CFA Flashcards
7 cards from real CFA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 CFA flashcards as text
Standard IV(A) Loyalty requires that, in matters related to their employment, members act:
Answer: For the benefit of their employer
Members must place their employer's interests before their own in employment matters and not deprive the employer of their skills.
The present value of a perpetuity paying $100 annually at a 5% discount rate is:
Answer: $2,000
Perpetuity value equals payment divided by rate: 100 / 0.05 = 2,000.
Convexity in a bond portfolio is generally desirable because it:
Answer: Increases price gains when yields fall and limits losses when yields rise
Positive convexity benefits the holder asymmetrically as yields move.
A Type I error in hypothesis testing occurs when an analyst:
Answer: Rejects a true null hypothesis
A Type I error is the false rejection of a true null hypothesis, with probability equal to the significance level.
Under the dividend payout policy, the retention ratio equals:
Answer: 1 minus the dividend payout ratio
The retention ratio is the fraction of earnings kept, i.e., one minus the payout ratio.
Diversification reduces portfolio risk most effectively when assets have:
Answer: Low or negative correlations
Combining assets that do not move together reduces overall portfolio variance.
Expansionary monetary policy by a central bank typically involves:
Answer: Lowering interest rates and increasing the money supply
Expansionary policy lowers rates and adds liquidity to stimulate the economy.