2014年6月CFA一级百题讲义 上海金程国际金融专修学院 中国·上海 2014年 金程教育 专业·领先·增值 2014年6月CFA一级百题预测 1- ETHICS .............................................................................................................................. 2 2- QUANTITATIVES .............................................................................................................. 88 3- ECONOMICS ................................................................................................................... 129 4- FINANCIAL STATEMENT ANALYSIS ................................................................................... 229 5- CORPORATE FINANCE ..................................................................................................... 373 6- EQUITY .......................................................................................................................... 419 7- FIXED INCOME ............................................................................................................... 496 8- DERIVATIVES .................................................................................................................. 496 9- ALTERNATIVE INVESTMENTS ........................................................................................... 585 10- PORTFOLIO .................................................................................................................. 605 “对于2014年6月考试，从全局来看，考试的难度在提高；另外，会计报表分析、Ethics和数学必须认真掌握，经典题目必须掌握；固定收益部分改动较大，除了最后一章信用风险分析基础没有变化，其余章节全部更新，难度在整体上有所提高，百题中这部分的题目是来自原版书及Mock中的精选，复习时要花点时间重点掌握；其他类投资方面删除了大宗商品投资这个章节。为了全面应对考试，我们全面推出了的各种学习平台，如Studysky平台、手机平台、金融城BBS答疑等活动，请各位充分利用。如有学术问题，请登录至论坛提问。祝大家好运！” 金程教育CFA全职师资团队，为您呈现最完美的百题预测 汤震宇：首席培训师，博士，CFA，FRM，CTP，CAIA，CMA，RFP 王 东：首席培训师，硕士，CFA，FRM 刘 健: 资深培训师，硕士，CFA，ACCA，CPA 何 旋：CFA三级通过、FRM、RFP 金程CFA研究团队：单晨玮、纪慧诚、梁震宇、戴慧丹、王雯婷 1 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 1-Ethics P1-1 The Process for the Enforcement of the Code and Standards Q1-1 After reviewing the material obtained during the investigation, then confirming violation, the CFA Designated Officer will A. issue a cautionary letter B. conclude the inquiry with no disciplinary sanction C. propose a disciplinary sanction Solution: C 第一步是对于对方展开调查，如果find violation之后直接进行惩罚。 Q2-1 ★Which of the following least likely reflects the two primary principles of the CFA Institute Rules of Procedure for Proceedings Related to Professional Conduct?（Mock83） A. Confidentiality of proceedings B. Fair process to the member and candidate C. Public disclosure of disciplinary sanctions Solution: C C is correct because the two principles of the Rules of Procedure for Proceedings Related to Professional Conduct are confidentiality of proceedings and fair process to the member and candidate. Q3-1 If a member does not accept a sanction from a designated officer of CFA PCP, the matter is referred to a hearing panel made up of: A. Local CFA society board member B. The CFA Institute Standards of Practice Council C. DRC members and CFA Institute member volunteers Solution: C C is correct because a hearing panel is composed of DRC members and CFA Institute member volunteers affiliated with the DRC. The hearing panel reviews materials and presentations from the Designated Officer and from the member or candidate. Q4-1 Tamlorn Mager, CFA, is an analyst at Pyallup Portfolio Management. CFA Institute recently notified Mager that his CFA Institute membership was suspended for a year because he violated the CFA Code of Ethics. A hearing panel also came to the same conclusion. Mager subsequently notified CFA Institute he does not accept the sanction, or the hearing panel’s conclusion. Which of the following actions by Mager is most consistent with the CFA Institute Professional Conduct Program?（mock91-10） A. Presenting himself to the public as a CFA charterholder B. Providing evidence for his position to an outside arbitration panel C. Using his CFA designation upon expiration of the suspension period Solution: C 2 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 The process for the enforcement of the Code and Standards: Inquiry is initiated Writted explanation from members/candidates Investigation Interview the member/candidates No disciplinary Violation Collecting documents and records sanction occurred 金程教育 专业·领先·增值 C is correct because the Designated Officer may impose a summary suspension on a member or candidate, which may be rejected or accepted by the member or candidate. If the member or candidate does not accept the proposed sanction, the matter is referred to a hearing panel composed of DRC members and CFA Instistute smemuber voelunte ers affil iated with the DRC. In this case, the hearing panel also affirmed the suspension decision by the Designated Officer, and therefore, the member loses the right to use his designation for a one-year period. Upon Propose a disciplinary sanction expiration of the suspension period, the analyst would be able to use his CFA designation. cautionary Key points: R1-1 The process for the enforcement of the Code and Standards letter RAccept eject The matter is referred to a End hearing by a panel of CFA Institute members. R2-1 ★Primary Principles:  (1) Fairness of the process to members and candidates  (2) Confidentiality of the proceedings. R3-1 ★Disciplinary Review Committee has overall responsibility for the Professional Conduct program and enforcement of the code and standards. R4-1 How to detect  Self-disclosure on annual Professional Conduct Statements of involvement in civil litigation or a criminal investigation, or that the member or candidate is the subject of a written complaint.  Written complaints about professional conduct received by the Professional Conduct staff.  Evidence of misconduct by a member or candidate that the Professional Conduct staff received through public sources, such as a media article or broadcast.  