概要信息：

CFA level1-Mock-114 
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Questions 1~18 Relate to Ethics .................................................................................. 2 
Questions 19~32 Relate to Quantitative analysis ...................................................... 8 
Questions 33~44 Relate to Economics ...................................................................... 13 
Questions 45~68 Relate to Financial Statement Analysis ....................................... 18 
Questions 77~88 Relate to Equity investment ......................................................... 32 
Questions 89~94 Relate to Derivatives ..................................................................... 36 
Questions 95~106 Relate to Fixed-income Analysis ................................................ 38 
Questions 107~110 Relate to Alternative Investments ............................................ 42 
Questions 111 ~120 Relate to Portfolio Management ............................................. 43 
 
  
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Questions 1~18 Relate to Ethics 
1. Correct answer: A. 
Members and candidates must self-disclose on the annual Professional Conduct Statement all 
matters that question their professional conduct, such as involvement in civil litigation or criminal 
investigations or being the subject of a written complaint.  
CFA Level I 
"Code of Ethics and Standards of Professional Conduct" 
 
2. Correct answer: B. 
Selling stock short is a management strategy and does not necessarily violate any aspect of the 
Standards of Professional Conduct.  
CFA Level I 
"Guidance for Standards I–VII" 
Standard II(B)–Market Manipulation 
 
3. Correct answer: C. 
Kozniak does not appear to have violated any CFA Institute Standards of Professional Conduct. 
Because she is known in the market for investing and brokering property and both parties have 
worked with Kozniak in the past, both parties would know of her interests. In addition, in both 
cases, she acts for her own account as a primary investor, not as a broker. She buys the property 
for her own portfolio and then sells the property from her own portfolio. Therefore, Kozniak did 
not violate Standard VI(A)–Disclosure of Conflicts. When she purchased the property for her 
portfolio, she saved her client from losing the building to the bank and did not charge a sales 
commission. Because the sale of the property to her other client did not take place until six months 
after her purchase, and she was unable to contact the client who had earlier expressed interest 
prior to her purchase, she cannot be accused of violating Standard III(A)–Loyalty, Prudence, and 
Care with either client.  
CFA Level I 
"Guidance for Standards I–VII" 
Standard III(A)–Loyalty, Prudence, and Care, Standard VI(A)–Disclosure of Conflicts 
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4. Correct answer: B.  
The portfolio manager received permission to use his investment performance history from his 
prior employer. The member violated his non-solicitation agreement by indicating his availability 
to new clients on several social media sites accessible by clients of his former employer. This 
action is a violation of Standard IV(A)–Loyalty because he did not act for the benefit of his former 
employer. In this case, the member may cause harm to his former employer if his messages result 
in clients moving to his new business from his former employer. The member also violated 
Standard IV(A) by taking his employer's property, the trading software.  
CFA Level I 
"Guidance for Standards I–VII" 
Standard IV(A)–Loyalty 
 
5. Correct answer: A. 
The analyst has conducted thorough research that indicates the company falsified its financial 
results, and she should request the company address this issue publicly as recommended by 
Standard II(A)–Material Nonpublic Information. If a member or candidate determines that 
information is material, the member or candidate should make reasonable efforts to achieve public 
dissemination of the information. This effort usually entails encouraging the issuer company to 
make the information public. If public dissemination is not possible, the member or candidate 
must communicate the information only to the designated supervisory and compliance personnel 
within the member's or candidate's firm and must not take investment action on the basis of the 
information.  
CFA Level I 
"Guidance for Standards I–VII" 
Standard II(A)–Material Nonpublic Information 
 
6. Correct answer: B. 
The member misrepresented the returns she could realistically achieve for her clients, violating 
Standard I(C)–Misrepresentation, which prohibits members and candidates from guaranteeing 
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clients any specific return on volatile investments.  
CFA Level I 
"Guidance for Standards I–VII" 
Standard I(C)–Misrepresentation 
 
7. Correct answer: A. 
Miffitt has not violated Standard III (E)–Preservation of Confidentiality, which involves 
information about former, current, and prospective clients.  
CFA Level I 
"Guidance for Standards I–VII" 
Standard II(A)–Material Nonpublic Information, Standard II(B)–Market Manipulation, Standard 
III(E)–Preservation of Confidentiality 
 
8. Correct answer: B. 
Under Standard IV(C)–Responsibility of Supervisors, a member should exercise reasonable 
supervision by establishing and implementing compliance procedures in place prior to the 
possibility of any violation occurring, which has not been done in this case.  
CFA Level I 
"Guidance for Standards I–VII" 
Standard IV(C)–Responsibilities of Supervisors 
 
9. Correct answer: C. 
The GIPS standards state that firms must make every reasonable effort to provide a compliant 
presentation to all prospective clients. As long as a prospective client has received a compliant 
presentation within the previous 12 months, the firm has met this requirement. It is a GIPS 
recommendation, not a requirement, that all clients receive a compliant presentation on an annual 
basis.  
CFA Level I 
"Global Investment Performance Standards (GIPS)" 
GIPS Requirement 0.A.9, GIPS Recommendation 0.B.4 
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10. Correct answer: A. 
The utility is not a suitable investment for a fund that only invests in companies with good 
environmental records. Continuing to hold this investment, therefore, was a violation of Standard 
III(C)–Suitability.  
CFA Level I 
"Guidance for Standards I–VII" 
Standard I(B)–Independence and Objectivity, Standard III(C)–Suitability, Standard VI(A)–
Disclosure of Conflicts 
 
11. Correct answer: B. 
Standard VI(A)–Disclosure of Conflicts requires the disclosure of conflicts. For Meir to 
understand what potential conflicts of interest employees may have with the firm and with their 
clients, he would need to know the outside interests of each staff member. The staff members 
themselves may not know enough about the company and its clients to disclose those interests that 
would present a potential conflict. Therefore, it may be best to have all employees declare their 
outside business interests on an annual basis so Meir can make the determination as to what 
outside business interests need to be disclosed to clients.  
CFA Level I 
"Guidance for Standards I–VII" 
Standard VI(A)–Disclosure of Conflicts 
 
12. Correct answer: B. 
A personal bankruptcy does not necessarily constitute a violation of Standard I(C)–
Misrepresentation or Standard I(D)–Misconduct. If the circumstances of the bankruptcy involved 
fraudulent or deceitful business conduct, then failing to disclose it may constitute a violation of the 
Standards of Professional Conduct.  
CFA Level I 
"Guidance for Standards I–VII" 
Standard I(C)–Misrepresentation, Standard I(D)–Misconduct 
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13. Correct answer: C. 
To claim compliance, firms must meet all GIPS requirements, not just calculate their performance 
according to GIPS requirements. 
CFA Level I 
―The GIPS Standards,‖ CFA Institute  
Section: Provisions of the Global Investment Performance Standards 
 
