across the entire firm, not specific composites It is not required for compliance but recommended

• Statement 1: Incorrect Verification is optional for GIPS compliance

• Statement 2: Incorrect Verification does not ensure accuracy of specific composites

• Statement 3: Correct Verification applies to the entire firm’s GIPS compliance processes 22/ Q According to the GIPS standards, a firm’s definition of discretion establishes criteria

to judge which of the following?

A Investment strategy the firm must implement

B Portfolios the firm must include in a composite

C Accounts the firm may exclude based on performance criteria

Reason:

• GIPS Standards: A firm’s definition of discretion determines which portfolios have

sufficient manager control to be included in a composite, based on the ability to implement the intended strategy

• A: Incorrect Discretion does not dictate strategy

• B: Correct Discretion criteria determine composite inclusion

• C: Incorrect Exclusion cannot be based on performance

23/ Q Yip Wai Yin, a CFA candidate, is an independent mutual fund sales agent For every front-end load product she promotes, Yip receives a portion of the front-end fee as commission at the time of sale For every back-end load fund she sells, Yip receives a smaller commission paid at the end of the year Yip always informs her clients that she is paid a commission as an agent, but does not provide details of the compensation structure When pitching her favored front- end load product line she tells clients 20% of her commission is always invested in the same fund as proof of her confidence in the fund she recommends Which Standard does Yip least likely violate?

• Standard VI(C) – Referral Fees: Yip must disclose the nature and amount of

commissions, not just their existence, potentially violating this standard

• Standard VI(A) – Disclosure of Conflicts: Not disclosing the commission structure and

her personal investment creates a conflict, likely violating this standard

• Standard VI(B) – Priority of Transactions: Yip’s actions do not involve prioritizing her

trades over clients’, so this is least likely violated

24/ Q For a retail client’s account to be included in a GIPS-compliant firm’s composite, it will most likely be in a composite:

A restricted to retail accounts

B composed of discretionary accounts

C with both fee-paying and non-fee-paying accounts

Reason:

• GIPS Standards: Composites include discretionary accounts where the firm can

implement the intended strategy Retail vs institutional or fee status is secondary

• A: Incorrect Composites are based on strategy, not client type

• B: Correct Discretionary accounts are required for composite inclusion

• C: Incorrect Non-fee-paying accounts can be included but are not the primary criterion 25/ Q The Standard relating to misconduct addresses:

A only all conduct that reflects poorly on members’ professional integrity

B only all actions violating trust in members’ professional and private lives

C both all conduct that reflects poorly on members’ professional integrity and all actions violating trust in members’ professional and private lives

Reason:

• Standard I(D) – Misconduct addresses dishonest or unprofessional conduct in both

professional and private lives that undermines trust or reflects poorly on integrity

• A: Incorrect Misconduct includes private life violations

• B: Incorrect Misconduct includes professional integrity issues

• C: Correct Both professional and private misconduct are covered

26/ Q Thomas Turkman recently hired Georgia Viggen, CFA, as a portfolio manager for North South Bank Although Viggen worked many years for a competitor, West Star Bank, the move was straightforward since she did not have a non-compete agreement with her previous employer Once Viggen starts working for Turkman, the first thing she does is to bring a trading software package she developed and used at West Star to her new employer Using public information, Viggen contacts all of her former clients to convince them to move with her to North South Viggen also convinces one of the analysts she worked with at West Star to join her at her new employer Viggen most likely violated the CFA Institute Code of Ethics and Standards of Professional Conduct concerning her actions involving:

• Standard IV(A) – Loyalty: Taking proprietary software developed at West Star without

permission violates loyalty to her former employer

• A: Incorrect Contacting clients using public information is permissible without a

non-compete

• B: Incorrect Convincing an analyst to join is not a violation unless unethical means were

used

• C: Correct Using West Star’s software violates Standard IV(A)

27/ Q Which of the following claims can an asset management firm most likely make regarding the GIPS standards?

