Question 1 - 86557 Henry Hilton, CFA, is undertaking an analysis of the bicycle industry. He hypothesizes that bicycle sales (SALES) are a function of three factors: the population under 20 (POP), the level of disposable income (INCOME), and the number of dollars spent on advertising (ADV). All data are measured in millions of units. Hilton gathers data for the last 20 years and estimates the following equation (standard errors in parentheses): SALES = á + 0.004 POP + 1.031 INCOME + 2.002 ADV (0.005) (0.337) (2.312) The critical t-statistic for a 95% confidence level is 2.120. Which of the independent variables is statistically different from zero at the 95% confidence level? A) ADV only. B) INCOME only. C) INCOME and ADV. -------------------------------------------------------------------------------- Question 2 - 86726 Which of the following statements regarding the instability of time-series models is most accurate? Models estimated with: A) shorter time series are usually more stable than those with longer time series. B) a greater number of independent variables are usually more stable than those with a smaller number. C) longer time series are usually more stable than those with shorter time series. -------------------------------------------------------------------------------- Question 3 - 89194 A Japanese automobile manufacturer builds an automobile plant in the U.S. In the foreign exchange market, this action creates a: A) supply of dollars and a demand for yen. B) demand for both dollars and yen. C) demand for dollars and a surplus of yen. -------------------------------------------------------------------------------- Question 4 - 89124 According to the law of comparative advantage: A) if a foreign government subsidizes the textile industry, the domestic government should impose a tariff. B) Mexico is considered to have a comparative advantage in plastics if Mexico can produce plastic using fewer resources than the U.S. C) a nation will benefit from trade when it imports goods for which it is the high cost producer and exports goods for which it is the low-cost producer. -------------------------------------------------------------------------------- Question 5 - 100865 All else being equal, which of the following investors will have the highest future accumulations? A) An active investor. B) A passive investor. C) A trader. -------------------------------------------------------------------------------- Question 6 - 89397 Mean-variance analysis assumes that investor preferences depend on all of the following EXCEPT: A) skewness of the distribution of asset returns. B) correlations among asset returns. C) expected asset returns. -------------------------------------------------------------------------------- Question 7 - 88567 Which of the following statements most accurately describes the capitalization rate used for real estate valuation? A) The capitalization rate is the rate of return that equity investors require on similar-risk real estate investments. B) The capitalization rate is the rate of return that equity investors require on similar-risk real estate investments net of the expected constant growth rate of net operating income. C) The capitalization rate is one plus the constant growth rate of net operating income. -------------------------------------------------------------------------------- Question 8 - 96389 Which of the following is NOT an advantage of using price-to-book value (PBV) multiples in stock valuation? A) Book values are very meaningful for firms in service industries. B) Book value is often positive, even when earnings are negative. C) PBV ratios can be compared across similar firms if accounting standards are consistent. -------------------------------------------------------------------------------- Question 9 - 89411 Which of the following is the appropriate “nodal decision” within the backward induction methodology of the interest tree framework for a putable bond? A) Max(par value, discounted value). B) Min(put value, discounted value). C) Max(put price, discounted value). -------------------------------------------------------------------------------- Question 10 - 88473 Compared to the value of a call option on a stock with no dividends, a call option on an identical stock expected to pay a dividend during the term of the option will have a: A) lower value in all cases. B) lower value only if it is an American style option. C) higher value only if it is an American style option.
Question 1 - 86557 A) ADV only. -------------------------------------------------------------------------------- Question 2 - 86726 C) longer time series are usually more stable than those with shorter time series. -------------------------------------------------------------------------------- Question 3 - 89194 A) supply of dollars and a demand for yen. -------------------------------------------------------------------------------- Question 4 - 89124 C) a nation will benefit from trade when it imports goods for which it is the high cost producer and exports goods for which it is the low-cost producer. -------------------------------------------------------------------------------- Question 5 - 100865 A) An active investor. -------------------------------------------------------------------------------- Question 6 - 89397 A) skewness of the distribution of asset returns. -------------------------------------------------------------------------------- Question 7 - 88567 B) The capitalization rate is the rate of return that equity investors require on similar-risk real estate investments net of the expected constant growth rate of net operating income. -------------------------------------------------------------------------------- Question 8 - 96389 C) PBV ratios can be compared across similar firms if accounting standards are consistent. -------------------------------------------------------------------------------- Question 9 - 89411 C) Max(put price, discounted value). -------------------------------------------------------------------------------- Question 10 - 88473 Compared to the value of a call option on a stock with no dividends, a call option on an identical stock expected to pay a dividend during the term of the option will have a: A) lower value in all cases.
I haven’t even glanced at derivatives yet 1.) I’m guessing the errors correspond to partial slope coefficients and the error isn’t stated for the intercept. lets do some t-tests POP 0.004/0.005 = .8, accept null INCOME 1.031 / 0.337 = 3.06 reject null ADV = 2.002 / 2.312 = 0.87 accept null B 2.) A 3.) tricky q, is it A or B? 4.) C 5.) A (havent seen this section yet) 6.) A 7.) B (from level 1) 8.) A 9.) i dont know, C? 10.) A
Q1.B? Tstat(POP)=0.004/0.005 = 0.8 Tstat(INCOME)=1.031/0.337 = 3.059347
we’re darned close swaption
I’ll wait on Banni, then I’ll post answers. Although I’ll bet that CP’s responses work one in the same.
