CFA Level 1 Free Practice Test

1. 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:

2. A bookstore earned USD200,000 over the past year. At a tax rate of 40%, that bookstore incurs an income tax expense of USD80,000. Under which of the following accounting systems would the expense typically be categorized as an operating activity?

I. IFRS
II. U.S. GAAP

3. You are provided with the following information on a non-callable, non-convertible preferred stock:

Face value: USD50
Annual dividend: USD2.50
Maturity: Perpetual
Embedded options: None
Required rate of return: 6.25%

The intrinsic value of this stock is closest to:

4. You are provided with the following information on a non-callable, non-convertible preferred stock:

Face value: GBP65.00
Annual dividend: GBP6.35
Maturity: Perpetual
Embedded options: None
Required rate of return: 8.75%

The intrinsic value of this stock is closest to:

5. Company XYZ purchases land for USD5,000,000. XYZ intends to hold the land for a long term (20 years) and rent the land out to generate income. Under IFRS, at which price is the company allowed to use on its financial reports for the value of the land:

I. USD5,000,000
II. The current market price