A Claim GIPS compliance using the GIPS Compliance Statement

B State that the firm will achieve GIPS compliance by a future date

C Claim partial GIPS compliance with details on areas of non-compliance

Reason:

• GIPS Standards: Firms can claim compliance only if fully compliant, using the GIPS

Compliance Statement Partial compliance or future compliance claims are not allowed

• A: Correct Full compliance with the statement is permissible

• B: Incorrect Future compliance claims are prohibited

• C: Incorrect Partial compliance claims are not allowed

28/ Q Countries who are global leaders and use their economic influence to control resources are best described as:

• Hegemonic: Countries that dominate global or regional systems through economic,

military, or political influence to control resources

• A: Incorrect Autarkic refers to self-sufficient economies

• B: Correct Hegemonic fits the description of resource control via influence

• C: Incorrect Multilateral refers to cooperative actions among multiple countries

29/ An analyst gathers the following information for a company’s fiscal year beginning 1 January:

Dividends declared and paid on convertible

Weighted average common shares outstanding

Convertible preferred shares outstanding during

• Diluted EPS accounts for the potential conversion of dilutive securities, such as

convertible preferred shares

• Step 1: Calculate Basic EPS

Basic EPS = (Net Income - Preferred Dividends) / Weighted Average Common Shares

= ($1,800,000 - $600,000) / 200,000 = $1,200,000 / 200,000 = $6.00

For convertible preferred shares, assume conversion occurs at the beginning of the period

If converted:

o Preferred shares (50,000) convert to 50,000 × 4 = 200,000 common shares

o Total shares = 200,000 (existing) + 200,000 (converted) = 400,000 shares

o Preferred dividends ($600,000) are not deducted if converted, as they are no longer paid

Diluted EPS = Net Income / Total Shares

= $1,800,000 / 400,000 = $3.00

30/ Q Normalized earnings are best defined as the:

A average level of achieved earnings over a long-term historical period

B estimated going-concern value of the company after the explicit forecast period

C expected level of mid-cycle earnings in the absence of any unusual or temporary factors

Answer: C

Reason:

• Normalized earnings represent a company’s expected earnings under typical, sustainable conditions, excluding temporary or unusual factors (e.g., one-time gains or losses)

• A: Incorrect Averaging historical earnings may include temporary fluctuations, not

reflecting sustainable earnings

• B: Incorrect Going-concern value relates to valuation, not earnings normalization

• C: Correct Normalized earnings focus on mid-cycle, sustainable earnings without unusual

factors

31/ Q All else being equal, an increase in the central bank’s policy rate most likely puts downward pressure on domestic inflation by:

A increasing consumption growth

B improving investors’ confidence

C strengthening the country’s currency

Answer: C

Reason:

• An increase in the central bank’s policy rate raises borrowing costs, reducing spending and demand, which helps curb inflation Additionally, higher rates attract foreign capital, strengthening the domestic currency, which reduces import prices and further lowers inflation

• A: Incorrect Higher rates typically reduce consumption by increasing borrowing costs

• B: Incorrect Investor confidence may improve, but it’s not the primary mechanism for

reducing inflation

• C: Correct A stronger currency lowers import costs, reducing inflationary pressure

32/ A technology company, reporting under US GAAP, has three classes of intangible assets The table below shows information on each of the three classes (in USD thousands):

Reason:

Under US GAAP, goodwill is not amortized but tested annually for impairment Licenses and

computer software are typically amortized, and any impairment is recognized if the carrying

value exceeds the recoverable amount To determine the impairment charge, we calculate the expected ending balance (after accounting for exchange movements, amortization, and additions/disposals) and compare it to the actual ending balance Any shortfall indicates an impairment charge

o Expected ending balance: $65,321 + $7,324 = $72,645

o Actual ending balance (31 Dec Year 2): $73,194

o Impairment: No impairment (actual > expected; difference may reflect

adjustments not requiring impairment)

o Expected ending balance: $8,243 + $821 - $1,244 - $25 = $7,795

o Actual ending balance: $10,856

o Impairment: No impairment (actual > expected; difference likely reflects new

additions not fully captured)

• Step 3: Computer Software

o Beginning balance: $5,257

o Exchange movements: +$334

o Amortization: -$2,102

o Additions/disposals: $0

o Expected ending balance: $5,257 + $334 - $2,102 = $3,489

o Actual ending balance: $8,214

o Impairment: No impairment (actual > expected) However, if we consider the

possibility of an error in the problem setup (as all actual balances exceed expected, suggesting no impairment), we analyze the shortfall context

33/ Q All else being equal, a decrease in which of the following financial metrics would most likely result in a lower return on equity (ROE)?