14. Correct answer: C. 
The prospective supervisor's first step should be to not take the position. Accepting the position 
with inadequate procedures in place or improper marketing material would leave Inkster at risk of 
incurring a violation of Standard IV(C)–Responsibilities of Supervisors. She could agree to be 
hired as an interim consultant with the bank in order to implement adequate procedures before 
taking on any supervisory role.  
CFA Level I 
"Guidance for Standards I–VII" 
Standard IV(C)–Responsibilities of Supervisors 
 
15. Correct answer: A. 
Both Musa and Kassim violated the Standards of Professional Conduct. Musa violated Standard 
IV(C)–Responsibilities of Supervisors by not ensuring policies were in place to prevent violations 
of the Standards of Professional Conduct (in this case, Standard VI(B)–Priority of Transactions) 
by someone subject to her supervision. As the head of compliance, Musa supervised Kassim and 
must meet her supervisory responsibilities outlined in the Standards of Professional Conduct. 
Kassim violated Standard VI(B)–Priority of Transactions because he did not give sufficient 
priority to Dunfield's clients before trading on his recommendation.  
CFA Level I 
"Guidance for Standards I–VII" 
Standard IV(C)–Responsibilities of Supervisors, Standard VI(B)–Priority of Transactions 
 
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16. Correct answer: A. 
By failing to adhere to the non-compete clause he agreed to abide by when signing his 
employment contract, Hasina shows a lack of professional integrity toward his employer. This 
behavior reflects poorly on the good reputation of members and is a violation of the Code of 
Ethics, which states that members and candidates must act with integrity, and Standard I (D)–
Misconduct, which states that members and candidates must not engage in any professional 
conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their 
professional reputation, integrity, or competence. The Code of Ethics at times requires a member 
or candidate to uphold a higher standard than that required by law, rule, or regulation—or in this 
case, the strict application of the employment agreement.  
CFA Level I 
"Code of Ethics and Standards of Professional Conduct," "Guidance for Standards I–VII" 
Standard I(A)–Knowledge of the Law, Standard I(D)–Misconduct 
 
17. Correct answer: B. 
In order to avoid violating Standard III(E)–Preservation of Confidentiality, Staal should determine 
whether applicable securities regulations require disclosing the records before she provides the 
confidential information concerning her client's investments.  
CFA Level I 
"Guidance for Standards I–VII" 
Standard III(E)–Preservation of Confidentiality 
 
18. Correct answer: A. 
Compliance with the GIPS standards does not eliminate the need for in-depth due diligence on the 
part of the investor.  
CFA Level I 
"Introduction to the Global Investment Performance Standards (GIPS)" 
  
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Questions 19~32 Relate to Quantitative analysis 
19. Correct answer: B. 
A confidence interval for a parameter = Point estimate ± Reliability factor × Standard error. For 
example, the reliability factors for confidence intervals based on the standard normal distribution 
are 1.65 for 90% confidence intervals and 1.96 for 95% confidence intervals. For a given point 
estimate and standard error, the confidence interval will be narrower with a lower reliability factor. 
CFA Level I 
"Sampling and Estimation," Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, and 
David E. Runkle 
Section 4.2 
 
20. Correct answer: A. 
For a positively skewed unimodal distribution, the mode is less than the median, which is less than 
the mean. 
CFA Level I 
"Statistical Concepts and Market Returns," Richard A. DeFusco, Dennis W. McLeavey, Jerald E. 
Pinto, and David E. Runkle 
Section 8 
 
21. Correct answer: C. 
Failure to reject a false null hypothesis is a Type II error. 
CFA Level I 
"Hypothesis Testing," Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, and David E. 
Runkle 
Section 2 
 
22. Correct answer: C. 
The appropriate test statistic is a z-statistic because the sample comes from a normal distributed 
population with known variance. A z-test does not use degrees of freedom. This test is two-sided 
at the 0.05 significance level, and the rejection point conditions are z > 1.960 and z < –1.960.  
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CFA Level I 
"Hypothesis Testing," Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, and David E. 
Runkle 
Section 3 
 
23. Correct answer: B. 
Correlation of returns between Asset A and B ρ(RA, RB), is defined as:  
)(R)(R)/R ,Cov(R = )R ,(R BABABA  , 
where 
AR  and BR  are the returns of Asset A and B 
)R ,Cov(R BA is the covariance of returns between Asset A and B 
)(RA  and )(RB  are the standard deviations of returns of Asset A and B 
In this problem, the correlation is 0.69  0.6857 = )1,225 × 625600/(  . 
CFA Level I 
"Probability Concepts," Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, and David E. 
Runkle 
Section 3 
 
24. Correct answer: C. 
Given a population that has a finite variance and a large sample size, the central limit theorem 
establishes that the sampling distribution of sample means will be approximately normal, the 
distribution of sample mean will have a mean equal to the population mean, and will have a 
variance equal to the population variance divided by the sample size. 
CFA Level I 
"Sampling and Estimation," Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, and 
David E. Runkle 
Section 3.1 
 
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25. Correct answer: C. 
Resistance is defined as a price range in which selling activity is sufficient to stop the rise in price. 
CFA Level I 
"Technical Analysis," Barry M. Sine and Robert A. Strong 
Section 3.2 
 
26. Correct answer: C. 
The p-value is the smallest level of significance at which the null hypothesis can be rejected. In 
this case, the given p-value (0.0275) is less than the given level of significance (0.05); therefore, 
the null hypothesis is rejected.  
CFA Level I 
"Hypothesis Testing," Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, and David E. 
Runkle 
Section 2 
 
27. Correct answer: A. 
By the definition of p-value, 0.03 is the smallest level of significance at which the null hypothesis 
can be rejected. An analyst cannot reject the null hypothesis at the 0.01 significance level. 
CFA Level I 
"Hypothesis Testing," Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, and David E. 
Runkle 
Section 2 
 
28. Correct answer: A. 
An opportunity cost is the value that investors forgo by choosing a particular course of action. 
CFA Level I 
"The Time Value of Money," Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, and 
David E. Runkle 
Section 2 
 
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29. Correct answer: B. 
Events are exhaustive when they cover all possible outcomes. Mutually exclusive means that only 
one event can occur at a time. Two events are dependent if the occurrence of one event does affect 
the probability of occurrence of the other event. In this situation, Event A and B are both mutually 
exclusive (because they cannot occur at the same time) and dependent (because if one event 
occurs, the probability of the other becomes zero). However, the two events are not exhaustive 
because they do not cover the event that the fund will earn a return above 5%. 
CFA Level I 
"Probability Concepts," Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, and David E. 
Runkle 
Section 2 
 
30. Correct answer: A. 
The t-statistic for the given information (normally distributed populations, population variances 
assumed equal) is calculated as:  
   
5.0
2
2
1
2
2121











n
s
n
s
XX
t
PP

 
In this case, we have: 
2
Ps = 2678.05. 
   
