CFA Institute CFA Institute Certifications CFA-LEVEL-1 Questions & Answers

• Question 651:

  Balanced funds invest

  A. in a broad market index.

  B. in a wide variety of common stocks.

  C. in both common stock and fixed-income securities.

  D. primarily in bonds.

  Correct Answer: C

  Balanced funds diversify outside the stock market by combining investments in common stock with those in fixed-income securities such as government and corporate bonds. The ratio of stocks to fixed-income securities that the fund will invest in will be stated in its prospectus.

• Question 652:

  The offering price for a share of a ________ equals the NAV of the share plus a sales charge.

  A. closed-end investment company

  B. 12b-1 plan fund

  C. no-load fund

  D. load fund

  Correct Answer: D

  The offering price for a share of a load fund equals the NAV of the share plus a sales charge, which typically is 7.5 to 8.0 percent of the NAV.

• Question 653:

  Which type of environment relates to the restrictions on use that apply to nearby properties?

  A. Socioeconomic

  B. Fiscal

  C. Legal

  D. Aesthetic

  Correct Answer: C

  Legal environment relates to the restrictions on use that apply to nearby properties.

• Question 654:

  Given the following:

  Return on Investor's Equity with 80% Financing = -75%

  Return on Investor's Equity with 0% Financing = -15%

  The investor is experiencing the effects of ________.

  A. cannot be determined by the information given

  B. negative leverage

  C. positive leverage

  D. none of these answers

  Correct Answer: B

  Remember that, in real estate, the use of debt financing to purchase a piece of property will affect its risk-return parameters. In this case, leverage has a negative effect.

• Question 655:

  ________ pertains to those characteristics that describe people's mental dispositions, such as personality, lifestyle, and self-concept.

  A. Characgraphics

  B. Socialgraphics

  C. Psychographics

  D. Demographics

  Correct Answer: C

  By comparing demographic and psychographic trends to the features of a property, you can judge whether it is likely to gain or lose favor among potential buyers or tenants.

• Question 656:

  Raw land is an example of a(n)

  A. income property.

  B. all of these answers.

  C. commercial property.

  D. speculative property.

  Correct Answer: D

  A speculative property is generally raw land and real estate investment properties that are expected to provide returns primarily from appreciation in value.

• Question 657:

  The following has its stock traded on the regular secondary market:

  A. investment management company

  B. load fund

  C. closed-end investment company

  D. no-load fund

  E. open-end investment company

  Correct Answer: C

  The market price of its shares is determined by supply and demand and typically offers no further shares and does not repurchase the shares on demand.

• Question 658:

  An examination of the relationship between performance and the expense ratio indicated that ________.

  A. good performance was associated with low expense ratios

  B. bad performance was associated with low expense ratios

  C. good performance was associated with high expense ratios

  D. there was no association between performance and expense ratios

  Correct Answer: A

  An examination of the relationship between performance and the expense ratio indicated that good performance was associated with low expense ratios; in one way, it is because management expense is money not invested in the portfolio of shares and/or bonds. Expense is necessary however when one needs to shift to better performing stocks according to market changes.

• Question 659:

  If an investment company issued 1 million shares for $20, and its portfolio of investments is now worth $38 million, what is its net asset value (NAV)?

  A. Not enough information

  B. $20 million

  C. $38

  D. $38 million

  E. $20

  Correct Answer: C

  An investment company sells shares in itself, and uses the proceeds to invest in a portfolio of individual investments such as stocks and bonds. The NAV is equal to the net value of the investment company's assets divided by the number of its shares outstanding. In this question the NAV is equal to $38 million / 1 million = $38.

• Question 660:

  Which of the following is not demographic figure?

  A. Person's lifestyle

  B. Person's age structure

  C. Person's occupation

  D. Person's marital status

  E. Person's gender

  Correct Answer: A

  Demographics - Age structure, occupation, gender, marital status. A person's lifestyle would be part of psychographics.