2007 schweser answers explanations of book 6 exam 1 am

杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ SchweserPrintableAnswersBook6Exam1AM TestID#:1364808 Question1#44786 Youranswer:Cwascorrect! StandardVI(C)ReferralFees.Membersandcandidatesshalldisclosetoclientsand prospectsanyconsiderationorbenefitreceivedbythememberordeliveredtoothersforthe recommendationofanyservicetotheclientorprospect.Thisallowstheclienttoevaluateany partialityshowninmakingreferrals. Question2#44787 Youranswer:Awascorrect! StandardIV(C)ResponsibilitiesofSupervisorsexplicitlystatesthatspeakingtotheemployee todeterminetheextentoftheviolationsandreceivingassurancesthatitwillnotberepeated isnotenough.Finleymusttakepositivestepstoinsurethattheviolationwillnotberepeated includingpromptlylaunchinganinvestigationandlimitingtheemployee抯activitiesand/or increasingsupervisionoftheemployeduntiltheresultsoftheinvestigationareknown. Question3#44788 Youranswer:Awascorrect! SteinviolatedStandardI(C)Misrepresentationbypresentingmaterialdevelopedbyanother withoutacknowledgement. Question4#44789 Youranswer:Dwascorrect! StandardV(A)DiligenceandReasonableBasis.Therecommendationreflectstheconsensus ofthegroupandnotnecessarilytheopinionofthememberorcandidate.Iftheconsensus opinionhasareasonablebasis,thememberdoesnothavetodissociatefromthereportbut shoulddocumentthedifferenceofopinion. Question5#44825 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Youranswer:Awascorrect! StandardIV(C)ResponsibilitiesofSupervisors.IfKleinclearlycannotdischargesupervisory responsibilitiesbecauseofaninadequatecompliancesystem,heshoulddeclineinwritingthe supervisoryresponsibilityuntilthefirmadoptsreasonableprocedurestoallowhimto adequatelyexercisesuchresponsibility. Question6#44826 Youranswer:Cwasincorrect.ThecorrectanswerwasD) StandardIII(A)Loyalty,Prudence,andCare.Crockerisessentiallyusingasoftdollar arrangementtopayforresearchusedinmanagingherclients?accounts.Crockermaypay higherfeeswithoutviolatingherfiduciarydutyaslongas(1)thecommissionpaidis reasonableinrelationtotheresearchandexecutionofservicesreceivedand(2)theresearch benefitsthefirm抯clients. Question7#44827 Youranswer:Cwascorrect! StandardIV(A)Loyalty.Thestandarddoesnotprohibitformeremployeesfromcontacting clientsoftheirperviousfirmsolongasthecontactinformationdoesnotcomefromthe recordsofthepreviousemployerorviolateanoncompeteagreement. Question8#44828 Youranswer:Awascorrect! StandardI(A)KnowledgeoftheLaw.ChambersresidesinanddoesbusinessinBotwariand isboundbythestricteroflocallawandtheStandards.TheStandardspermitreferralfeesthat areproperlydisclosedtoclientsanddonotprohibitgiftstoclientsinreturnforbusiness. Question9#44829 Youranswer:Cwascorrect! StandardVI(A)DisclosureofConflicts.Membersandcandidatesmustmakefulldisclosureof allmattersthatcouldimpairtheirindependence.Sellsidemembersandcandidatesshould disclosetotheirclientsanyownershipinasecuritythattheyarerecommending. 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Question10#44832 Youranswer:Bwascorrect! AccordingtoStandardIV(B)AdditionalCompensationArrangements,membersand candidatesmustobtainwrittenpermissionfromtheiremployerbeforeacceptinganofferof compensation(fortheperformanceofworkdonefortheiremployer)inadditiontowhatthey receivefromtheiremployerandthatiscontingentonfutureperformance.Suchcontingent additionalcompensationisjudgedtobereasonablyexpectedtoimpairtheemployee抯 independenceandobjectivity. Question11#44833 Youranswer:Awasincorrect.ThecorrectanswerwasD) Compliancerequiresthatthefirmfollowlocallawanddisclosetheconflictbetweenlocallaw