94.093768.0
18
05.2678
25
05.2678
0185200
5.0
2 








t  
CFA Level I 
―Hypothesis Testing,‖ Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, and David E. 
Runkle  
Section 3.2 
 
31. Correct answer: B. 
Nonparametric procedures are primarily used in three situations: when the data are given in ranks, 
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when the data do not meet distributional assumptions, or when the hypothesis being addressed 
does not concern a parameter. 
CFA Level I 
"Hypothesis Testing," Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, and David E. 
Runkle 
Section 5 
 
32. Correct answer: C.  
The most appropriate test statistic for the difference between two population means (unequal and 
unknown population variances) is 
   
5.0
2
2
2
1
2
1
2121











n
s
n
s
XX
t

 
CFA Level I 
"Hypothesis Testing," Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, and David E. 
Runkle 
Section 3.2 
  
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Questions 33~44 Relate to Economics 
33. Correct answer: B. 
In first-degree price discrimination, the entire consumer surplus is captured by the producer; the 
consumer surplus falls to zero. 
CFA Level I 
"The Firm and Market Structures," Richard G. Fritz and Michele Gambera 
Section 6.4 
 
34. Correct answer: C. 
Using the expenditures approach: 
GDP = Consumer spending on goods and services + Business gross fixed investment + Change in 
inventories + Government spending on goods and services + Government gross fixed investment 
+ Exports – Imports + Statistical discrepancy 
 
Consumer spending on goods and services 875,060 
Business gross fixed investment 286,400 
Change in inventories (68,500) 
Government spending on goods and services 305,600 
Government gross fixed investment 84,120 
Exports 219,800 
Imports (250,980) 
Statistical discrepancy (2,850) 
= Gross domestic product (GDP) 1,448,650 
 
 CFA Level I 
―Aggregate Output, Prices, and Economic Growth,‖ Paul R. Kutasovic  and Richard G. Fritz 
Sections 2.2, 2.3 
 
35. Correct answer: A. 
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Cost-push inflation arises due to increases in costs associated with production: wages and raw 
materials prices.  
CFA Level I  
―Understanding Business Cycles,‖ Michele Gambera, Milton Ezrati, and Bolong Cao  
Section 4.2.4.1 
  
36. Correct answer: C. 
Prior to the price ceiling, the total surplus was d + e + f + g + h, consisting of consumer surplus of 
f + e and producer surplus of d + g + h. The price ceiling causes the quantity supplied to decrease 
to QC and for those consumers who can find supply to gain consumer surplus of g at the expense 
of producers. With the decline in supply, consumers lose consumer surplus e and producers lose 
producer surplus d for a combined deadweight loss of d + e.  
CFA Level I 
"Demand and Supply Analysis: Introduction," Richard V. Eastin and Gary L. Arbogast 
Section 3.13 
 
37. Correct answer: C. 
The optimal output level is 60 units as that level produces the highest profit: 
 
Output  
(units) 
Price 
 ($/unit) 
Total  
Revenue ($) 
Total Costs ($) Profit  
($) 
20 2,800 56,000 10,600 45,400 
40 2,600 104,000 32,600 71,400 
60 2,400 144,000 66,600 77,400 
80 2,200 176,000 112,600 63,400 
100 2,000 200,000 170,600 29,400 
 
 CFA Level I 
―The Firm and Market Structures,‖ Richard G. Fritz and Michele Gambera  
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Sections 6.1, 6.2, 6.3 
 
38. Correct answer: B. 
The characteristics of monopolistic competition include a large number of competitors, low 
pricing power, and the production of differentiated products (through advertising and other 
non-price strategies), but these still result in some pricing power. The ease of entry results in zero 
economic profits in the long run. 
CFA Level I 
"The Firm and Market Structures," Richard G. Fritz and Michele Gambera 
Sections 2.1, 2.2, 4 
 
39. Correct answer: C. 
Nominal GDP is defined as the value of goods and services measured at current prices. Real GDP 
is not affected by price increases while nominal GDP and the GDP deflator increase with price 
increases: 
Real GDPcurrent year = Nominal GDPcurrent year×100  GDP deflator  
Real GDPcurrent year = PXbase year × QXcurrent year  
CFA Level I 
―Aggregate Output, Prices, and Economic Growth,‖ Paul R. Kutasovic, and Richard G. Fritz 
Section 2.1.2 
 
40. Correct answer: A. 
At full employment, a weaker currency reduces the purchasing power of all domestic currency 
denominated assets (including the present value of current and future income). Households 
respond by reducing general expenditures and increasing savings. This response is the wealth 
effect and reflects the proportion of one's income that is saved (or spent). 
CFA Level I 
"Demand and Supply Analysis: Consumer Demand," Richard V. Eastin and Gary L. Arbogast 
Section 6.2 
"Aggregate Output, Prices, and Economic Growth," Paul R. Kutasovic and Richard G. Fritz 
CFA level1-Mock-114 
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Section 3.3.1 
"Currency Exchange Rates," William A. Barker, Paul D. McNelis, and Jerry Nickelsburg 
Sections 5.1, 5.2 
 
41. Correct answer: B. 
A shift in the demand curve results from a change in any variable other than the good's own price, 
Px. Given the demand function, a change in either Py or I would result in a shift in the demand 
curve. A change in quantity demanded, which refers to a movement along the demand curve, 
arises when the good's own price changes. 
CFA Level I 
"Demand and Supply Analysis: Introduction," Richard V. Eastin and Gary L. Arbogast 
Section 3.2 
 
42. Correct answer: B. 
In a perfectly competitive market, sellers have no pricing power and thus sell their product at the 
price established by demand and supply in the market – the market equilibrium price. 
CFA Level I 
"The Firm and Market Structures, " Richard G. Fritz and Michele Gambera   
Section 3.3 
 
43. Correct answer: A. 
 
Each company will consider the other’s reaction in selecting its strategy. Using the following 
summary, it is best for both chains to provide 24-hour service.  
Chain Consideration Best Decision 
  
  
1 
If it opens for 24 hours, it will see a higher payoff 
regardless of what Chain 2 does. 
  
  
  
Open for 24 hours 
Chain 2 
Closes at 9 p.m. 
Chain 2 
Opens for 24 hours 
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Chain 1 earns 540 
instead of 180 
Chain 1 earns 108 
instead of 55 
  
  
2 
If it opens for 24 hours, it will see a higher payoff 
regardless of what Chain 1 does. 
  
  
Open for 24 hours Chain 1 
Closes at 9 p.m. 
Chain 1 
Opens for 24 hours 
Chain 2 earns 592 
instead of 290 
Chain 2 earns 140 
instead of 75 
 
CFA Level I  
―The Firm and Market Structures,‖ Richard G. Fritz and Michele Gambera 
Section 5.1  
 
44. Correct answer: A. 
 
The profit maximizing output will arise when  MR = MC 
MR = 150 - 10 × Q = MC = 3 × Q2 - 20 × Q + 73   
On reduction, this becomes: 3 x Q2 - 10 ×Q - 77 = 0 
Only with Q=7 will this equation be satisfied:  3 × 72 – 10 × 7 -77 = 0 
  
