Free Access CFA.CFA-Level-I.v2022-03-06.q736 Practice Test (Page 94)

Question 461

Clay's Construction Company does work on large construction contracts that take many years to complete. Before they become a public company they are trying to decide which method of recognizing revenue they should use for financial reporting only. If they decide to use percentage of completion rather than completed contract, the effect will be:

A.higher net income, lower cash flow.

B.lower net income, higher cash flow.

C.smoother net income, the same cash flow.

Question 462

All of the following statements typically characterize the structure of an investment company EXCEPT:

A.An investment company receives an annual management fee ranging from 3 to 5% of the total value of the fund.

B.An investment company adopts a corporate form of organization. The board of directors of an investment company hires a separate investment management company to manage the portfolio of securities and to handle other administrative duties.

C.An investment company invests a pool of funds belonging to many investors in a portfolio of individual investments.

Question 463

Selecting a depreciation method that results in higher earnings than the economic depreciation of the assets warrant is an example of

A.Using unrealistic or inappropriate estimates and assumptions to achieve a desired outcome.

B.Using loopholes or bright-lines in accounting principles to structure transactions to achieve a desired outcome that differs from the economic structure of the transaction.

C.Following GAAP but selecting alternatives within GAAP that bias or distort reported results to achieve a desired outcome.

Question 464

Which of the following statements most accurately depicts bonds price volatility?

A.Short maturity bonds are more volatile than long maturity bonds.

B.During periods of increasing interest rates, high coupon bonds exhibit lower price volatility than low coupon bonds.

C.Bonds with low duration are much more volatile than bonds with high duration.

Question 465

The higher the exercise price:

A.The higher the call price

B.The lower the call price

C.The higher the stock price

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Question 461

Question 462

Question 463

Question 464

Question 465

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