A report by a CFA exam proctor of a possible violation during the examination.  发现有人违反，经过CFA调查后，一般会有三种处理方法：1）不处罚；2）发警告信；3）进行处罚（由轻到重依次为：private centure, public centure, timed revocation, 3 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 suspension, revocation） R5-1 The Designated Officer may decide  that no disciplinary sanctions are appropriate  to issue a cautionary letter  to discipline the member or candidate R6-1 Hearing panel  consists of DRC members and CFA Institute member volunteers affiliated with the DRC  The hearing panel’s task is to determine whether a violation of the Code and Standards occurred and, if so, what sanction should be imposed. R7-1 ★AMC vs. Code and standards  The Asset Manager Code of Professional Conduct (AMC), is to help asset managers comply with the regulations mandating codes of ethics for investment advisers.  AMC was drafted specifically for firms  Code and Standards is aimed at individual investment professionals P2-1 Knowledge of Law Q5-1 ★Dorian Solot, CFA, is responsible for a team of research analysts at Apac Bank, located in a country with strict laws prohibiting intellectual property transfers. Solot believes the work of one of her analysts, Blaine Paddock, CFA, is not completed as carefully and thoroughly as it should be. Solot completely reviews all of Paddock’s research and confirms her suspicions. Solot then confronts Paddock about his poor quality research and tells him he can leave Apac voluntarily or be fired. Paddock chooses to leave the bank, walking out with his personal papers and research notes that were created prior to his joining Apac. Subsequently, Paddock uses this intellectual property to help establish a high-net-worth investment advisory firm. When a prospective client asks Paddock if he left Apac because of questions on the quality of his work, Paddock says it was to start his own business. Paddock least likely violated the CFA Institute Standards of Professional Conduct concerning his: (2012 Mock84) A. research. B. intellectual property. C. prospective client disclosure. Solution: B B is correct because the analyst has not violated Standard related to intellectual property because there is no indication the analyst was ignorant of, or has violated, any law related to intellectual property, because these documents were created by the analyst prior to his employment at Apac. Q6-1 ★Jane and Joe work for an investment company and even in the same group. Jane, CFA, always shares some latest information in the industry with Joe, who is studying for the CFA level 2 exam. One day Joe discovered that Jane may conduct something that maybe harmful to the company’s clients. What should Joe do with this situation? A. Do nothing because he takes no supervisory duties and should appreciate the help from 4 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Jane. B. Report to the CFA committee. C. Disassociate from the misconduct and report to the company’s compliance department Solution: C 如果发现同事有违规行为，采取的行动是首先保证自己不能参与，同时向compliance department or direct supervisor报告自己的发现。 Q7-1 Charlie Mancini, CFA, is the Managing Director for Business Development at VES Financial (VES), a large .-based mutual fund organization. Mancini has been under pressure recently to increase revenues. In order to secure business from a large hedge fund manager based in Asia, Mancini recently approved unusual terms for the fund’s client agreement. To allow for time zone differences, the agreement allows the hedge fund to trade in all of VES’s mutual funds six hours after the close of . markets. According to the Standards of Practice Handbook, did Mancini violate any CFA Institute Standards of Professional Conduct? A. No. B. Yes, because he failed to inform his other clients of the unusual terms under the new client agreement, thus not treating clients equally. C. Yes, because he failed to review regulations on late-trading and did not consult with VES’s compliance director to determine if late-trading was acceptable. Solution: C The Standards relating to Market Manipulation requires members/candidates not to engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants. Mancini failed to follow regulations on late trading and allowed the hedge fund client to manipulate the time of its trading and thereby misled other market participants and benefited itself. ★About late trading: Late trading refers to the practice of placing orders to buy or redeem mutual fund shares after the time as of which a mutual fund has calculated its net asset value (NAV), usually as of the close of trading at 4:00 . Eastern Time, but receiving the price based on the prior NAV already determined as of that day. Late trading violates the federal securities laws concerning the price at which mutual fund shares must be bought or redeemed and defrauds innocent investors in those mutual funds by giving to the late trader an advantage not available to other investors. Q8-1 ★A central bank fines a commercial bank it supervises for not following statutory regulations regarding nonperforming loan provisions on three large loans as a result of the bank's loan provisioning policy. Louis Marie Buffet, CFA, sits on the board of directors of the commercial bank as a non-executive director, representing minority shareholders. He also chairs the bank's internal audit committee that determines the loan provisioning policy of the bank. Mercy Gatabaki, CFA, is the bank's external auditor and follows international auditing standards whereby she tests the loan portfolio by randomly 5 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 selecting loans to check for compliance in all aspects of central bank regulations. Which charterholder