CFA Practice Test

Question 1

The formula will most likely be used to calculate the value of an existing single-family home utilized for residential purposes:

Accepted Answer

sales comparison approach.

Answer

income approach

Answer

cost approach

Question 2

Which of the following alternative investments is the best fit for a high-net-worth individual with a long time horizon
 and a need for immediate income?

Accepted Answer

Commercial real estate.

Answer

Multi-strategy hedge funds.

Answer

Venture capital.

Question 3

Utilized buyout finance is assessing Siena Company relative to its peer companies. Siena is most likely a great candidate 
for an administration buy-in in the event that it has:

Accepted Answer

higher cash flow and less capable managers than its peers.

Answer

higher cash flow and more capable managers than its peers.

Answer

lower cash flow and more capable managers than its peers.

Question 4

A REIT's funds from operations (FFO) are most likely computed as follows:

Accepted Answer

Net income plus depreciation less gains from sales of real estate plus losses from sales of
real estate.

Answer

Net income plus depreciation less capital expenditures.

Answer

Net income less gains from sales of real estate plus losses from sales of real estate.

Question 5

Consider the following propositions:
Phrase1: Commodities have generally had a higher Sharpe ratio than bonds but a lower Sharpe ratio than stocks.
Phrase 2: Commodity price volatility is typically higher than reported consumer price inflation volatility.
Which of these is the most likely case?

Accepted Answer

Only Statement 1 is incorrect.

Answer

Both statements are correct.

Answer

Only Statement 2 is incorrect.

Question 6

The spot price of a commodity market is in contango if it is:

Accepted Answer

lower than futures prices

Answer

equal to futures prices.

Answer

higher than futures prices.

Question 7

Which of the following is the least likely source of profit from a commodity futures position with collateral?

Accepted Answer

Storage costs

Answer

Spot price return

Answer

Collateral yield

Question 8

In 20x7, an investment in a hedge fund with a 2-and-20 fee structure rose in value each period, yielding an 8 percent
 net return net of management fees. Which of the following provisions would have the highest incentive fees for 20x7?

Accepted Answer

6% soft hurdle rate and a high water mark provision.

Answer

7% hard hurdle rate and no high water mark provision.

Answer

5% hard hurdle rate and a high water mark provision.

Question 9

Which of the following alternative investments would be best for a high-net-worth individual with a long time horizon and
a need for immediate income?

Accepted Answer

Commercial real estate.

Answer

Venture capital.

Answer

Multi-strategy hedge funds.

Question 10

The esteem of an existing single—family domestic utilized for private purposes will most likely be calculated utilizing the:

Accepted Answer

sales comparison approach.

Answer

income approach.

Answer

cost approach.