Alternatively: by comparing net profit under each alternative 
Units Marginal revenue Marginal cost TR TC Net Profit 
7 150 - 10 × 7 = 80 3 × 7 2 - 20 × 7 + 73 = 80 805 484 321 
8 150 - 10 × 8 = 70 3 × 8 2 - 20 × 8 + 73 = 105 880 576 304 
11 150 - 10 × 11 = 40 3 × 11 2 - 20 × 11 + 73 = 216 1045 1045 0 
 
CFA Level I 
"The Firm and Market Structures," Richard G. Fritz and Michele Gambera 
Section 5.1  
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Questions 45~68 Relate to Financial Statement Analysis 
45. Correct answer: C. 
A decrease in the tax rate will result in a decrease in the previously reported amounts of deferred 
tax assets. That is, the value of the future tax assets, based on the new lower rate, is reduced for 
offsetting future tax payments.  
CFA Level I 
―Income Taxes,‖ Elbie Antonites and Michael A. Broihahn  
Section 3.3  
 
46. Correct answer: C. 
When a long lived asset is sold only the net gain or loss is reported on the income statement. The 
gain or loss on a sale = sales proceeds – carrying amount = $80,000 – $70,000 = $10,000 gain. 
CFA Level I 
"Long-lived Assets," Elaine Henry and Elizabeth A. Gordon 
Section 6.1 
 
47. Correct answer: C. 
The direct method of cash flow statement presentation shows the specific cash inflows and 
outflows that result in reported cash flow from operating activities (e.g., cash from customers and 
cash to suppliers). Companies using IFRS can decide to report interest and dividend receipts as 
either an investing or operating activity, whereas under US GAAP, they must report such income 
as an operating activity. The listed operating and investment activities indicate that the company 
reports under IFRS using the direct method.  
CFA Level I 
"Understanding Cash Flow Statements," Elaine Henry, Thomas R. Robinson, Jan Hendrik van 
Greuning, and Michael A. Broihahn 
Sections 2.3, 2.3.2, 3.2.1.5 
 
48. Correct answer: C. 
Under US GAAP, bank overdrafts are not considered part of cash and cash equivalents and are 
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classified as financing cash flows. 
CFA Level I 
"Understanding Cash Flow Statements," Elaine Henry, Thomas R. Robinson, Jan Hendrik van 
Greuning, and Michael A. Broihahn 
Section 2.2 
 
49. Correct answer: C. 
Income tax expense equals income tax payable (the tax rate multiplied by the taxable income) plus 
the increase in the deferred tax liabilities. 
(0.30 × $215,000) + ($90,650 – $82,400) = $64,500 + $8,250 = $72,750. 
CFA Level I 
―Income Taxes,‖ Elbie Antonites and Michael A. Broihahn  
Section 2  
 
50. Correct answer: A. 
The SEC now advocates for global accounting standards through public announcements, such as 
its "Statement in Support of Convergence and Global Accounting Standards" (2010). In the past, 
the SEC had required reconciliations between IFRS and US GAAP, but these requirements were 
withdrawn in 2008. The SEC now imposes no requirements on its issuers. 
CFA Level I 
"Financial Reporting Standards," Elaine Henry, Jan Hendrik van Greuning, and Thomas R. 
Robinson 
Section 4 
 
51. Correct answer: B. 
The Deferred tax asset is based on the temporary difference arising from the difference in the 
carrying value for taxes vs. the financial statements = (120,000 – 100,000) × 17%= 3,400. The rate 
that should be used is the rate expected when the reversal will occur which is now the lower rate 
of 17%. 
CFA Level I 
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"Income Taxes," Elbie Antonites and Michael A. Broihahn 
Section 3.3 
 
52. Correct answer: A. 
A common-size balance sheet expresses all balance sheet accounts as a percentage of total assets 
and would provide insight into what portion of a company’s assets is liquid. On the other hand, 
cash and current ratios measure liquidity relative to current liabilities, not relative to total assets. 
CFA Level I 
 ―Understanding Balance Sheets,‖ Elaine Henry and Thomas R. Robinson  
Sections 7.1, 7.2 
 ―Financial Analysis Techniques,‖ Elaine Henry, Thomas R. Robinson, and Jan Hendrik van 
Greuning 
Section 3.2.1  
 
53. Correct answer: A. 
Under IFRS (International Financial Reporting Standards), first determine the recoverable amount, 
which is the higher of value in use (the present value of the expected future cash flows) = $32,000 
or fair value minus costs to sell = $34,000 – 4,000 = $30,000 
The recoverable amount ($32,000) is lower than the carrying value ($36,000). Therefore, the asset 
is impaired and should be written down to that amount. 
Under US GAAP, to assess impairment, the carrying value ($36,000) is compared with the 
undiscounted expected future cash flows ($38,000). In this case, the carrying value is lower so the 
patent is not impaired. 
CFA Level I 
―Long-Lived Assets,‖ Elaine Henry and Elizabeth A. Gordon 
Sections 5.1, 5.2  
 
54. Correct answer: A. 
US GAAP prohibits the revaluation of PPE. Therefore, this is a source of an important difference 
between US GAAP and IFRS with respect to reporting of income taxes. 
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CFA Level I 
"Income Taxes," Elbie Antonites and Michael A. Broihahn 
Section 8 
 
55. Correct answer: C. 
Because the asset is self-constructed, the costs of specifically identifiable interest during the 
construction period can be capitalized and included in the cost of the showroom. 
 
  € Millions 
Construction costs  38.5 
Interest expense in 2012 and 2013: 0.08 × €30 × 2 years 4.8 
Total capitalized cost 43.3 
    
Straight line depreciation expense: 
(Capitalized cost – Residual value)/Useful life = (43.3 – 5.0)/40 
  
0.9575 
 
CFA Level I 
―Long-Lived Assets,‖ Elaine Henry and Elizabeth A. Gordon 
Sections 2.1, 3.1 
 
56. Correct answer: C. 
 
  Current Ratio Cash Ratio Quick Ratio 
Numerator Current assets =  
Cash + Marketable securities 
+ Receivables + Inventory 
Cash + 
Marketable 
securities 
Cash + Marketable 
securities + Receivables 
Denominator Current liabilities Current liabilities Current liabilities 
Current year       
  Numerator 114 + 23 + 231 + 462  114 + 23 = 137 114 + 23 + 231 = 368 
CFA level1-Mock-114 
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= 830 
  Denominator 390 390 390 
        
Ratio: Current 
year 
2.13 0.35 0.94 
Ratio: Prior 
year  
2.19 0.37 0.97 
Change in ratio  –0.06 –0.02 –0.03 
  
CFA Level I 
―Understanding Balance Sheets,‖ Elaine Henry and Thomas R. Robinson  
Section 7.2 
―Financial Analysis Techniques,‖ Elaine Henry, Thomas R. Robinson, and Jan Hendrik van 
Greuning  
Section 4.3 
 
57. Correct answer: B. 
The allowance for doubtful accounts increases by the bad debt expense recognized for the year 
and decreases by the amounts written off during the year.  
 