is most likely in violation of the Code and Standards? (2014 Mock 99-8) A. Gatabaki B. Buffet C. Both Solution: B Buffet sat on the audit committee that determined the bank's provisioning policies that were contrary to the statutory regulations of the central bank. As a result, he most likely violated Standard I–Professionalism by not abiding by regulations of a regulatory body. Gatabaki did not violate Standard I - Professionalism because it is not apparent she knowingly facilitated the incorrect provisioning policy. Key points of Knowledge of law： R8-1 必须了解并遵守与工作相关(governing their professional activities) 的法律法规，但不需要成为expert on compliance; R9-1 如果法律法规之间存在冲突,总是遵守最严格的； R10-1 不能故意(knowingly)参与或协助违法违规行为，同时必须脱离干系 R11-1 如果有传递关系，遵循最后一个生效的law or regulations； work (applicable) live Comply with Ms  Live Ls Ls < Code  Code Ls  Live Ms Ms > Code  Ms R12-1 Guidance of compliance  如果你怀疑(suspect) 有人违法，首先要咨询相关人士（如独立第三方）, 但咨询结果如果是错误的，你也不能免责;  ★如果你知道(know)有人在违法，还可以采取分步骤的方法：向公司里的适当人员（supervisor or compliance department）汇报，也可以选择直面当事人（confronting wrongdoers），如果仍没有改进，则你必须与违法行为划清界限（disassociate）并且保存相关记录，甚至辞职；同时要进一步咨询以便采取进一步的行动； R13-1 当发现有违法行为时，CFA Institute并不要求你向政府管理机构汇报。是否汇报取决于适用法律(applicable law)是否有相关要求。 R14-1 如果一个人新到一家公司工作发现其内部有问题，应该Quit the job； R15-1 ★Inaction combined with continuing association with those involved in illegal or unethical conduct may be construed as participation or assistance in the illegal or unethical conduct. R16-1 ★投资产品的开发与销售：投资产品的开发者、销售及维护人员要注意产品销售地和来源地的法律；对于分销商，同样要注意其是否遵守了法律。 R17-1 跨境业务：需要due diligence，为了保证公司及自身的声誉，要了解适用的法律 R18-1 对于个人：1）stay informed；2）encourage公司时常对合规程序进行review；3）保存readily accessible current reference copies of applicable statutes, rules, regulations R19-1 对于公司：The formality and complexity of compliance procedures for firms depend on the 6 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 nature and size of the organization and the nature of its investment operations.  公司要Develop or adopt a code of ethics，Provide information on applicable laws，Establish procedures for reporting violations P3-1 Independence and Objectivity Q9-1 An analyst has been writing research reports on a firm for many years. As part of the analyst’s continuing research efforts, the analyst allowed the firm to fly him to the firm’s headquarters 500 miles away and put him up in the guest quarters the firm had for all corporate visitors. In the current year, the firm is planning a secondary share offering that coincides with the tenth anniversary of the firm going public. When the analyst arrived at the headquarters, he found a new set of high-quality golf clubs as a gift to him. On the golf clubs was the firm’s logo, and the firm was giving the clubs to all visitors this year in honor of the anniversary and the IPO. Based upon this information, Standard I (B), Independence and Objectivity, has: A. been broken because of the value of the golf clubs and the value of the trip to the headquarters B. been broken because of the value of the golf clubs C. not been broken because the trip is allowed and the firm is giving the clubs to all visitors Solution: B Modest gifts and entertainment are acceptable. Should commercial transportation be unavailable, modestly arranged travel may be accepted to participate in appropriate information gathering events. Q10-1 Romar Brockman, CFA, is a sell-side analyst. Approximately half of Brockman’s compensation comes from his firm’s Investment-banking division. Brockman was asked to write a report about Anacortes Concrete (AC), an Investment-banking client. Despite concerns about the slowdown in concrete demand, Brockman issued a very positive report on AC. When issuing his report, Brockman least likely violates the CFA Institute Standard relating to: A. Loyalty to Employer. B. Loyalty, Prudence, and Care. C. Independence and Objectivity. Solution: A The Standards require members to put client interests ahead of member and employer interests. As Brockman’s compensation is dependent upon investment banking revenues, Brockman may not be objective. When issuing the report, he is in jeopardy of violating Standards relating to Independence and Objectivity; Loyalty, Prudence, and Care; and Disclosure of Conflicts. Key points of Independence and Objectivity： R20-1 Basic principle  Must not offer, solicit, or accept any gift, benefit, compensation, or consideration 7 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 that reasonably could be expected to compromise their own or another’s independence and objectivity R21-1 雇主可能为了与其他公司保持业务关系，可能会要求研究人员issue favorable research reports，正确的做法是保持客观独立，按照客观事实撰写报告 R22-1 社交活动也可能违反I(B)，When seeking corporate financial support for conventions, seminars, weekly society luncheons, evaluate both the actual effect on independence and whether objectivity might be perceived to be compromised in the eyes of clients R23-1 ★Investment banking relationships  Firewall—minimizes conflicts of interest. Separate reporting structures for personnel on the research side and personnel on the investment banking side  Compensation should not link analyst remuneration directly to investment banking assignments in which analyst may participate as a team member.  It is appropriate to have analysts work with investment bankers only when the conflicts are adequately and effectively managed and disclosed. R24-1 Public companies  Analysts should not be pressured to issue favorable research by the companies they follow.  Can promise to cover the firm, should not promise favorable report about the firm.  Due diligence in financial research and analysis involves gathering information from public disclosure documents and also company management and investor-relations personnel, suppliers, customers, competitors, and other relevant sources. R25-1 Buy-Side clients  Sell-side analyst should not be pressured by buy-side firms to issue favorable research on current or prospective investment-banking clients.  