CFA CFA 3

Question 1

Standard III(B) Fair Dealing requires that members treat all clients fairly when:

Accepted Answer

Disseminating investment recommendations or taking investment action

Answer

Fair Dealing applies to the dissemination of recommendations and the execution of investment actions across clients.

Question 2

The Gordon (constant) growth dividend discount model values a stock as D1 divided by:

Accepted Answer

(r - g)

Answer

Value equals next year's dividend divided by the required return minus the constant growth rate.

Question 3

A futures contract differs from a forward contract primarily because futures are:

Accepted Answer

Standardized and exchange-traded with daily settlement

Answer

Futures are standardized, traded on exchanges, and marked to market daily through a clearinghouse.

Question 4

Which measure of central tendency is most affected by extreme outliers?

Accepted Answer

Arithmetic mean

Answer

The arithmetic mean incorporates every value, so outliers pull it strongly.

Question 5

Operating leverage is highest for a firm with:

Accepted Answer

High fixed costs relative to variable costs

Answer

A large proportion of fixed costs magnifies the effect of sales changes on operating income.

CFA Practice Test