Six BSAS exam questions

My BSAS sample exam is missing answers to six questions, so I retype them here: ---------------------------------- Rebecca Moreland, CFA actively looks for trading ideas for the hedge fund she manages. Noting that the fund does not currently have a position in QWE Corp. (ticker: QWE), she considers buying some shares. She calls her broker and receives the following quote: QWE: Bid $22.2 Ask $22.6 Impressed with the levels, Moreland instructs her broker to purchase 13,500 shares of QWE on behalf of the fund, with the caveat being that she would like to leverage the position 50%; that is she would like the initial margin percentage on her QWE position to be 50%. Her broker immediately complies. 81. If the maintenance margin is 25%, the price at which Moreland can expect to receive a margin call is closest to: A. $5.65 B. $10.04 C. $14.80 D. $15.07 82. Two days later, QWE’s stock price has moved up significantly. Moreland calls her broker and receives the following quote: QWE: Bid $24.5 Ask $24.8 She decides to completely liquidate the fund’s position in QWE Corp. Ignoring any commission costs or interest costs, the holding period return for the QWE stock is closest to: A. 8.4% B. 11.7% C. 16.8% D. 23.4% 83. Contrary Opinion Trading rules of technical analysis are developed from the premise that: A. Data derived from the market itself usually provides a converse indication of price patterns B. Past price patterns or relationships that appear currently will behave contrary to expectations eventually. C. Extreme bullish behavior by investors is usually an indication of a market bottom D. The majority of investors are wrong as the market approaches peaks and troughs 84. At what point in the industry life cycle would a firm’s Return on Assets be most likely to exceed the firms’s cost of capital? A. Infancy B. Growth C. Maturity D. Decline 85. A firm’s share price increased form $30 to $35, its shares outstanding increased by 5%, and its earnings per share increased from $6 to $6.5. Given this information, it follows that: A. the stock experienced P/E expansion B. earnings growth was similar to stock price growth C. the company had a decrease in its dividend payout ratio D. earnings increased because the firm increased its number of common shares outstanding 86. Creek manufacturing is expected to pay a dividend of $4.20 in the upcoming year. Dividends are expected to grow at 8% per year. The risk-free rate of return is 4% and the expected return on the market portfolio is 14%. The stock’s current price is $84.00. The market capitalization rate is closest to: A. 9% B. 11% C. 13% D. 15% ---------------------------------- My answers are 81) D, 82) C, 83) D, 84) B, 85) A, 86) C. What are yours?

  1. D. Assuming she pays the ask price of 22.6, we multiply this by (1-init)/(1-maint) = .5/.75 to arrive at 15.07. 82. C. Assuming she sells at the bid price of 24.5, she made 1.9 per share and only put up 11.3 per share. Thus her holding period return is 16.8%. 83. D. Contrarians think most people are usually wrong, and that they buy out of greed at peaks and sell out of fear in troughs. 85. A. Compare 30/6, which equals 5, to 35 over 6.5, which equals 5.4. 86. C. 4.2/(x-8%) = 84. Solve for x to get 13%.

C. D, D, B, A, C My reasoning for differences is that in 83, the margin call is (1-0.5)/(1-.25) * $22.20 = 14.8%. In 84, gain with no leverage is ($24.80-$22.20)/$22.20 = 11.71%. 50% maintenance is 2x leverage, so 11.71% * 2 = 23.42%.

Guys, I believe your answers to the first two are correct…those bid/ask spreads are ridiculous though!!!

I got same as ymc. D, C, D, B, A, C

What do you guys think about BSAS exams? I think they are in between Schweser exams and CFAI sample exams. Some of its questions can be as time consuming as Schweser ones. These six questions however are on the easy side…

Somehow I have last year’s BSAS exam on my computer. Is that public info that I got legally or something that some fiend sent me? Edit: If it’s legit, I’d be glad to send it to someone if they want to send it to other people (it has answers, too).

did you mean to say FIEND on purpose??? JDV?

Yes - if it’s not legit some fiend (i.e., a dastardly individual) sent it to me. Some of my friends are fiends though.