andGIPS. Question12#44834 Youranswer:Awascorrect! StandardIII(D)PerformancePresentationrequiresthatstatementsaboutperformancebenot onlyaccurate,butalsofairandcomplete.WhileVance抯statementmaybeaccurateina technicalsense,itisneitherfairnorcomplete,anditseemsintendedtomisleadprospects aboutVance抯trackrecordinmanagingequitiesaccountsand/orselectingequitysecurities. WhilecompliancewithGIPSanditsmethodsofcompositeconstructionarerecommended, theyarenotrequiredbytheStandard. Question13#44835 Youranswer:Dwascorrect! StandardV(B)CommunicationwithClientsandProspectiveClients.Briefcommunications mustbesupportedbybackgroundreportsordatathatcanbemadeavailabletotheclientif requested.Drakeshouldhavegiventheclientamoredetailedanalysisoftheinvestment whentheclientcalledtorequestsuchinformation.DrakedidnotviolateStandardIII(C) becausehe搕horoughly?readandevaluatedtheanalysisanddeterminedthatthestructured productwasinlinewithhisclient抯objectivesbeforerecommendingtheproducttohisclient. Question14#44836 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Youranswer:Cwascorrect! StandardVI(B)PriorityofTransactions.Clienttransactionsmusttakeprecedenceover members?orcandidates?trades.Heshouldhavesubmittedhispersonaltradeorderonlyafter tradingforhisclient.StandardIII(B)FairDealingrequiresthatFarleydealfairlywithallclients whenrecommendingsecuritiesortakinginvestmentaction.Sincetheendowmentfundis Farley抯onlyaccount,hehasnotdisadvantagedanyotherclientbyonlytakingactiononthe behalfoftheendowment. Question15#44837 Youranswer:Dwascorrect! StandardIII(A)Loyalty,Prudence,andCare.Membersandcandidatesmustcomplywiththeir fiduciarydutytothosepersonsandinterestsbywhomthedutyisowed.Specifically, membersmustalwaysactforthebenefitoftheirclientsandplaceclients?interestsbefore theirown.Murphy抯actionsindirectingtradestoCasanovaviolatethefiduciarydutyowed toWellington&Worrel抯clients,asheappearstobeselectingCasanovaforthediscounts receivedonpersonalsecuritiestransactions.Casanovachargeshighercommissionratesand deliverspoorerexecutionthanotherbrokersusedbythefirm.ByusingCasanova,Murphy violateshisfiduciarydutybyfailingtoactintheclients?bestinterest.Alternatively,the arrangementwithCedrockappearstocomplywithMurphy抯fiduciaryduty,asthefirm receivesinvestmentresearchusedinmanagingclientportfolios(asoftdollararrangement) andachievesbetterexecutionforclienttrades.Becausethetradingarrangementwith Cedrockbenefitsclients,itdoesnotviolateStandardIII(A). Question16#44838 Youranswer:Bwasincorrect.ThecorrectanswerwasC) DoddhasmostlikelyviolatedStandardIII(B)FairDealingbygivingPhillipsanovergenerous allocationoftheoversubscribed(揾ot?newissue.Theissueisnotthatheisoffering compensationtoaclienttoresolveadispute,butthatbyoverallocatingtheIPOsharesto Phillipsheisnottreatinghisotherclientsfairly.StandardIII(B)FairDealingrequiresthat candidatesandmembersnotusesharesof揾otissues?asanincentivetoachieveareward orbenefit.Thebenefitinthiscaseisthatthedisputewill揼oaway.?/SPAN> Question17#44839 Youranswer:Dwascorrect! 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ TheeightmajorsectionsoftheCFAInstituteGlobalInvestmentPerformanceStandardsare FundamentalsofCompliance,InputData,CalculationMethodology,CompositeConstruction, Disclosures,PresentationandReporting,RealEstate,andPrivateEquity. Question18#44840 Youranswer:Bwascorrect! StandardIII(C)Suitabilityrequiresthattheclientportfoliofittheclientriskandreturn objectivesasstatedintheinvestmentpolicystatement,andthatseemstobethecasehere. Theproperfocusofriskanalysisisontheentireportfolioandneednotbeappliedonan issuebyissuebasis.ThereappearstobenoviolationofV(A)DiligenceandReasonable Basissincehispreviousanalysisindicatedtheportfoliowassuitableandhisrecords supportedthatconclusion. Question19#44841 Youranswer:Bwascorrect! Withnointerestpaidontheoriginal$5,000loan,at6%infiveyearstheloanbalancewillbe: Newloanbalance=$5,000(1.06) 5 =$6,691.13orPV=5,000;I/Y=6;N=5;PMT=0;CPT →FV=?6,691.13.