基金经理也要尊重卖方分析师的独立性 R26-1 Gift from client & Gift from the third party  最好能拒绝所有会compromise their own or another’s independence and objectivity的礼物. Modest gift is OK, but as long as its purpose is not to compromise the objectivity.  ★判断的原则：第一是礼物的金额很少（modest）；第二是礼物不能是单独为你准备的(arrangement not unusual)  ★Gift from client可以接受, 但必须披露并获得同意，否则违反I(B)。尽量接受前披露，如果实在没法披露，也要事后披露。 R27-1 Fund manager relationships  ★Members and candidates who are responsible for hiring and retaining outside managers should not accepts gifts, entertainment, or travel funding that may be perceived as impairing their decisions.  For meeting sponsored by funds, members and candidates must review the merits of each offer individually in determining whether they may attend yet maintain their independence of conduct regarding the analytic process and the distribution of their reports. 8 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R28-1 ★The rating agencies  Members and candidates at rating agencies should ensure that procedures at the agencies prevent undue influences from a sponsoring company during the analysis.  abide by their agencies’ and the industry’s standards of conduct regarding the analytical process and the distribution of their reports  develop the necessary firewalls and protections to allow the independent operations of their different business lines.  When using information provided by credit rating agencies, members and candidates should be mindful of the potential conflicts of interest. R29-1 ★Issuer-Paid research  Analysts’ compensation for preparing such research should be limited, and the preference is for a flat fee that is not linked to their conclusions or recommendations (directly or indirectly)  Must fully disclose potential conflict of interest, including the nature of compensation. If not  misleading investors  Conduct a thorough analysis of the company’s financial statements based on public information, benchmarking within a peer group, and industry analysis. (Distinguish between fact and opinion) R30-1 Travel Funding  may be influenced by discussions exclusively with the company executives when flying on a corporate or chartered jet.  最佳做法：always use commercial transportation rather than accept paid travel arrangements from an outside company.  Should commercial transportation be unavailable, members and candidates may accept modestly arranged travel to participate in appropriate information-gathering events, such as a property tour. R31-1 Procedures for compliance  Protect the integrity of opinions: unbiased, design compensation systems with integrity  Create a restricted list: if unwilling to issue unfavorable, put it on a restricted list and only issue factual information  ★Restrict special cost arrangement: pay charges by themselves when visiting headquarter, not reimbursed for air fees by corporate issuer, limit use firm’s aircraft only when no commercial transportation. Should not always be hosted by issuer.  ★Limit gifts: Customary, business-related entertainment is okay as long as its purpose is not to influence professional independence or objectivity; 礼物的价值要参考local custom并且说明价值限制是per gift or annual total amount.  ★Restrict invesments: develop formal policies about eployee purchases of equity or equity-related IPOs, require prior approval for employee to participate in IPOs, disclose timely investment actions following the offering, strict limit on private placements. 9 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Review procedures: emplement effective supervisory and review procedures about personal investment activities  Independence policy: formal written policy, not influenced by any parties that could comprise their independence.  ★Appointed officer: to supervise for compliance; provide procedures and policies for reporting violation to every employee. P4-1 Misrepresentation Q11-1 ★Bryan Barrett, CFA, provides investment advice on gold and other hard assets to several large institutions. To broaden his business and meet increased interest in these assets from retail customers, Barrett advertises his services in publications that serve a general audience. As the client base for the institutions that Barrett serves is large, he is comfortable stating in the ad that thousands of his clients have benefited from his advice. Does Barrett’s advertisement violate any CFA Institute Standards of Professional Conduct? A. No B. Yes, related to Misrepresentation C. Yes, related to Communication with Clients Solution: B As Barrett’s client base is made up of a small number of large institutions, stating in the advertisement that his customer base is a larger number is a misrepresentation and a violation of Standard I (C). In addition, since the advertisement focuses only on the benefits and does not mention the potential risks of these investments, it is also potentially misleading to clients. Q12-1 ★★Colin Gifford, CFA, is finalizing a monthly newsletter to his clients, who are primarily individual investors. Many of the clients’ accounts hold the common stock of Capricorn Technologies. In the newsletter, Gifford writes, “Based upon the next six months earnings of $ per share and a 10% increase in the dividend, the price of Capricorn's stock will be $22 per share by the end of the year.” Regarding his stock analysis, the least appropriate action Gifford should take to avoid violating any CFA Institute Standards of Professional Conduct would be to: A. separate fact from opinion. B. include earnings estimates. C. identify limitations of the analysis. Solution: B While pro forma analysis may be standard industry practice, it is not required by the Standards. Earnings estimates are opinions and must be clearly identified as such. Q13-1 Robert is responsible for the creation and distribution of ABC Company’s marketing materials. In the materials, it says that the asset value of the company is 350 billion, but actually the true value is 35 billion. Before Robert could make necessary change to the data, his subordinates had distributed these materials to their clients without seeking 10 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Roberts’ permission. Robert doesn’t know the distribution of the materials. Under this circumstance, does Robert violate any CFA Standards of Professional Conduct? A. No B. Misrepresentation C. Misconduct Solution: A 这个属于打印错误，不是Robert故意为之，而且在他没有检查的情况下对外发布了，这个不属于Misrepresentation。