Professional Documents
Culture Documents
Pass 1013 Questions
Pass 1013 Questions
Pass 1013 Questions
Level 1
Study Session 3
Practice Questions
Click here to view the PDF
The questions and answers for study session 3 are provided by the Financial
Analyst Quizzer, a product of Beach Front Direct. Further information about
the product can be obtained here. Financial Analyst Quizzer can also
be purchased by clicking here.
1/9/00
Page 1 of 1
Level 1
Sponsorship by:
Study Session 3
Practice Questions
(4) To help gain a better understanding of the relationship between the return on the common stocks of small companies
and the return on the S&P 500 Index, you run a simple linear regression to quantify this relationship, using the monthly
return on small stocks as the dependent variable and the monthly return on the S & P 500 as the independent variable. The
results of the regression are shown below:
Intercept
S&P 500
Coefficient
1.71%
1.52%
1/9/00
Page 2 of 2
Level 1
Sponsorship by:
Study Session 3
Practice Questions
(2) A.
Explanation:
References: Bodie and Marcus, "Quantitative Review," Appendix A, Investments, 3rd edition, (Irwin, 1996), Level I CFA
Candidate Readings (AIMR, 1997), p. A11 (39); Reilly and Brown, Investment Analysis and Portfolio Management, 5th
edition, (Dryden, 1997), Ch. 1, pp. 8-10.
Source: 1996 Sample Exam 2 Question 21
Used 1 time in actual or sample exam
Quantitative Methods--Study Session 3
Readings 1 -- Quantitative Review; 4 -- The Investment Setting
Learning Outcome: calculate mean and standard deviation of expected returns.
Solution:
1 + 2 + 3 + 5 + 8 + 8 + 15 = 42
Mean = 42 / 7 = 6.
The Median is the middle value: 5.
The Mode is the most common value: 8.
(3) D
Explanation:
Reference: Schroeder, Sjoquist and Stephan, Understanding Regression Analysis: An Introductory Guide, (Sage
Publications, 1986), pp. 16-17, 25.
Source: 1993 Exam Question 57
Used 1 time in actual or sample exam
Quantitative Methods--Study Session 3
Reading 2 -- Understanding Regression Analysis. An Introductory Guide
Learning Outcome: discuss the results of regression and correlation analysis.
Comment: What is needed to answer the question is the slope, which is not provided.
(4) B
Explanation:
Study Session 3
Reference: Schroeder, Sjoquist and Stephan, Understanding Regression Analysis: An Introductory Guide, (Sage
Publications, 1986), pp. 23-28.
Source: 1994 Exam Question 46
Used 1 time in actual or sample exam
Quantitative Methods--Study Session 3
Reading 2 -- Understanding Regression Analysis. An Introductory Guide
Learning Outcome: discuss the relationship between the dependent and independent variables.
Solution:
2
R = 0.774
=0.5991
1/9/00
Page 3 of 3
Level 1
Sponsorship by:
Study Session 3
Practice Questions
(5) D
Explanation:
Study Session 3
Reference: Bodie and Marcus, "Quantitative Review," Appendix A, Investments, 3rd edition, (Irwin, 1996), Level I CFA
Candidate Readings (AIMR, 1997), pp. A16-A18 (44-46) and Table 20.2 at p. 666 (69).
Source: 1996 Sample Exam 1 Question 37
Used 2 times in actual or sample exams
Quantitative Methods--Study Session 3
Reading 1 -- Quantitative Review
Learning Outcome: calculate the upper and lower limits of confidence intervals.
Solution:
As a rule of thumb, two standard deviations produce a 95% confidence level. Since this question presents a one-tailed test,
the probability of falling below the expected value by two standard deviations is 2.5%.
Confidence interval =
19% - 10%
---------------4.5%
= 2 standard deviations
Table 20.2 shows that the frequency of outcomes two standard deviations less than the expected return is 2.28%.
Hence,
Probability of keeping the account = 1.0000 - 0.0228 = 0.9772,
closest to 0.975.
1/9/00
Page 4 of 4