$6,691.13istheloanthathastoberetiredoverthenextfiveyears.The financialcalculatorsolutionis:PV=6,691.13;I/Y=6;N=5;CPT→PMT.YouobtainPMT= ?,588.45. Question20#44844 Youranswer:Cwascorrect! N=4;PV=?,000;FV=6,520;CPT→I/Y=12.99%,or Question21#44845 Youranswer:Cwascorrect! AandBdescribeahistogram,andDdescribesafrequencypolygon. Question22#44846 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Youranswer:Awascorrect! holdingperiodreturn(HPR)= Question23#44847 Youranswer:Cwascorrect! range=maximumvalue?minimumvalue=55?15=40Calculatethemean: Togetthemeanabsolutedeviation,sumthedeviationsaround themean(ignoringthesign),anddividebythenumberofobservations Notethattheunitsofvarianceherearepercentsquared.Usingdecimalsratherthanwhole percentyields0.0250. Question24#44848 Youranswer:Bwascorrect! Question25#44849 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Youranswer:Bwascorrect! Forthepositivelyskeweddistribution,themodeislessthanthemedian,whichislessthan themean. Question26#44850 Youranswer:Bwasincorrect.ThecorrectanswerwasA) ThenominalincreaseinindustrialproductionisexpectedtobeThusthe realchangeisexpectedtobeGiventheregressionequation,our forecastis9,397.54=8,950+395(1.133). Question27#44851 Youranswer:Awascorrect! ThefirstyearaccountreturnwasThesecondyearreturnwas Thegeometricmeanis,whichisthetime weightedreturn.Sinceonlyoneassetwasinvolved,alsogivesthetime weightedreturn.Tocalculatethemoneyweightedreturn,usethecashflowfunctionwithCf0 =?2,000,Cf1=?5,000,andCf2=54,000×2=108,000,andcomputeIRR,whichis7.73%. Themoneyweightedreturnislowerbecausetheamountintheaccountwasgreaterinthe secondperiod,whenthereturnwaspoor. Question28#44858 Youranswer:Dwascorrect! Thebinomialdistributionisadiscretedistribution,whilethenormaldistributionisanexample ofacontinuousdistribution.Univariateandmultivariatedistributionscanbediscreteor continuous. Question29#44859 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Youranswer:Dwascorrect! About68%ofallobservationsfallwithin?standarddeviationofthemean.Thus,about68% ofthevaluesfallbetween5and25. Question30#44860 Youranswer:Bwascorrect! Thecentrallimittheoremholdsforanydistributionaslongasthesamplesizeislarge(i.e.,n >30). Question31#44861 Youranswer:Bwascorrect! Thepopulationvarianceisknown(inthiscase100),sothestandarderrorofthesample meanis Question32#44863 Youranswer:Cwascorrect! Thettestisusedwhenthesamplesizeissmall. Question33#44864 Youranswer:Dwascorrect! Itwoulddecrease,notincrease,theprofitabilityofcorporateinvestmentprojects. Question34#44865 Youranswer:Awascorrect! Thepotentialdepositexpansionmultiplieristhereciprocalofthereserveratio.Ifthereserve ratiois20%,then1/0.20=5. Question35#44866 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Youranswer:Awascorrect! Iftheeconomyisjustbeginningtocomeoutofarecession,aperiodofexpansionis beginning.Inatypicalbusinesscycle,thiswillbefollowedbyabusinesspeak,andaperiod ofcontraction,leadingtothenextrecessionarytrough.Thiswouldcompleteonecyclefrom thetimeofthelastrecession.CandDarenotappropriatesincethequestionsaysthatthe economyiscomingoutofarecession.Thissuggeststhattheeconomyisgettingbetter,not worse. Question36#44868 