可以参考Handbook第40页 Case 3, but he should correct the error as soon as possible. Q14-1 ★Elis is a portfolio manager of high net worth clients. One day, she received a material from her brokerage introducing an investment product that claimed to provide an insured income. She quickly reviewed the product and sent out the emails to all her clients. The email heading was "New fixed income product! Hot opportunity!”, And she also in-closed the products prospectus in her email. Did Elis most likely violate which of the following standards? A. Misrepresentation the nature of the product only B. Misrepresentation the nature of the product and fail to disclose the detail of the product C. Fail to disclose the detail of the product Solution: A Insured income differs from fixed income. She in-closed the products prospectus in her email, she didn’t fail to disclose the detail of the product. Q15-1 Grey recommends the purchase of a mutual fund that invests solely in long¬term . Treasury bonds. He makes the following statements to his clients: （原版书Reading2-16） Statement 1: "The payment of the bonds is guaranteed by the . government; therefore, the default risk of the bonds is virtually zero." Statement 2: "If you invest in the mutual fund, you will earn a 10 percent rate of return each year for the next several years based on historical performance of the market." Did Grey's statements violate the CFA Institute Code and Standards? A. Neither statement violated the Code and Standards. B. Only Statement 1 violated the Code and Standards. C. Only Statement 2 violated the Code and Standards. Solution：C This question involves Standard I(C)—Misrepresentation. Statement 1 is a factual statement that discloses to clients and prospects accurate information about the terms of the investment instrument. Statement 2, which guarantees a specific rate of return for a mutual fund, is an opinion stated as a fact and, therefore, violates Standard I(C). If Statement 2 were rephrased to include a qualifying statement, such as "in my opinion, investors may earn. . .," it would not be in violation of the Standards. 11 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q16-1 ★★Roberto Sanchez, CFA, and Andreas Lopez, CFA, worked as financial analysts for OneWorld Analytics for years. While at OneWorld, Lopez created a highly complex financial valuation model with Sanchez making small contributions to its development. Recently, Lopez left OneWorld to start his own company using a simplified model he developed prior to joining OneWorld. Over a six-month period, he improves this software, duplicating features he used at OneWorld. His upgraded program produces predictions similar to the results of the OneWorld program. At One World, Sanchez continues to use the complex model he and Lopez developed and attains superior results. Whose behavior most likely conforms to the CFA Institute Code of Ethics and Standards of Professional Conduct?（MOCK92-12） A. Lopez but not Sanchez B. Sanchez but not Lopez C. Both Lopez and Sanchez Solution：C C is correct because both Lopez and Sanchez upheld the requirements of Standard I (C) Misrepresentation regarding work completed for an employer Sanchez has the right to continue using the software primarily developed by Lopez because OneWorld Analytics, not the employee, owns the software. Lopez does not leave with the model he developed while employed by OneWorld Analytics, and therefore, he is not in violation of the Standards. Once Lopez leaves OneWorld, he develops a separate model based on a model he developed prior to joining OneWorld Analytics. The simplified model remains the intellectual property of Lopez. The duplication of features is allowable under Standard IV (A) in that Lopez’s expertise gained at his former employer is not considered to be confidential or privileged. Therefore, both Lopez and Sanchez upheld the Standards. Key points of Misrepresentation： R32-1 下面的形式都与Misrepresentation相关  Oral representations, advertising, electronic communications, or written materials. （written materials include research reports, market letters, newspaper columns, and books; electronic communications includes internet communications, web pages, chat room, and e-mail）  Misrepresentation是指untrue statement or omission of a fact或者false or misleading  将“明知故犯”（knowingly）界定为知道或者应该知道misrepresentation was being made or that omitted information could alter the investment decision-making process.  分析时要考虑多种情形（from very positive scenarios to extremely negative scenarios） R33-1 Impact on Investment Practice:  不能保证specific return which is inherently volatile.  Not prohibit from guaranteeing return which is built into the structure of the product or for which an institution has agreed to cover any losses. 如,联邦储蓄利12 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 率是2%，那么保证2%利率是可以的  不可以对客户说“我们可以提供你需要的所有服务”，正确的做法是提供一个公司所能提供的服务清单；  不能misrepresent qualifications，一旦发现要立即改正，如果过了很长时间不改正，就会被定义为misrepresent（如名片打印错误一年后才发现就算违反）  ★如果通过outside managers进行投资，must disclose intended use of external managers, members and candidates must not represent outside managers’ investment practices as their own.  ★使用第三方信息要注意：Exercise care and diligence，同时如果影响到了投资业绩，investment professional要对此负责 R34-1 Plagiarism  Plagiarism定义为：Copying or using in substantially the same form materials prepared by others without acknowledging the source of the material or identifying the author and publisher of such material.  适用于任何场合，包括口头交流，媒体采访等  未经许可copy (or represent as their own) original ideas/material就算违反，必须acknowledge and identify the source of ideas/material.  常见形式：★Using excerpts from others’ reports without acknowledgement；Citing quotations as “leading analysts” and “investment experts” without naming specific reference；Using charts and graphs without stating sources；Presenting statistical estimates of forecasts prepared by others and identifying the sources without including the qualifying statements or caveats that may have been used；Copying proprietary computerized spreadsheets or algorithms without authorization；Preparation of research reports based on multiple sources without acknowledging the sources  引用别人的思想需要鸣谢(credit or acknowledgement), 否则就是Plagiarism；  引用他人的模型，分析师作了少许修改，把模型作为自己的，属于plagiarism行为，违反了I(C)，正确的做法是鸣谢这个模型的出处来源；  引用媒体的转载, obtain the information directly from the author and cite only that author或者use the information provided by the intermediary and cite both sources，不能only cite the information from the intermediary  无心的打字错误不违反misrepresentation，但是如果发现错误，却没有纠正，那么就违反了misrepresentation  自己在业余时间开发的模型属于自己所有，可以使用； R35-1 Work Completed for Employer  ★The firm retains the right to continue using the work completed after a member or candidate has left the organization.公司可以issue future reports without providing attribution to the prior analysts，但公司内其他员工不能reissue a previously released report solely under his name R36-1 Procedures  Factual presentations: written list of available services and a description of qualifications，并且指定专人作为公司发言人  Qualification summary: 对于representations of qualifications，公司要定期检查 13 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 employee correspondence and documents  Verify outside information: 对于第三方要verify，防止其因为错误陈述而影响公司声誉. Encourage to develop policy to verify.  Maintain webpage: 保存网页; protect site’s integrity, confidentiality, and security; not misrepresent and fully disclose.  ★Plagiarism policy: maintain copies of all research reports with research ideas, material with new methodologies, and other materials being relied on in preparing the research report; attribute quotations, including projections, talbes ,statistics, model/product ideas, and new methodologies prepared by persons other than recognized financial and statistical reporting service or similar service; attribute summaries or paraphrase. P5-1 Misconduct Q17-1 ★Gabrielle Gabbe, CFA, has been accused of professional misconduct by one of her competitors. The allegations concern Gabbe’s personal bankruptcy filing when she was a college student ten years ago and had a large amount of uninsured medical bills. By not disclosing the bankruptcy filing to her clients, did Gabbe violate any CFA Institute Standards of Professional Conduct? A. No B. Yes, related to Misconduct C. Yes, related to Misrepresentation Solution: A A personal bankruptcy does not necessarily constitute a violation of Standard I (D). If the circumstances of the bankruptcy involve fraudulent or deceitful business conduct, failing to disclose it may constitute a violation of the Standards. Q18-1 A CFA Candidate purchased copyrighted CFA exam preparatory study guide from a publisher. Two weeks prior to the exam, the Candidate lost the study guide, so he photocopied a copy that his friend had purchased. According to the Standards of Practice Handbook, did the Candidate most likely violate the CFA Institute Standards of Professional Conduct? A. Yes. B. No, because he had purchased his own copy. C. No, because both had purchased their own copies. Solution: A The Candidate violated Standard I (A)-Knowledge of the Law and Standard I (D)-Misconduct. By photocopying the material without the permission of the author and publisher, the Candidate violated copy write laws and effectively stole the intellectual property of the author and publisher, hence acted in a dishonest way. Q19-1 ★As a condition of his employment with an investment bank, Abasi Hasina, CFA, was 14 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 required to sign an employment contract, including a non-compete clause restricting him from working for a competitor for three years after leaving the employer. After one year, Hasina quits his job for a comparable position with an investment bank in a country where non-compete clauses are illegal. Lawyers with whom he consulted prior to taking the new position determined the non-compete clause was a violation of human rights and thus illegal. Did Hasina most likely violate the CFA Institute Code of Ethics? （2012 Mock84） A. Yes B. No, because the non-compete clause violates his human rights C. No, because the non-compete clause is illegal in the new country of employment Solution: A A is correct because by failing to adhere to the non-compete clause he agreed to abide by when signing his employment contract, Hasina shows a lack of professional integrity toward his employer. This behavior reflects poorly on the good reputation of members and is a violation of the Code of Ethics, which states that members and candidates must act with integrity, and Standard I (D) Misconduct, which states that members and candidates must not engage in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity, or competence. The Code of Ethics at times requires a member or candidate to uphold a higher standard than that