CFA Practice Exam Part 4
1. If a company is liquidated, proceeds from asset sales are distributed to common shareholders:
(a) before unsecured debt investor and preferred shareholder claims are paid
(b) after secured debt investor and preferred shareholder claims are paid
(c) after preferred shareholder claims are paid but before unsecured debt investor claims are paid
Correct answer: b
2. Which of the following is not a sovereign bond issue?
(a) State of New York municipal bond
(b) US Treasury note
(c) German bond
Correct answer: a
3. Which of the following bonds contains an embedded option that provides the issuer certain rights?
(a) Putable bond
(b) Callable bond
(c) Convertible bond
Correct answer: b
4. In contrast to forward contracts, futures contracts:
(a) trade on organized exchanges (b) have contract sizes tailored to investor needs
(c) have negotiable expiration dates
Correct answer: a
5. Which type of private equity strategy is most likely used to finance a start-up company?
(a) Growth equity
(b) Buyout
(c) Venture capital
Correct answer: c
6. In commercial real estate investment, the amount derived from discounting future cash flows of lease and rental payments plus capital appreciation represents the value of the:
(a) asset
(b) equity
(c) liability
Correct answer: a
7. The type of bank that is exclusively owned by its members is a:
(a) savings and loan bank
(b) commercial bank
(c) mutual bank
Correct answer: c
8. A form of pension plan in which the participant has some ability to determine how pension contributions are invested is described as a(n):
(a) defined contribution plan
(b) endowment plan
(c) defined benefit plan
Correct answer: a
9. An investor attempting to replicate a price-weighted index would hold an equal:
(a) percentage of outstanding shares of each security in the index
(b) amount invested in each security in the index
(c) number of units (shares) of each security in the index
Correct answer: c
10. From the standpoint of taxes, investors will benefit from:
(a) deferring taxes to the future if tax rates will be higher in the future
(b) realizing gains via stock repurchases as opposed to receiving the same gains as dividends
(c) selling appreciated shares to meet cash needs instead of borrowing against them
Correct answer: b
(a) before unsecured debt investor and preferred shareholder claims are paid
(b) after secured debt investor and preferred shareholder claims are paid
(c) after preferred shareholder claims are paid but before unsecured debt investor claims are paid
Correct answer: b
2. Which of the following is not a sovereign bond issue?
(a) State of New York municipal bond
(b) US Treasury note
(c) German bond
Correct answer: a
3. Which of the following bonds contains an embedded option that provides the issuer certain rights?
(a) Putable bond
(b) Callable bond
(c) Convertible bond
Correct answer: b
4. In contrast to forward contracts, futures contracts:
(a) trade on organized exchanges (b) have contract sizes tailored to investor needs
(c) have negotiable expiration dates
Correct answer: a
5. Which type of private equity strategy is most likely used to finance a start-up company?
(a) Growth equity
(b) Buyout
(c) Venture capital
Correct answer: c
6. In commercial real estate investment, the amount derived from discounting future cash flows of lease and rental payments plus capital appreciation represents the value of the:
(a) asset
(b) equity
(c) liability
Correct answer: a
7. The type of bank that is exclusively owned by its members is a:
(a) savings and loan bank
(b) commercial bank
(c) mutual bank
Correct answer: c
8. A form of pension plan in which the participant has some ability to determine how pension contributions are invested is described as a(n):
(a) defined contribution plan
(b) endowment plan
(c) defined benefit plan
Correct answer: a
9. An investor attempting to replicate a price-weighted index would hold an equal:
(a) percentage of outstanding shares of each security in the index
(b) amount invested in each security in the index
(c) number of units (shares) of each security in the index
Correct answer: c
10. From the standpoint of taxes, investors will benefit from:
(a) deferring taxes to the future if tax rates will be higher in the future
(b) realizing gains via stock repurchases as opposed to receiving the same gains as dividends
(c) selling appreciated shares to meet cash needs instead of borrowing against them
Correct answer: b
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