Youranswer:Dwascorrect! Anindividualistechnicallyunemployedwhenheorsheisactivelyseekingemploymentoris waitingtoreturntoajobfromwhichheorshewasjustlaidoff.Notallpeoplewhoarenot workingareconsideredunemployed.Examplesincludehouseholdworkers,students, prisoners,andretirees. Question37#44869 Youranswer:Cwasincorrect.ThecorrectanswerwasD) Thelongrunproductiondecisiondiffersfromtheshortrunproductiondecisioninthatfixed costscanbechangedinthelongrunbutnottheshortrun.Thus,shortruncostcurvesapply foragivensizeofaplant,andlongruncostcurvescanshowcostsfordifferentsizeplants. Question38#44870 Youranswer:Cwascorrect! Onebrandofflourlikelyhasmanygoodsubstitutes,andelasticityofdemandislikelyhigh. Theotherstatementsaretrue.Demandelasticityisgreaterinthelongrunthanintheshort run.Thedemandforgasolineislikelyinelastic.Thus,whenthepriceincreases,the percentagechangeinquantitydemandedislessthanthepercentagechangeinprice.There arefewsubstitutesforgasoline,especiallyintheshortrun.Forgoodsthatarecomplements, crosselasticityisnegative. Question39#44871 Youranswer:Bwascorrect! 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Themonopolistfacesadownwardslopingdemandcurve.Insomecases,amonopolistmay beunabletosellforaprofit.Pricemaybeinsufficienttocovertheperunitcostofthe monopolistevenwhenoperatingattheMR=MCrateofoutput. Question40#44873 Youranswer:Dwascorrect! Theseconditionscharacterizemonopolisticcompetition.Bycontrast,monopoliesand oligopolieshavehighbarrierstoentryandinvolveeitherasingleseller(monopoly)orasmall numberofinterdependentsellers(oligopoly).Similartomonopolisticcompetition,pure competitioninvolvesalargenumberofindependentsellers.Withpurecompetition,products arehomogeneous(notdifferentiated),nobarrierstoentryexist(notlowbarrierstoentry),and thedemandscheduleishorizontal(notdownwardsloping)andperfectlyelastic(nothighly elastic). Question41#44874 Youranswer:Awascorrect! PartofthetradingstrategywouldincludesellingtheforeignorU.S.currencyforward.When theinterestrateislowrelativetothehedgedU.S.interestrate,aninvestorshouldborrow domesticcurrency,convertthelocalcurrencytoforeigncurrencyatthecurrentspotrate,lend attheforeigncurrencyinterestrate,andsimultaneouslysellforeigncurrencyunitsforwardto hedgeorlockinyourforeignlendings.Attheendoftheperiod,theinvestorshouldliquidate foreignlendingsanddelivertheforeigncurrencyproceedsagainsttheforwardcontractto convertforeignloanproceedsbackintolocalcurrencyunits.Theinvestorthenrepays domesticloansandreapsthearbitrageprofits. Question42#44875 Youranswer:Bwascorrect! Accountingprofitisoftenanunsatisfactoryperformancemeasurefromaneconomicpointof viewbecauseaccountingcostsgenerallydonotincludetheopportunitycostsofequitycapital. Accountingcostsdoreflectthecostofdepreciationandtaxes. Question43#44876 Youranswer:Dwascorrect! [...]... is [300,000 ­ 200,000 ­ 60 ,000 ­ 35,000] (1 ­ 0.35) ­ 34, 919 + 60 ,000 = 28,3 31 Remaining principal balance is 2 million ­ 34, 919 = 1, 965 ,0 81 so second­year interest is 1 96, 508 and principal portion of the payment is 234, 919 ­ 1 96, 508 = 38, 411 Second­year after­tax cash flow is [300,000 ­ 1 96, 508 ­ 60 ,000 ­ 35,000] (1 ­ 0.35) ­ 38, 411 + 60 ,000 = 27 ,10 9 Including the proceeds of the sale the total second­year... compound rate is $1, 3 91. 02 Ending value must be $888.94 (1. 0325 )14 = $1, 3 91. 02 ?u >1, 000.00 face value at maturity 3 91. 02 ?u> 315 .00 total coupons (14 × 22.50) 76. 02 Question 95 ­ #44933 Your answer: B was correct! This is a supernormal growth stock valuation problem Step 1: Find the dividends in the supernormal growth period D1 = 1. 