Beginning balance allowance for doubtful 
accounts 
£56 million 
Plus bad debt expense ? 
Minus write-offs –£84 million 
Ending balance allowance for doubtful 
accounts 
£92 million 
Solve for bad debt expense = £120 million. 
 
CFA Level I 
CFA level1-Mock-114 
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―Understanding Balance Sheets,‖ Elaine Henry and Thomas R. Robinson   
Section 3.1.3  
  
58. Correct answer: C. 
With accelerated amortisation, first year amortisation expense is the highest. 
CFA Level I 
―Long-lived Assets,‖ Elaine Henry and Elizabeth A. Gordon 
Sections 3.1, 3.2 
 
59. Correct answer: A. 
 
Net income = Comprehensive income – Other comprehensive 
income  
$193.0 – 
$87.6 
$105.4 
million 
Net income per share (EPS) =  
Net income/Common shares outstanding 
$105.4/46.5 $2.27 million 
P/E = Stock price/EPS $60.75/$2.27  26.76 
 
CFA Level I 
―Understanding Income Statements,‖ Elaine Henry and Thomas R. Robinson  
Section 8  
―Financial Analysis Techniques,‖ Elaine Henry, Thomas R. Robinson, and Jan Hendrik van 
Greuning  
Section 5.1  
  
60. Correct answer: A. 
The notes provide a comprehensive description of all of the entity's accounting policies, 
irrespective of whether judgment was required or whether the policies are important in 
understanding the financial statements. 
CFA Level I 
CFA level1-Mock-114 
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"Financial Reporting Standards," Elaine Henry, Jan Hendrik van Greuning, and Thomas R. 
Robinson 
Section 8.3.1 
 
61. Correct answer: C. 
The primary benefit of the direct method is that it provides information on the specific sources of 
operating cash receipts and payments. 
CFA Level I 
"Understanding Cash Flow Statements,"Elaine Henry, Thomas R. Robinson, Jan Hendrik van 
Greuning, and Michael A. Broihahn 
Section 2.3 
 
62. Correct answer: C. 
Cost of sales is reported on the same basis as revenue. To report revenue under gross reporting, the 
e-commerce company must meet four criteria:  
 
Criteria Met/Not Met 
The e-commerce company must   
be the primary obligor under the contract.  Not met 
bear the inventory risk and credit risk.  Not met 
be able to choose its supplier.  Met 
also have reasonable latitude to establish pricing.  Met 
 
The first criterion is not met. The major hotel chains have the obligation of fulfilling the room 
contract once it is entered into. The second criterion is not met either because the e-commerce 
company did not incur costs for vacant rooms. The major chains bear the inventory risk. Because 
all criteria are not met, the e-commerce company must use net reporting for which revenue is 
$500,000 and cost of sales is $250,000.  
CFA Level I 
CFA level1-Mock-114 
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―Understanding Income Statements,‖ Elaine Henry and Thomas R. Robinson  
Section 3.2.4 
  
63. Correct answer: C. 
Whether securities are classified as held for trading or available for sale, they are measured at their 
fair value on the balance sheet. All gains/losses on held-for-trading securities are reported on the 
income statements, whereas the unrealized gains/losses on available-for-sale securities are 
reported in equity. This treatment is the same for both IFRS and US GAAP reporting. 
CFA Level I 
"Understanding Income Statements," Elaine Henry and Thomas R. Robinson 
Section 8 
"Understanding Balance Sheets," Elaine Henry and Thomas R. Robinson 
Section 4.5 
 
64. Correct answer: C. 
The revenue/expense-based approach is a measurement approach, not a standard setting approach. 
CFA Level I 
"Financial Reporting Standards," Elaine Henry, Jan Hendrik van Greuning, and Thomas R. 
Robinson 
Sections 2, 6.2 
 
65. Correct answer: C. 
Deferred tax balances result from temporary differences between a company’s income as reported 
for tax purposes and income reported for financial statement purposes. The temporary difference 
in this case arises from the difference between the depreciation for accounting purposes and the 
depreciation for tax purposes. Because of this difference, the company would report more income 
tax expense than would actually be paid in taxes. The difference is a deferred tax liability. 
  
CFA level1-Mock-114 
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Temporary difference balance = Depreciation expense for 
accounting purposes – Depreciation for tax purposes 
£6,340 – £4,500 £1,840 
Deferred tax balance =  
      Temporary difference balance × Corporate tax rate 
  
£1,840 × 25%  
  
£460 
  
CFA Level I 
―Understanding Balance Sheets,‖ Elaine Henry and Thomas R. Robinson 
Section 5.2 
―Income Taxes,‖ Elbie Antonites and Michael A. Broihahn  
Sections 2.2, 4 
 
66. Correct answer: A. 
A company must disclose separate information about any operating segment which meets certain 
quantitative criteria—namely, the segment constitutes 10 percent or more of the combined 
operating segments’ revenue, assets, or profit. (For purposes of determining whether a segment 
constitutes 10 percent or more of combined profits or losses, the criteria is expressed in terms of 
the absolute value of the segment’s profit or loss as a percentage of the greater of (i) the combined 
profits of all profitable segments and (ii) the absolute amount of the combined losses of all 
loss-making segments.) 
CFA Level I 
"Financial Analysis Techniques," Elaine Henry, Thomas R. Robinson, and Jan Hendrik van 
Greuning 
Section 7.1 
 
67. Correct answer: A. 
  
CFA level1-Mock-114 
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(millions) Accounting Purposes Tax Purposes 
Revaluation surplus (£10,000 – £6,800) = £3,200 No revaluation allowed 
Depreciation, straight line 20 years 5 years remaining 
Start of year balance after 
revaluation, 2013 
£10,000 £5,000  
Depreciation, 2013 (£10,000/20 years) = £500 £1,000 
Net balance, end of 2013 £9,500 £4,000 
Minus revaluation surplus – £ 3,200 _____ 
Carrying value for purposes 
of deferred taxes 
£6,300 £4,000 
Deferred tax liability = 0.30 × (£6,300 – £4,000) = £690 
Only the portion of the difference between the tax base and the carrying amount that is not 
the result of the revaluation is recognized as giving rise to a deferred tax liability. The portion 
arising from the revaluation surplus is used to reduce the revaluation surplus in equity. 
 
CFA Level I 
―Income Taxes,‖ Elbie Antonites and Michael A. Broihahn  
Sections 2.2, 6.2 
 
68. Correct answer: C. 
The higher the current ratio, the more liquid the company. Thus, with a current ratio of 2.6 
(1,800/700), the company is less liquid than the industry, which has a current ratio of 3.2. 
 Current ratio = Current assets/Current liabilities. 
 
