I finished the Standards book, along with the test questions on the back. The questions are very good, and provide good rationale in the back for the answers.
Here's another tip: when sending out your CFA registration forms, it might be a good idea to send it via certified mail. I'm a worry wart when it comes to making sure a package has been sent and received properly. With the registration fees jumping up every $100 per rolling deadline, making sure that the package comes on time is quite a money saver.
And finally, the next email I got from Allen Resources:
_______________________________________________
Subj: Allen Resources - CFA Tip of the Week - 10/14/98
Date: 10/14/98 7:16:30 PM Pacific Daylight Time
From: Pass@AllenResources.com (Allen Resources - CFA Prep)
Sender: tip-week-owner@AllenResources.com
Reply-to: info@AllenResources.com
To: tiprecipients@AllenResources.com (Tip Recipients)
These questions will help you assess your progress in preparing
for the 1999 CFA exam.
All of the questions come from our TestBank Software for all
three CFA levels.
- 5 questions & answers for Level I
(approximately 6,220 Questions are in our Level I Software)
- 1 question & answer for Level II
(approximately 1,630 Questions are in our Level II Software)
- 1 question & answer for Level III
(approximately 1,522 Questions are in our Level III Software)
*** Level I
Question 1: Which one of the following statements about an
oligopolistic firm is true? An oligopolistic firm:
a) will consider the potential response of its rivals when making
business decisions.
b) is likely to be formed when the minimum-cost output is only a
small portion of the market output.
c) will seldom use product quality as a competitive weapon.
d) is likely to be formed when barriers to entry are low.
Question 2: Which one of the following would be a bullish signal
to a technical analyst using contrary opinion rules?
a) The ratio of over the counter volume to New York Stock
Exchange volume is relatively high.
b) A large proportion of speculators expect the price of stock
index futures to rise.
c) Mutual funds have a relatively small cash position.
d) The ratio of odd-lot short sales to total odd-lot sales is
relatively high.
Question 3: Performance Presentation Standards require the
disclosure of whether composite returns on international
investments are ________ of foreign withholding taxes.
a) none of these answers
b) net or gross
c) gross
d) net
Question 4: Which of the following is part of the modern view of
the Phillips curve?
a) When inflation exceeds what was anticipated, unemployment
falls below the natural rate.
b) Once people fully anticipate the inflationary side effects of
expansionary policies, the short-run Phillips curve shifts
downward to the left and unemployment returns to its natural
rate.
c) Demand stimulus can permanently reduce unemployment but only
at the cost of inflation.
d) When inflation is less than anticipated, unemployment remains
unchanged.
Question 5: The second step of the three-step, top-down approach
to valuation is to decide to allocate investment funds
a) among industries and types of securities within those
industries.
b) among industries.
c) among corporations and types of securities.
d) among industries and corporations.
Answer 1: a
Rationale & Reference:
Under an oligopoly, the firms are interdependent. That is, the
decisions of one of the firms affect all other firms and
therefore, affect their decisions. This is because there is a
small number of firms in the industry and if they wish to
maximize profit, they must cooperate. Therefore firms consider
the potential response of other firms in the industry when they
make their own decisions.
1994 CFA Exam, #74, p.m.
Gwartney & Stroup, Chapter 21, p. 558
Answer 2: d
Rationale & Reference:
Many technical analyst rely on technical trading rules developed
from the premise that the majority of investors are wrong as the
market approaches highs and lows. Therefore these technicians try
to determine when the majority of investors is either bullish or
bearish and then trade in the opposite direction.
1993 CFA Exam, #63, p.m.
Reilly & Brown, p. 777
Answer 3: b
Rationale & Reference:
The performance presentation must disclose whether composites and
benchmarks are presented gross or net of withholding taxes on
dividends, interest and capital gains; if net, the assumed tax
rate for both the composite and the benchmark.
Performance Presentation Standards, p. 17
Answer 4: a
Rationale & Reference:
The modern view of the Phillips curve is that higher than
expected inflation will serve to lower the rate of unemployment
through an erosion of the real wage. Since wage contracts are
written to reflect the anticipated rate of inflation, nominal
wages do not keep pace with the actual rate of inflation. As a
result, employment rises since labor is now cheaper.
Gwartney & Stroup, p. 372
Answer 5: b
Rationale & Reference:
The second step of the three-step, top-down approach to valuation
is the analysis of alternative industries, which attempts only to
determine which industries will prosper, and which will fail
(thereby determining investment strategy across industries). The
security type decision is made in the first step, and the
decision of individual firm investments is made in the third
step.
Reilly & Brown, p. 431
*** Level II
Question: Learning Outcome Statement:
Define the role of highest and best use in real estate valuation.
Answer:
Analysis of the highest and best use of the land as though vacant
and of the property as improved is essential in the valuation
process and allows the appraiser to interpret the market forces
that influence the subject property and identify the use upon
which the final estimate is based.
Analyzing the highest and best use of the land as though vacant
serves two purposes.
1. It helps the appraiser identify comparable properties. In
conformity with the principle of consistent use, the highest and
best use of the land as though vacant for each comparable
property should be the same as that of the subject property.
2. It identifies the use among alternative uses that would
produce maximum income to the land after property income is
allocated to the improvements. In the cost approach and some
income capitalization techniques, a separate land value estimate
is required. Estimating the land's highest and best use as though
vacant is a necessary part of deriving a land value estimate.
There are also two reasons to analyze the highest and best use of
the property as improved.
1. It helps to identify comparable properties. Each improved
property should have the same or similar highest and best use as
the improved property.
2. It helps to decide whether the improvements should be cured of
items of deferred maintenance and retained, modified (e.g.,
renovated, modernized, converted), or demolished. Identification
of the existing property's most profitable use is crucial to this
determination.
The highest and best use conclusion should specify the optimal
use, when the property will be put to this use or achieve
stabilized occupancy, and the market participants who will
support the use- e.g., an owner-user of the property, an equity
or debt investor in the property.
Appraisal Institute, pp. 87-88
*** Level III
Question: Learning Outcome Statement:
Discuss the notion of agency friction in terms of its effects on
pension fund investment decisions.
Answer:
People hire money managers because they believe managers can do
something for them that they cannot do for themselves.
However, the client-firm relationship creates a friction between
investing appropriately to generate a high return and investing
conservatively enough so as to not lose money in the short term.
Of course, these two objectives are diametrically opposed.
As a result, invest managers, feeling the client's sensitivity to
minimize short-term losses, will often select an investment
strategy that is short-term focused rather than long-term
(high-yield) focused.
"The purchase of popular, favored stocks helps the manager get a
pat. Out-of-favor, recently down stocks produce a scowl and more.
Managers prefer being good dogs. Given these processes and
attitudes in principal-agent relationships, are most pension
assets being managed in the best interest of the ultimate
beneficiaries?"
Wood, pp. 77-78
***********************************************
Software, Audio Tapes, Written Study Guides, Physical FlashCards
& Used CFA Books...
At Allen Resources, our objective is very clear - to help
candidates pass the CFA exam. Call, fax or e-mail us to put our
experience to work for your 1999 exam preparation. Please tell
your friends and colleagues about this free service provided by
Allen Resources for CFA candidates.
Allen Resources
11 South Angell Street
Providence, RI 02906
Phone: 401-454-8165
Fax: 401-454-8846
E-mail: Pass@AllenResources.com
Internet: allenresources.com
___________________________________________________
(Hey Dave, they also do technical analysis!)
RT |