A Leverage

B The tax rate

C Days of sales outstanding

Answer: A

Reason:

Return on Equity (ROE) is calculated as Net Income / Shareholders’ Equity and can be analyzed

ROE = Net Profit Margin × Asset Turnover × Leverage (Equity Multiplier), where Leverage

= Total Assets / Equity

A decrease in leverage (i.e., lower Total Assets relative to Equity) reduces the Equity Multiplier, directly lowering ROE, assuming other factors remain constant This is because less debt financing reduces the amplification of returns on equity

A decrease in the tax rate increases Net Income (since less tax is paid), which would increase ROE, not decrease it

A decrease in DSO (faster collection of receivables) improves cash flow and potentially increases Asset Turnover, which would increase ROE, not decrease it

34/ An analyst regresses net profit margin (NPM) on research and development expenditure scaled by revenues (RDR) and gathers the following information:

• The effective marginal cost of debt is calculated as: Cost of Debt = Interest Rate × (1 -

Tax Rate) If interest expense becomes tax-deductible, the tax shield reduces the after-tax

cost of debt, lowering the marginal cost

• A: Correct The effective cost decreases due to the tax shield

• B: Incorrect The cost does not change if interest was already deductible

• C: Incorrect The cost does not increase with tax deductibility

36/ Q The supply curve for a specific goods shows the highest:

A quantity sellers are willing to offer at each price

B price buyers are willing to pay for each quantity

C price sellers are willing to accept for each quantity

Answer: C

Reason:

• The supply curve represents the relationship between the price of a good and the quantity

sellers are willing to supply For each quantity, it shows the minimum price sellers are

willing to accept to offer that quantity

• A: Incorrect The supply curve shows price for each quantity, not quantity for each price

• B: Incorrect This describes the demand curve, not the supply curve

• C: Correct The supply curve shows the price sellers accept for each quantity supplied 37/ Q Which of the following expense recognition choices is least consistent with conservative accounting of reported net income?

A Recognizing expenses later rather than earlier

B Reflecting lower warranty expenses due to improved product quality

C Estimating lower uncollectible accounts due to stricter credit policies

Answer: A

Reason:

• Conservative accounting prioritizes recognizing expenses and losses earlier and revenues later to avoid overstating net income

• A: Correct Recognizing expenses later inflates current net income, which is least

consistent with conservatism

• B: Incorrect Lower warranty expenses due to improved quality reflect economic reality

and are consistent with conservatism if supported by evidence

• C: Incorrect Lower uncollectible accounts due to stricter policies are justifiable and align

with conservative principles if based on reasonable estimates

38/ Q Which of the following ratios will most likely increase as a result of an inventory down?

write-A Current ratio

B Total asset turnover ratio

C Receivables turnover ratio

Answer: B

Reason:

• An inventory write-down reduces inventory value, decreasing total assets and current assets

• A: Current ratio = Current Assets / Current Liabilities A write-down reduces current assets,

likely decreasing the current ratio

• B: Total asset turnover = Sales / Total Assets A write-down reduces total assets, increasing

the ratio if sales remain unchanged

• C: Receivables turnover = Sales / Receivables A write-down does not affect receivables,

so the ratio is unchanged

39/ Q Which of the following statements about evaluating a project with a real option is most accurate?

A The cost of the real option should be ignored as it represents a sunk cost

B The value of the real option less the incremental cost should be included in the project NPV

C If the project NPV is negative before considering the real option, management should not undertake the project

Answer: B

Reason:

• Real options (e.g., to expand or abandon a project) add value to a project’s NPV by accounting for flexibility

• A: Incorrect The cost of a real option is not necessarily a sunk cost; it must be considered

in the analysis

• B: Correct The value of the real option, net of its incremental cost, should be included in

the project’s NPV calculation

• C: Incorrect A negative NPV before the real option may become positive after including

the option’s value, so the project may still be viable

40/ Q In a simple linear regression model, the residual for an observation of Y is computed as:

A the observed value of Y divided by the expected value of Y

B the unexplained variation in Y divided by the explained variation in Y

C the difference between the observed value of Y and the estimated value of Y

Answer: C

Reason:

• In a simple linear regression, the residual for an observation is the difference between the observed value of the dependent variable (Y) and the predicted (estimated) value of Y from the regression model

• A: Incorrect Dividing observed by expected Y is not the residual definition

• B: Incorrect This describes a ratio of variances, not the residual

• C: Correct Residual = Observed Y - Estimated Y

41/ An analyst gathers the following information about two projects with the same discount rate:

Flows

• Net Present Value (NPV) is calculated as the sum of the present values of all cash flows,

discounted at the given rate

• For Project 1, NPV = 0, meaning the present value of inflows ($400 for 3 years) equals

the initial outflow ($1,000) This implies the discount rate is the internal rate of return (IRR) for Project 1, where NPV = 0

• For Project 2, the initial outflow is higher (-$1,300 vs -$1,000), but the inflows are only

25% higher ($500 vs $400 each year) Since both projects use the same discount rate (Project 1’s IRR), we compare the cash flow structures:

o Project 2’s higher initial investment requires proportionally higher inflows to achieve the same NPV However, the inflows ($500 × 3 = $1,500) are not sufficiently higher than Project 1’s ($400 × 3 = $1,200) relative to the increased outflow ($1,300 vs $1,000)

o At Project 1’s IRR, the present value of Project 2’s inflows ($500 discounted over