TheAliMan Wrote: ------------------------------------------------------- > we’re darned close swaption Thats not at all good then, since our answers are not matching with the global benchmark (cpk)
change my first choice to a B… wrong read of the question. So got that wrong…
- A 2. A 3. A 4. C 5. B 6. A 7. B 8. A 9. C 10. A
well as of cp’s update, my only different answer is Question 8 
wait- q 1 was that easy? god i suck at quant. i took the b1 + the 2.12whatever (the std error) to get my yes/no decision. i’m sure i’m wrong. i am horrific at quant.
Ans 1. A 2. A 3. C 4. C 5. B 6. A 7. B 8. C 9. C 10. A Your answer: B was correct! The calculated test statistic is coefficient/standard error. Hence, the t-stats are 0.8 for POP, 3.059 for INCOME, and 0.866 for ADV. Since the t-stat for INCOME is the only one greater than the critical t-value of 2.120, only INCOME is significantly different from zero. This question tested from Session 3, Reading 12, LOS a, (Part 1). -------------------------------------------------------------------------------- Question 2 - #86726 Your answer: C was incorrect. The correct answer was A) shorter time series are usually more stable than those with longer time series. Those models with a shorter time series are usually more stable because there is less opportunity for variance in the estimated regression coefficients between the different time periods. This question tested from Session 3, Reading 13, LOS g. -------------------------------------------------------------------------------- Question 3 - #89194 Your answer: A was incorrect. The correct answer was C) demand for dollars and a surplus of yen. The Japanese automaker will need to buy U.S. dollars to pay for costs in the United States such as payments to workers, overhead costs, supplies and materials. Thus, the Japanese automaker will be looking to trade yen for dollars, creating a demand for dollars and a surplus of yen. This question tested from Session 4, Reading 19, LOS d. -------------------------------------------------------------------------------- Question 4 - #89124 Your answer: C was correct! This statement is the law of comparative advantage. The other choices are incorrect. The law of comparative advantage supports international trade. According to the law of comparative advantage, both trading partners are better off if they specialize in the production of goods for which they are the low-opportunity cost producer and trade for those goods for which they are the high-opportunity cost producer. Mexico is considered to have an absolute advantage in plastics if Mexico can produce plastic using fewer resources than the U.S. This question tested from Session 4, Reading 16, LOS a. -------------------------------------------------------------------------------- Question 5 - #100865 Your answer: A was incorrect. The correct answer was B) A passive investor. The passive investor will pay a low tax rate on a deferred basis and have the highest accumulation of the three investors. The active investor will have the next lowest future accumulation because although gains are taxed at a lower rate, the gains are taxed every year. The trader will have the lowest future accumulation because her capital gains will be short-term and taxed at a high rate. The gains will also be taxed every year. This question tested from Session 18, Reading 70, LOS b. -------------------------------------------------------------------------------- Question 6 - #89397 Your answer: A was correct! Mean-variance analysis assumes that investors only need to know expected returns, variances, and covariances in order create optimal portfolios. The skewness of the distribution of expected returns can be ignored. This question tested from Session 18, Reading 66, LOS a, (Part 1). -------------------------------------------------------------------------------- Question 7 - #88567 Your answer: B was correct! The capitalization rate © is the rate of return that equity investors require on similar-risk real estate investments (k) net of the expected constant growth rate of net operating income (g). That is, C = k - g. This question tested from Session 13, Reading 47, LOS a. -------------------------------------------------------------------------------- Question 8 - #96389 Your answer: C was incorrect. The correct answer was A) Book values are very meaningful for firms in service industries. Book values are not very meaningful for firms in service industries. This question tested from Session 12, Reading 43, LOS c, (Part 2). -------------------------------------------------------------------------------- Question 9 - #89411 Your answer: C was correct! When valuing a putable bond using the backward induction methodology, the relevant cash flow to use at each nodal period is the coupon to be received during that nodal period plus the computed value or exercise price, whichever is greater. This question tested from Session 14, Reading 55, LOS i. -------------------------------------------------------------------------------- Question 10 - #88473 Your answer: A was correct! An expected dividend during the term of an option will decrease the value of a call option. This question tested from Session 17, Reading 62, LOS g.
My answers : 1 B 2 A 3 C 4 C 5 B 6 A 7 don’t remember 8 A 9 C 10 A
crap 8/10
i’m officially quant-tarded.
yea 10/10!
swaptiongamma is my hero.
Not at all. Just a lucky day for me. Ask me FSA (Synthesis) and see how I go 0/6
8/10 - not too bad! What level of difficulty are you using when you generate these?
This one was all ‘Easy’ questions since the Qbank tends to generate graphs/charts on Advanced Qs that do not copy and paste well.