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Cfa Level 1

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08/16/2008

Question:
Retained earnings represent:

a) accumulated, undistributed earnings since inception.
b) earnings inclusive of any paid-in capital since inception.
c) undistributed net income in the last accounting period.
d) none of these answers.
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08/15/2008

Question:
What is the payment at expiration of the following Forward Rate Agreements (FRA)?

The Bank has sold a 6 × 12 FRA at 3.75% for a face amount of $300M .
The 3 month Libor is set at 4.00% on the fixing day.
The 6 month Libor is set at 4.25% on the fixing day.
The 9 month Libor is set at 4.15% on the fixing day.
The 12 month Libor is set at 4.35% on the fixing day.

a) Profit of $734,394
b) Loss of $734,394
c) Profit of $750,000
d) Loss of $734,035
e) Profit of $734,035
f) Loss of $750,000
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08/14/2008

Question:
A firm has a dividend growth rate of 4.3%. It typically pays out 45% of its earnings as dividends. Recently, it paid out $1.2 per share dividend and the required rate of return on its stock is 12.6%. The firm's return on equity equals ________.

a) 12.60%
b) 9.56%
c) 7.82%
d) none of these answers
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08/13/2008

Question:
Which of the following statements is true of fixed-income securities?

a) Fixed-income securities have a contractually mandated payment schedule.
b) Fixed-income securities are equity claims on the issuing firm.
c) If the issuing firm does not make payments on a fixed-income security, it can be brought into bankruptcy.
d) The issuing firm generally makes payments only when it shows a profit.
e) The issuing firm is effectively lending money to the investor.
08/16/2008
Question:
Retained earnings represent:

correct

Correct answer: accumulated, undistributed earnings since inception.

Rationale:
Any undistributed...