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

• Question 721:

  Which of the following approaches determines the value by finding the amount it would take to rebuild it at today's prices for land, labor and construction materials?

  A. Cost approach

  B. Income approach

  C. Current pricing approach

  D. Comparative sales approach

  Correct Answer: A

  Cost approach determines value by assessing how much it would cost to rebuild it at today's prices for land, labor and construction methods.

• Question 722:

  Name the type of fee charged by a fund to cover distribution costs?

  A. management fees

  B. 12b-1

  C. commissions

  D. low-load

  E. deferred sales load

  F. no-load

  Correct Answer: B

  The 12b-1 plan allows a fund to deduct as much as 1.25 percent of average net assets per year to cover distribution costs such as advertising, brokers' commissions and marketing expenses.

• Question 723:

  Which of the following is not classified as an income property? A leased:

  A. office building.

  B. none of these answers.

  C. condominium.

  D. shopping center.

  E. apartment complex.

  Correct Answer: B

  All of the answers are income properties.

• Question 724:

  Global funds

  A. invest only in established countries.

  B. invest in any country in the world.

  C. invest only in developing countries.

  D. invest only outside of the U.S.

  Correct Answer: B

  A global fund is a type of foreign fund that invests in both U.S. and non-U.S. securities. The international investment opportunities provided by this type of fund give American investors an added level of diversification.

• Question 725:

  When valuing real estate, ________ utilizes selling prices of properties that are similar to the subject property.

  A. the comparative sales approach

  B. the income approach

  C. the cost approach

  D. none of these answers

  Correct Answer: A

• Question 726:

  A no-load open-end fund

  A. never charges sales or redemption fees.

  B. usually charges sales fees.

  C. sometimes charges sales fees.

  D. sometimes charges redemption fees.

  Correct Answer: D

  A no-load open-end fund does not charge sales fees, but rather sells shares at their NAVs. Some noload funds do charge redemption fees of about half a percent of NAV. The popularity of no-load funds has increased substantially in recent years.

• Question 727:

  International funds

  A. typically have one-half of their portfolios invested in the U.S.

  B. typically have one-fifth of their portfolios invested in the U.S.

  C. do not invest any portion of their portfolios in the U.S.

  D. typically have two-thirds of their portfolios invested in the U.S.

  E. typically have one-third of their portfolios invested in the U.S.

  Correct Answer: C

  An International fund is a type of foreign fund that only invests in non-U.S. securities. The international investment opportunities provided by this type of fund give American investors an added level of diversification.

• Question 728:

  An investment company

  A. invests only in stocks.

  B. borrows money from individuals and invests that money in securities.

  C. lends money to other companies or individuals.

  D. invests a pool of funds belonging to many individuals.

  Correct Answer: D

  An investment company sells shares in itself, and uses the proceeds to invest in a portfolio of individual investments such as stocks and bonds. If such a company sold 1 million shares for $50 dollars each, it would invest $50 million (minus commissions) into things like government bonds or speculative stocks.

• Question 729:

  A major goal of the venture capital industry has been to resolve the conflicts that arise between

  A. investors and entrepreneurs.

  B. venture capitalists and investment bankers.

  C. investors and venture capitalists and between venture capitalists and entrepreneurs.

  D. venture capitalists and stockbrokers.

  Correct Answer: C

  When selecting venture capitalists, investors must understand exactly how both sets relationships are to be handled and whether the incentive structure is competitive.

• Question 730:

  ________ financing is one of the early stages of financing in venture capital.

  A. all of these answers are correct.

  B. Seed

  C. First-stage

  D. Start-up

  Correct Answer: A

  There are three early stages of financing:

  1.

  Seed financing. This is capital (typically less than $50,000) that is provided at the "idea" stage, which goes for product development and market research.

  2.

  Start-up financing. This capital is used in product development and initial marketing for firms in business under one year and has not sold their product commercially.

  3.

  First-stage financing. This is capital provided to initiate commercial manufacturing and sales.