 Current Assets £ thousands   Current Liabilities £ thousands 
Cash 200   Accounts payable 300 
Accounts receivable 350   Taxes payable 200 
Inventory 1,250   Loan payable, first installment 200 
Total 1,800   Total 700 
CFA level1-Mock-114 
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CFA Level I 
―Understanding Balance Sheets,‖ Elaine Henry and Thomas R. Robinson  
Section 7.2 
―Financial Analysis Techniques,‖ Elaine Henry, Thomas R. Robinson, and Jan Hendrik van 
Greuning  
Section 4.3 
―Working Capital Management,‖ Edgar A. Norton, Jr., Kenneth L. Parkinson, and Pamela 
Peterson Drake  
Sections 2.2 
  
CFA level1-Mock-114 
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Questions 69~76 Relate to Corporate finance 
69. Correct answer: B. 
Fixed operating cost 12,000
Operating breakeven point= = 1 000
price-var iable cos t per unit 12
 ，
 
CFA Level I 
―Measures of leverage‖ 
 
70. Correct answer: A. 
Breakeven quantity of sales,  
VP
CF


BEQ  
= (€50 million + €30 million) ÷ (€85 - €65) = 4.0 million units. 
CFA Level I  
―Measures of Leverage,‖ Pamela Peterson Drake, Raj Aggarwal, Cynthia Harrington, and Adam 
Kobor 
Section 3.6 
 
71. Correct answer: A. 
  
Cost of trade credit = 
 
 
1
Discount1
Discount
1
period discount beyond days of 365/Number







         
Cost of trade credit = 
 
 
%9.441
%31
3%
1
365/30







   
CFA Level I 
―Working Capital Management,‖ Edgar A. Norton, Jr., Kenneth L. Parkinson, and Pamela 
Peterson Drake 
Section 7.1 
 
72. Correct answer: A. 
CFA level1-Mock-114 
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A reduction in inventory will increase the inventory turnover (Cost of goods sold/Average 
inventory), which means that the days in inventory will be reduced (365/Inventory turnover). This 
will lead to a reduction in the cash conversion cycle (also called net operating cycle). Cash 
conversion cycle consists of number of days of inventory and number of days of receivables 
minus number of days of payables. 
CFA Level I 
―Financial Analysis Techniques,‖ Thomas R. Robinson, Jan Hendrik van Greuning, Elaine Henry, 
and Michael A. Broihahn  
Section 4.3.2 
―Working Capital Management,‖ Edgar A. Norton, Jr., Kenneth L. Parkinson, and Pamela 
Peterson Drake  
Section 2.2  
 
73. Correct answer: C. 
Based on the following equation: 
 
  costs Financing- costs Fixedcost Variable-Price Quantity
cost Variable-PriceQuantity
DTL



the change to accelerated depreciation increases the fixed costs, thus making DTL increase (i.e., 
the numerator does not change and the denominator decreases). 
CFA Level I 
―Measures of Leverage,‖ Pamela Peterson Drake, Raj Aggarwal, Cynthia Harrington, and Adam 
Kobor  
Section 3.5 
 
74. Correct answer: C. 
Sales risk is associated with uncertainty with respect to total revenue, which, in turn, depends on 
price and units sold.  
CFA Level I 
―Measures of Leverage,‖ Pamela Peterson Drake, Raj Aggarwal, Cynthia Harrington, and Adam 
Kobor  
CFA level1-Mock-114 
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Section 3.1, 3.2 
 
75. Correct answer: C. 
3.6
= =1.5
nterest 3.6-1.2
EBIT
DFL
EBIT I


 
CFA Level I 
―Measures of leverage‖ 
 
76. Correct answer: A. 
In a Dutch auction, the company stipulates a range of acceptable prices. Shareholders indicate how 
many shares they will tender at the various prices.  
CFA Level I 
―Dividends and Share Repurchases: Basics,‖ George H. Troughton and Gregory Noronha  
Section 4.1 
  
CFA level1-Mock-114 
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Questions 77~88 Relate to Equity investment 
77. Correct answer: A. 
Companies pursuing cost leadership must be able to invest in productivity-improving capital 
equipment in order to be low-cost producers and maintain efficient operating systems. 
CFA Level I 
―Introduction to Industry and Company Analysis,‖ Patrick W. Dorsey, Anthony M. Fiore, and Ian 
Rossa O’Reilly  
Section 6 
 
78. Correct answer: B. 
Net profit margin = Net earnings/Sales 
Net earnings = Net profit margin × Sales; 
Dividends per share (Dn) = (Net earnings × Payout ratio)/Number of outstanding shares; 
Therefore, D1 = ($180 million × 0.15 × 0.60)/8.1 million = $2.00 
D2 = $2.00(1 + 0.25) = $2.50 
D3 = $2.00(1 + 0.25)2 = $3.13 
D4 = $2.00(1 + 0.25)2 (1 + 0.05) = $3.28  
 
68.46$
05.012.0
28.3$
= V3 

 
 
       
36.39$
12.01
86.46$
12.01
13.3$
12.01
50.2$
12.01
00.2$
v
3320 







  
CFA Level I 
―Equity Valuation: Concepts and Basic Tools,‖ John J. Nagorniak and Stephen E. Wilcox 
Section 4.3 
 
79. Correct answer: B. 
Share buyback reduces equity, holding other factors (e.g., earnings) constant, thus return on equity 
will be higher. 
CFA Level I 
―Financial Analysis Techniques,‖ Elaine Henry, Thomas R. Robinson, and Jan Hendrik van 
CFA level1-Mock-114 
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Greuning  
Sections 4.5.2, 6.2 
―Introduction to Industry and Company Analysis,‖ Patrick W. Dorsey, Anthony M. Fiore, and Ian 
Rossa O’Reilly  
Section 6.1  
 
80. Correct answer: B. 
Operationally efficient markets are liquid markets in which the costs of arranging trades, 
commissions, bid–ask spreads, and order price impacts, are low. 
CFA Level I 
―Market Organization and Structure,‖ Larry Harris 
Section 9  
 
81. Correct answer: C. 
The put option feature facilitates raising capital because the shares are more appealing to investors. 
As such, it provides a benefit to the issuing company. It also helps investors limit their potential 
losses because they can sell the shares back to the issuing company if the market price falls below 
the pre-specified put price. Therefore, putable common shares are beneficial to both the issuing 
company and the investors.  
CFA Level I 
―Overview of Equity Securities,‖ Ryan C. Fuhrmann and Asjeet S. Lamba  
Section 3 
 
82. Correct answer: B. 
In an efficient market, market participants will process available information and those with 
opposite views will trade among each other until securities market prices fully reflect their 
fundamental values. An efficient market is thus a market in which asset prices reflect all past and 
present information. 
CFA Level I 
"Market Efficiency," W. Sean Cleary, Howard J. Atkinson and Pamela Peterson Drake 
CFA level1-Mock-114 
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Section 2.1 
 
83. Correct answer: C. 
Market indices are used as model portfolios for index funds and exchange-traded funds, but they 
are not useful as model portfolios for active funds. 
CFA Level I 
"Security Market Indices," Paul D. Kaplan and Dorothy C. Kelly 
Section 4 
 
84. Correct answer: A. 
Because regulated markets are more informationally efficient, there are fewer arbitrage 
opportunities. 
CFA Level I 
"Market Organization and Structure," Larry Harris 
Section 10 
 