00 (1. 20) = $1. 20; D2 = 1. 2 (1. 2) = $1. 44; D3 = 1. 44 (1. 15) = $1 .65 6 Step 2: Use... cash flow is 63 7 ,10 9 NPV = = $52,2 91. 81 Question 11 1 ­ #44950 Your answer: D was correct! The four­firm concentration ratio is the sum of the market shares of the four largest firms in the industry 45% + 25% + 15 % + 10 % = 95 The Herfindahl index is the sum of the squares of the market shares of each of the firms in the industry 0.452 + 0.252 + 0 .15 2 + 0 .10 2 + 0.052 = 0.30 Question 11 2 ­ #449 51 Your answer:... regression coefficients Question 1 16 ­ #44955 Your answer: D was correct! after­tax cash flow = (revenue ?cost ?depreciation) (1 ?t) + depreciation (revenue ?cost) (1 ?t) + depreciation(t) [$250,000 ?(0.04 × $250,000) ? $15 ,000 ?( $1, 000,000 × 0.0 26) ] (1? 0.35) + (1, 000,000 × 0.0 26) [($250,000 ? $10 ,000 ? $15 ,000 ?$ 26, 000) (0 .65 )] + $ 26, 000 = $15 5,350 Question 11 7 ­ #449 56 Your answer: B was correct! Historical... answer: B was correct! Question 64 ­ #449 01 Your answer: D was correct! Deferred tax: Year 1: $1, 200 ?$400 = $800 Year 2: $1, 200 ?$400 = 800 Balance = $1 ,60 0 Tax Year 1 Tax Year 2 Fin Year 1 Revenue Fin Year 2 $5,000 $5,000 $5,000 $5,000 Depreciation 4,000 4,000 2,000 2,000 EBT 1, 000 1, 000 3,000 3,000 400 400 1, 200 1, 200 $60 0 $60 0 $1, 800 $1, 800 Tax (0.4) EAT Question 65 ­ #44902 Your answer: B was correct!... fifth year is the product of one minus the probability of failure in each year Therefore the 5­year survival probability is (1 ?0.25) (1 ?0.20) (1 ?0.20) (1 ?0 .15 ) (1 ?0 .10 ) = 0. 367 2 The NPV of the project if it survives is The NPV of the project if it fails is ?2 million Therefore the expected NPV = (0. 367 2)($4.55 36) +(0 .63 28)(?2) = $0.4 064 82 million = $4 06, 482 Question 12 0 ­ #44959 Your answer: C... dividends and the end of year price (P3) back to the end of period 1 to get P1 Step 1: Find the dividends in the supernormal growth period D2 = 1. 2 (1. 2) = 1. 44; D3 = 1. 44 (1. 15) = $1 .65 6 Step 2: Use the constant growth model to find the price at the end of period 3 Step 3: Discount all of the cash flows back to time one Question 97 ­ #44935 Your answer: D was correct! The OAS is a measure of the yield spread... correct! 10 0 @ $ 210 = $ 21, 000 70 @ $225 = $15 ,750 $ 36, 750 Question 59 ­ #448 96 Your answer: A was correct! Purchases 19 0 Sales Balance 17 0 20 @ $ 210 = $4,200 Question 60 ­ #44897 Your answer: D was correct! FIFO ending inventory = FIFO INV = LIFO INV + LIFO reserve = 22,000 + 4,000 = $ 26, 000 FIFO after­tax profit = LIFO after­tax profit + (change in LIFO reserve) (1 ?t) = $2,000 + ($4,000 ?$3,000) (1 ?0.4)... with a low net profit margin The cash conversion cycle is: ( 365 /6) + ( 365 /9) ?( 365 /12 ) = 60 .8 + 40 .6 ?30.4 = 71 days Question 57 ­ #44894 Your answer: C was correct! In periods of rising prices and stable or increasing inventory quantities, FIFO, compared to LIFO, results in higher working capital 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第 6 本解释！买本公司 notes 看的舒心，用的放心，祝您一次通过！ 杨帆 13 818 157537 CFA 资料专卖 欢迎广大考友订购！... was correct! Since equity is 40% of assets, the equity multiplier is 1/ 0.40 = 2.5 Using the traditional DuPont formula, ROE = 8.7% × 2.4 × 2.5 = 52.2% Question 74 ­ #44 911 Your answer: D was correct! g = (1 ?payout)(ROE) = (1 ?0.40)( 16 % ) = 9 .6% 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第 6 本解释！买本公司 notes 看的舒心，用的放心，祝您一次通过！ 杨帆 13 818 157537 CFA 资料专卖 欢迎广大考友订购！ Question 75 ­ #44 912 Your answer: A was correct!