required by law, rule, or regulation, or in this case the strict application of the employment agreement. Q20-1 Christina Ng, a Level I CFA candidate, defaulted on a bank loan she obtained to pay for her Master’s degree tuition when her wedding cost more than expected. A micro finance loan company lent her money to pay off the tuition loan in full, including penalties and interest. The micro finance loan company even extended further credit to pay for her parents’ outstanding medical bills. Unfortunately, her parents’ health problems escalated to the point where Ng had to take extensive time away from work to deal with the issues. She was subsequently fired and consequently defaulted on the second loan. Because she was no longer employed, Ng decided to file for personal bankruptcy. Do the loan defaults leading up to Ng’s bankruptcy most likely violate Standard I (D) Misconduct? A. No B. Yes, with regard to the first loan default C. Yes, with regard to the second loan default Solution: A A is correct because although Ng’s first loan default, which played a part in the subsequent bankruptcy, is a result of poor financial choices (. paying for higher wedding costs rather than her tuition loan), neither of the loan defaults or the bankruptcy involves fraudulent or deceitful business conduct but are based on unfortunate personal circumstances. Therefore, she would most likely not be in violation of Standard I (D) Misconduct. Key points of Misconduct： 15 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R37-1 Scope of application  ★凡是有关于欺诈的(dishonesty, fraud, or deceit)，或者影响到professional reputation, integrity, or competence的行为都是misconduct  但是职业无关的除欺诈以外的行为是不违反misconduct的，比如作为某一环保组织成员参加游行  Excessive drinking at lunch during work making negative effect on your ability to make sound investment decisions is a violation of Standard I(D). R38-1 ★个人破产may not reflect on the integrity or trustworthiness of the person declaring bankruptcy  如果是经营破产（如与欺诈无关），不算；  如果是因欺诈（fraudulent or deceitful business conduct）导致的破产，算。 R39-1 Recommended procedures  Code of ethics: every employee should subscribe and make clear that the un-ethical activities will not be tolerated.  List of violations: potential violations and associated disciplinary sanctions.  Employee references: of good character and eligible for work in the investment industry because of past infractions of the law. P6-1 Material Nonpublic Information Q21-1 ★Diana Fairbanks, CFA, is married to an auditor employed at a large accounting firm. When her husband mentioned that a computer firm he was auditing would receive a qualified opinion, she thought nothing of it. Later that week, when she reviewed a new client’s account, she noticed that there were substantial holdings of this company. When she did an Internet search for news on the company, she did not find anything about its most recent audit or anything adverse. Which of the following actions concerning the computer stock should Fairbanks most likely take to avoid violating the CFA Institute Standards of Professional Conduct? A. Take no investment action. B. Complete a thorough and diligent analysis of the company and then sell the stock C. Sell the stock immediately as she has a reasonable basis for taking this investment action. Solution: A The information concerning the qualified opinion is nonpublic and material. She would be in violation of Standard II (A) if she took investment action based on the information. She should also make reasonable efforts to achieve public dissemination of the information. Q22-1 According to the CFA Institute Standards of Practice handbook, insider trading is the least likely to be prevented by establishing: A. watch list B. restricted list C. selective disclosure Solution: C 16 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A firewall restricts the flow of confidential information to those who need to know the information to make more appropriate decision. If the firm is not willing to disclose negative recommandation on its clients, a restricted list should be established to dismiss only factual information. The disclosure of information to a selected groups of analysts in a meeting room cannot be considered as public. Q23-1 Which of the following constitutes material nonpublic information? A. Changes in management which is only released in internal conference B. Hearing other analysts talk about a potential loss of the company C. Obtain new patent but not sure it will affect stock price Solution: A 判断material的条件（竞争对手的预测不能认为是MNI）: reliable and unambiguous，对股价有影响的information是material的。A选项既是非公开信息，又构成了“重要”信息，所以选A Q24-1 Oliver Opdyke, CFA, works for an independent research organization that does not manage any client money. In the course of his analysis of Red Ribbon Mining he hears rumors the president of Red Ribbon, Richard Leisberg, has recently been diagnosed with late stage Alzheimer’s disease, a fact not publicly known. The final stage of Alzheimer’s is when individuals lose the ability to respond to their environment, the ability to speak, and, ultimately, the ability to control movement. Leisberg is the charismatic founder of Red Ribbon, and under his leadership the company grew to become one of the largest in the industry. