CFA Level 1 Free Practice Test

1. Which of the following forms of trading blocs allow for unrestricted trade of goods and services among its members?

I. Free trade areas
II. Customs unions
III. Common market

2. Haspiess Systems, Inc. and Signicomp Manufacturing enter into a netted interest rate swap, with a notional USD75M. Haspiess will pay a fixed 5%, and Signicomp will pay LIBOR + 75bp. LIBOR is 3.5%.

The first semiannual payment will be closest to:

3. Meta Corp. sells 15,000 units of its product at a price of USD10 per unit. The company’s fixed costs are USD12,000 and interest expense is USD3,000. The variable cost per unit is USD7.

Meta Corp’s degrees of operating leverage and financial leverage are:

4. A 10 Year semi-annual 8% coupon bond is selling at USD967. If the yields increase by 50 basis points the price is expected to fall to USD924 and if the yields decrease by 50 Basis points the price is expected to rise to $1010.

The effective duration is closest to:

5. Which of the following statements relating to obstacles to efficient allocation of resources is/are most likely incorrect?

I: Price ceilings set below the equilibrium price lead to shortages, bribery, poor quality and black marketeering.
II: Subsidies decrease equilibrium quantities and lead to dead weight losses from overproduction.
III: Production quotas decrease equilibrium quantities and lead to dead weight losses from underproduction.