3 years) is unlikely to cover the $1,300 outflow, resulting in a negative NPV

• A: Correct Project 2’s NPV is negative due to the higher initial cost not being offset by

proportionally higher inflows at the same discount rate

• B: Incorrect NPV would be zero only if Project 2’s IRR equaled Project 1’s discount rate,

which is unlikely given the cash flow disparity

• C: Incorrect Project 2’s inflows are not sufficiently large to produce a positive NPV

42/ Q In machine learning, overfitting can most likely be mitigated by using:

A higher computing power

B a simpler machine-learning model

C an unsupervised machine-learning model

Answer: B

Reason:

• Overfitting occurs when a model is too complex and captures noise in the training data A simpler model (e.g., fewer parameters or features) reduces complexity, mitigating overfitting

• A: Incorrect Higher computing power enables more complex models but does not address

overfitting

• B: Correct Simplifying the model reduces overfitting by focusing on general patterns

• C: Incorrect Unsupervised models are not inherently simpler and do not directly mitigate

overfitting

43/ Q Under the revaluation model, an initial revaluation that increases the carrying value

of an asset most likely results in a:

A higher net profit margin

B lower financial leverage ratio

C higher total asset turnover ratio

Answer: B

Reason:

• The revaluation model (IFRS) increases an asset’s carrying value, increasing total assets and equity (via revaluation surplus)

• A: Incorrect Revaluation does not directly affect net income unless depreciation changes

significantly, so net profit margin is unlikely to increase

• B: Correct Financial leverage = Total Assets / Equity Higher assets and equity reduce the

leverage ratio, as the increase in equity is typically proportional or greater

• C: Incorrect Total asset turnover = Sales / Total Assets Higher assets decrease this ratio

if sales remain unchanged

44/ Q With respect to fiscal policy, which of the following is an automatic stabilizer?

A Tax rate changes

• A: Incorrect Tax rate changes require legislative action and are discretionary

• B: Incorrect Infrastructure spending is discretionary, not automatic

• C: Correct Unemployment benefits increase during recessions and decrease in expansions,

stabilizing the economy automatically

45/ Q The regulation of economic activity over time is associated with:

A fiscal policy only

B monetary policy only

C both fiscal policy and monetary policy

Answer: C

Reason:

• Both fiscal policy (government spending and taxation) and monetary policy (central bank actions, e.g., interest rates) regulate economic activity to manage growth, inflation, and employment over time

• A: Incorrect Fiscal policy alone does not cover all regulation

• B: Incorrect Monetary policy alone is insufficient

• C: Correct Both policies work together to stabilize the economy

46/ Q Ignoring income taxes, an impairment loss on equipment will most likely decrease:

A net profit margin

B total asset turnover

C working capital turnover

• B: Incorrect Total asset turnover = Sales / Total Assets Lower assets increase this ratio if

sales are unchanged

• C: Incorrect Working capital turnover = Sales / (Current Assets - Current Liabilities)

Equipment impairment does not directly affect working capital

47/ Q If an auditor is experiencing some scope limitation, but can still issue an opinion, the auditor most likely issues a(n):

• A scope limitation occurs when an auditor cannot obtain sufficient appropriate audit

evidence to form an opinion on certain aspects of the financial statements

• A: Incorrect An adverse opinion is issued when misstatements are material and pervasive,

not due to scope limitations

• B: Correct A qualified opinion is issued when a scope limitation is material but not

pervasive, allowing the auditor to express an opinion with reservations

• C: Incorrect A disclaimer of opinion is issued when the scope limitation is so pervasive

that the auditor cannot form an opinion at all

48/ An analyst gathers the following annual information on three companies:

B Company B

C Company C

Answer: A

Reason:

Gross Profit Margin = (Sales - Cost of Sales) / Sales

• Calculate for each company:

Gross Profit Margin = 210,000 / 450,000 = 0.4667 or 46.67%

49/ Q The primary responsibility of a corporation’s directors is to act in the best interest of the:

• Under corporate governance principles, directors have a fiduciary duty to act in the best

interest of shareholders, who are the owners of the corporation and bear the residual risk

• A: Incorrect Creditors’ interests are secondary unless the company is in distress or

bankruptcy

• B: Incorrect Managers are agents of the shareholders, not the primary beneficiaries

• C: Correct Shareholders are the primary focus of directors’ duties

50/ Q Debt as a proportion of total capital is most likely greatest in which of the following life-cycle stages of a company?