85. Correct answer: A. 
Cumulative voting allows shareholders to direct their total voting rights to specific candidates, as 
opposed to having to allocate their voting rights evenly among all candidates. Thus, applying all 
of the votes to one candidate provides the opportunity for a higher level of representation on the 
board than would be allowed under statutory voting. 
CFA Level I 
―The Corporate Governance of Listed Companies: A Manual for Investors,‖ Kurt Schacht, James 
C. Allen, and Matthew Orsagh 
Section: Shareowner Voting 
―Overview of Equity Securities,‖ Ryan C. Fuhrmann and Asjeet S. Lamba  
Section 3.1 
 
86. Correct answer: B. 
If markets are semi-strong-form efficient (which also encompasses weak-form efficiency), the role 
CFA level1-Mock-114 
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of a portfolio manager is not necessarily to beat the market, but rather to establish and manage a 
portfolio consistent with the portfolio’s objectives, with appropriate diversification and asset 
allocation, while taking into consideration the risk preferences and tax situation of the investor. 
CFA Level I 
―Market Efficiency,‖ W. Sean Cleary, Howard J. Atkinson, and Pamela Peterson Drake  
Section 3.4.3  
 
87. Correct answer: C. 
Putable preference shares are less risky than their callable counterparts. They give the investor the 
option to put the shares back to the company. Because of the lower risk, they will provide a lower 
expected rate of return. Common shares are the most risky, whether or not they are dividend 
paying, and are likely to offer the highest expected return.  
CFA Level I 
―Overview of Equity Securities,‖ Ryan C. Fuhrmann and Asjeet S. Lamba  
Section 6.2 
 
88. Correct answer: A. 
Companies with large amounts of undervalued assets (which can be sold to reduce debt) that 
generate high levels of cash flow (which are used to make interest and principal payments on the 
debt) are likely candidates for MBO transactions. 
CFA Level I 
―Overview of Equity Securities,‖ Ryan C. Fuhrmann and Asjeet S. Lamba  
Section 4 
  
CFA level1-Mock-114 
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Questions 89~94 Relate to Derivatives 
89. Correct answer: A. 
The pricing of forwards and futures will differ if futures prices and interest rates are negatively 
correlated. A negative correlation between futures prices and interest rates makes forwards more 
desirable than futures in the long position. 
CFA Level I 
"Basics of Derivative Pricing and Valuation," Don M. Chance 
Section 3.2 
 
90. Correct answer: A. 
American call prices can differ from European call prices only if the underlying stock is dividend 
paying. In the absence of such cash payments, European and American call options have the same 
value. 
CFA Level I 
"Basics of Derivative Pricing and Valuation," Don M. Chance 
Section 4.3 
 
91. Correct answer: B. 
A swap is a series of forward payments. Specifically, a swap is an agreement between two parties 
to exchange a series of future cash flows. The corporation receives fixed interest rate payments 
and makes variable interest rate payments. Given that the contract is for one year and the floating 
rate is based on three-month LIBOR, at least four payments will be made during the year. 
CFA Level I 
―Derivative Markets and Instruments,‖ Don M. Chance 
Section 4.1 
 
92. Correct answer: B. 
If futures prices and interest rates are uncorrelated, the prices of forwards and futures will be 
identical. 
CFA Level I 
CFA level1-Mock-114 
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"Basics of Derivative Pricing and Valuation," Don M. Chance 
Section 3.2 
 
93. Correct answer: C. 
Derivative markets are not necessarily more or less volatile than spot markets. Derivative markets 
reveal prices and volatilities of the underlying assets and facilitate risk management. 
CFA Level I 
"Derivative Markets and Instruments," Don M. Chance 
Section 5 
 
94. Correct answer: C. 
Only deep-in-the-money put options may be exercised early. The price cannot fall below zero and 
thus the additional upside of such an option is limited. 
CFA Level I 
"Basics of Derivative Pricing and Valuation," Don M. Chance 
Section 4.3 
  
CFA level1-Mock-114 
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Questions 95~106 Relate to Fixed-income Analysis 
95. Correct answer: B. 
The company's interest coverage ratio can be computed as: EBITDA/Interest expense. That is:  
 
 
20X1 20X2 
EBITDA 125.0 170.0 
Interest expense 30.0 38.0 
EBITDA/Interest expense 4.17 4.47 
 
EBITDA = Operating profit + Depreciation and amortization 
The company's EBITDA interest coverage ratio has improved over this period. If EBIT is used to 
calculate the coverage ratios you reach the same conclusion, for 20X1 the ratio is 3.33 and for 
20X2 it is 3.86.  
CFA Level I 
―Fundamentals of Credit Analysis‖, Christopher L. Gootkind  
Section 5.2.1 
  
96. Correct answer: A. 
An FRN with a floor on the coupon rate prevents the coupon rate from falling below a 
prespecified minimum rate. 
CFA Level I 
"Fixed-Income Securities: Defining Elements," Moorad Choudhry and Stephen E. Wilcox 
Section 4.2 
 
97. Correct answer: C. 
A call provision gives the issuer the right to redeem all or part of the bond before the specified 
maturity date to protect the issuer against a decline in interest rates. Therefore, it benefits the 
issuer and provides a lower future funding cost. 
CFA Level 1 
"Fixed-Income Securities: Defining Elements," Moorad Choudhry and Stephen E. Wilcox, CFA 
CFA level1-Mock-114 
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Section 5 
 
98. Correct answer: A. 
A security with a present value of 96.47, 19 interest payments of 8, and a 20th payment of 
principal plus interest (108) has a yield to maturity of 8.37%. 
CFA Level 1 
"Introduction to Fixed-Income Valuation," James F. Adams and Donald J. Smith 
Section 3 
 
99. Correct answer: C. 
If the discount rate increases to 7.5% from 6.5%, the price of a bond decreases. At a discount rate 
of 7.5%, the bond sells at a discount to face value. As a discount bond approaches maturity, it will 
increase in price over time until it reaches par at maturity. 
CFA Level I 
"Introduction to Fixed-Income Valuation," James F. Adams and Donald J. Smith 
Section 2.3 
 
100. Correct answer: B. 
The price of the commercial paper per 100 of par value is: 





 DR
year
Days
FVPV 1       
where PV and FV are the price and face value of the money market instrument, Days is the 
number of days between settlement and maturity, Year is number of days in the year, and DR is the 
discount rate stated as an annual percentage.  
So, 8125.980475.0
360
90
1100 





PV   The bond equivalent yield is,  





 

PV
PVFV
Days
Year
AOR So, %874.4
8125.98
8125.98100
90
365





 
AOR   
CFA Level 1 
"Introduction to Fixed-Income Valuation," James F. Adams and Donald J. Smith 
Section 3.5 
CFA level1-Mock-114 
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101. Correct answer: A. 
A sinking fund arrangement is a way to reduce credit risk by making the issuer set aside funds 
over time to retire the bond issue. 
CFA Level 1 
"Fixed-Income Markets: Issuance, Trading, and Funding," Moorad Choudhry, Steven V. Mann, 
and Lavone F. Whitmer 
Section 6.3.3 
 
