CFA CFA 2

Question 1

Under the CFA Institute Code of Ethics, what must a member do when an investment recommendation could benefit the member personally?

Accepted Answer

Disclose the conflict of interest to clients and prospects

Answer

Decline to make any recommendation

Answer

Transfer the account to a colleague

Answer

Wait 30 days before acting

Question 2

The required rate of return used to discount a firm's free cash flow to the firm (FCFF) is the:

Accepted Answer

Weighted average cost of capital (WACC)

Answer

Cost of equity

Answer

Risk-free rate

Answer

After-tax cost of debt

Question 3

A bond's Macaulay duration of 6 years and modified duration are related by which adjustment?

Accepted Answer

Dividing Macaulay duration by (1 + yield per period)

Answer

Multiplying by (1 + yield)

Answer

Adding convexity

Answer

Subtracting the coupon rate

Question 4

Which financial ratio best measures a company's ability to meet short-term obligations using its most liquid assets?

Accepted Answer

Quick (acid-test) ratio

Answer

Debt-to-equity ratio

Answer

Gross margin

Answer

Interest coverage ratio

Question 5

In the Capital Asset Pricing Model (CAPM), beta measures a security's:

Accepted Answer

Systematic (market) risk

Answer

Total risk

Answer

Unsystematic risk

Answer

Default risk

Question 6

Under IFRS, which inventory cost flow assumption is NOT permitted?

Accepted Answer

LIFO (last-in, first-out)

Answer

FIFO (first-in, first-out)

Answer

Weighted average cost

Answer

Specific identification

Question 7

A positively sloped (normal) yield curve generally implies that:

Accepted Answer

Longer-term yields are higher than shorter-term yields

Answer

Short-term yields exceed long-term yields

Answer

All maturities have equal yields

Answer

Yields are falling across all maturities