102. Correct answer: C. 
The yield to maturity (r) is computed by solving for r in the following equation: 
87.00 = 8/(1 + r)5 + 8/(1 + r)6 + 8/(1 + r)7 + 8/(1 + r)8 + 8/(1 + r)9 + 108/(1 + r)10, which gives a 
yield to maturity of 6.0%. 
CFA Level 1 
"Introduction to Fixed-Income Valuation," James F. Adams and Donald J. Smith 
 
103. Correct answer: A. 
Balloon risk is the risk that the borrower will not be able to arrange for refinancing or sell the 
property to make the balloon payment typically associated with commercial loans backing CMBS. 
As a result, the CMBS may extend in maturity implying that balloon risk is a type of extension 
risk. 
CFA Level I 
"Introduction to Asset-Backed Securities", Frank J. Fabozzi 
Section 6.2.2 
 
104. Correct answer: C. 
In a mortgage pass-through security the pass-through rate is less than the mortgage rate on the 
underlying pool of mortgages by an amount equal to the servicing (and other administrative) fees. 
CFA Level I 
"Introduction to Asset-Backed Securities", Frank J. Fabozzi 
CFA level1-Mock-114 
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Section 5.1.1 
 
105. Correct answer: A. 
The value of the bond is  
     
     
       
         
83.106$
2/30.012/27.012/23.012/18.012/12.01
5.2
2/27.012/23.012/18.012/12.01
5.2
2/23.012/18.012/12.01
5.2
2/18.012/12.01
5.2
2/12.01
5.2










CFA Level I 
"Introduction to Fixed-Income Valuation," James F. Adams and Donald J. Smith 
Section 4 
 
106. Correct answer: C. 
The market values of the bonds (Price × Par amount) are $17,479,376, $4,018,928, and 
$6,771,416, respectively, for a portfolio value of $28,269,720. Therefore, the duration of the 
portfolio is  
35.948.11
720,269,28
416,771,6
19.9
720,269,28
928,018,4
56.8
720,269,28
376,479,17


















  
CFA Level I 
"Understanding Fixed-Income Risk and Return," James F. Adams and Donald J. Smith 
Section 3.4 
  
CFA level1-Mock-114 
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Questions 107~110 Relate to Alternative Investments  
107. Correct answer: A. 
When a commodity market is in contango, futures prices are higher than spot prices. When spot 
prices are higher than the futures price, the market is said to be in backwardation. 
CFA Level I 
"Introduction to Alternative Investments," Terri Duhon, George Spentzos, and Scott D. Stewart 
Section 6.4.1 
 
108. Correct answer: B. 
The Sharpe ratio and the safety-first measure use standard deviation as the measure of risk, which 
ignore the negative skewness in returns. The Sortino ratio uses the downside deviation as the 
measure of risk, which will reflect negative skewness if present. 
CFA Level I 
"Introduction to Alternative Investments," Terri Duhon, George Spentzos, and Scott D. Stewart 
Section 9.2 
 
109. Correct answer: B. 
The exclusion of returns of funds that have been liquidated is called survivorship bias. It is most 
likely that only poor performers are eliminated and thus reported returns are artificially inflated. 
CFA Level I 
"Introduction to Alternative Investments," Terri Duhon, George Spentzos, and Scott D. Stewart 
Section 2 
 
110. Correct answer: A. 
The historical standard deviations of annual return for venture capital are higher than that of 
common stocks. Investors should therefore require a higher return in exchange for accepting this 
higher risk, along with the illiquidity of venture capital investing. 
CFA Level I 
"Introduction to Alternative Investments," Terri Duhon, George Spentzos, and Scott D. Stewart 
Section 4.3 
CFA level1-Mock-114 
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Questions 111 ~120 Relate to Portfolio Management 
111. Correct answer: B. 
Although the client owns a successful business and has a high income, she exhibits above-average 
risk aversion, indicating that her ability to take risk is high but her willingness to take risk is low. 
CFA Level I 
"Basics of Portfolio Planning and Construction," Alistair Byrne and Frank E. Smuddle 
Section 2.2 
 
112. Correct answer: A. 
One of the assumptions of the CAPM is that investors plan for the same single holding period. 
CFA Level I 
"Portfolio Risk and Return: Part II," Vijay Singal 
Section 4.1 
 
113. Correct answer: A. 
Jensen's alpha = 0.12 – [0.027 + 1.5(0.075 – 0.027)] = 0.021, or 2.10%. 
CFA Level I 
"Portfolio Risk and Return: Part II," Vijay Singal 
Section 4.3.2 
 
114. Correct answer: A. 
The execution step of the portfolio management process has three parts: asset allocation, security 
analysis, and portfolio construction. 
CFA Level I 
"Portfolio Management, An Overview," Robert M. Conroy and Alistair Byrne 
Section 4 
 
115. Correct answer: C. 
The optimal portfolio is identified as the point at which the capital allocation line (CAL) is 
tangential to the investor's indifference curve. As investor risk aversion increases, the optimal 
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portfolio slides down the CAL to a point of lower expected risk and lower expected return. 
CFA Level I 
"Portfolio Risk and Return: Part I," Vijay Singal 
Section 3.3 
 
116. Correct answer: C. 
The increase in return with every unit increase in risk keeps decreasing as one moves from left to 
right because the slope of the efficient frontier continues to decrease. Thus, investors obtain 
decreasing increases in returns as they assume more risk. 
CFA Level I 
"Portfolio Risk and Return: Part I," Vijay Singal 
Section 5.2 
 
117. Correct answer: A. 
An individual's ability to take risk is affected by such factors as time horizon and expected income. 
Personality type is most likely to affect an individual's willingness to take risk. 
CFA Level I 
"Basics of Portfolio Management and Construction," Alistair Byrne and Frank E. Smudde 
Section 2.2.1 
 
118. Correct answer: B. 
The covariance is calculated from the standard deviations of the two assets and their correlation. 
The portfolio weights are not relevant.  
CFA Level I 
"Portfolio Risk and Return: Part I," Vijay Singal 
Section 4.1.3 
 
119. Correct answer: C. 
 0.115.0/2.075.0/,  MJKUMJKUJKU S  
CFA level1-Mock-114 
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 and       12.005.012.0105.0  FRMJKU RRRFRRJKUE         
The required rate of return of JKU is 12%, and the expected return of JKU is 15%. Therefore, JKU 
is undervalued relative to the security market line (SML); the risk–return relationship lies above 
the SML.  
CFA Level I 
"Portfolio Risk and Return: Part II," Vijay Singal 
Section 4 
 
120. Correct answer: A. 
The standard deviation of a two asset portfolio is calculated as follows:  
 2,12121
2
2
2
2
2
1
2
1 2 RRCovWWWWP    
CFA Level I 
"Portfolio Risk and Return: Part I," Vijay Singal 
Section 2.3.3