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, the most appropriate action for Opdyke is to: （2012 Mock84） A. immediately publish a sell recommendation for Red Ribbon Mining. B. confirm the president’s diagnosis before publishing his research report. C. encourage Red Ribbon Mining management to disclose the president’s medical condition. Solution: C C is correct because members and candidates should make reasonable efforts to achieve public dissemination of information that is material and nonpublic, as required by Standard II (A) Material Nonpublic Information. This effort usually entails encouraging the issuer company to make the information public. In this case, if the diagnosis is fact and not rumor, then this information is material and should be disclosed. Q25-1 ★Andrews, a private wealth manager, is conducting interviews for a new research analyst for his firm. One of the candidates is Wright, an analyst with a local investment bank. During the interview, while Wright is describing his analytical skills, he mentions a current merger in which his firm is acting as the adviser. Andrews has heard rumors of a possible merger between the two companies, but no releases have been made by the companies concerned. Which of the following actions by Andrews is least likely a violation of the Code and Standards? (原版书Reading2-32) A. Waiting until the next day before trading on the information to allow time for it to become 17 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 public. B. Notifying all investment managers in his firm of the new information so none of their clients are disadvantaged. C. Placing the securities mentioned as part of the merger on the firm's restricted trading list. Solution：C The guidance to Standard II(A)—Material Nonpublic Information recommends adding securities to the firm's restricted list when the firm has or may have material nonpublic information. By adding these securities to this list, Andrews would uphold this standard. Because waiting until the next day will not ensure that news of the merger is made public, answer A is incorrect. Negotiations may take much longer between the two companies, and the merger may never happen. Andrews must wait until the information is disseminated to the market before he trades on that information. Answer B is incorrect because Andrews should not disclose the information to other managers; no trading is allowed on material nonpublic information. Q26-1 ★★James Simone, CFA, the CFO of a publicly listed company, seeks to improve the quality of his company’s communication with institutional fund managers. He holds an investor briefing with this group the evening before the company earnings are announced. The company’s quarterly earnings are broadcast in a press release the next day before the market opens. The earnings information in the investor briefing is identical to that in the press release. Did Simone most likely violate the CFA Institute Standards of Professional Conduct? （2012 Mock83） A. Yes B. No, because investor briefing and press release information are identical C. No, because the company releases information while the market is closed Solution: A A is correct because Simone violated Standard II (A) Material Nonpublic Information by giving institutional fund managers access to material nonpublic information prior to public dissemination (., the press release). By releasing earnings results to a select group of institutional fund managers prior to a public press release, Simone allows the institutional fund managers a time advantage over other investors not invited to the investor briefing. Q27-1 ★Zhao Xuan, CFA, is a sell side investment analyst. While at a software industry conference, Zhao hears rumors that Green Run Software may have falsified its financial results. When she returns to her office, Zhao conducts a thorough analysis of Green Run. Based on her research, including discussions with some of Green Run’s customers, Zhao is convinced that Green Run’s reported 50% increase in net income during recent quarters is completely fictitious. So far, however, Zhao is the only analyst suspicious about Green Run’s reported earnings. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, the least appropriate action for Zhao is to: （2012 Mock84） A. report her suspicions to Green Run’s management. B. do nothing, until other analysts support her analysis. C. recommend her clients sell their Green Run shares immediately. 18 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B B is correct because the analyst has conducted thorough research that indicates the company falsified its financial results, and she should request the company address this issue publicly as recommended by Standard II (A) Material Nonpublic Information. If a member or candidate determines that information is material, the member or candidate should make reasonable efforts to achieve public dissemination of the information. This effort usually entails encouraging the issuer company to make the information public. If public dissemination is not possible, the member or candidate must communicate the information only to the designated supervisory and compliance personnel within the member’s or candidate’s firm and must not take investment action on the basis of the information. Q28-1 An investment banking department of a brokerage firm often receives material nonpublic information that could have considerable value if used in advising the firm's brokerage clients. In order to conform to the Code and Standards, which one of the following is the best policy for the brokerage firm? （原版书Reading2-23） A. Permanently prohibit both "buy" and "sell" recommendations of the stocks of clients of the investment banking department. B. Establish physical and informational barriers within the firm to prevent the exchange of information between the investment banking and brokerage operations. C. Monitor the exchange of information between the investment banking department and the brokerage operation. Solution：B The best policy to prevent violation of Standard II(A)-Material Nonpublic Information is the establishment of firewalls in a (inn to prevent exchange of insider information. The physical and informational barrier of a firewall between the investment banking department and the brokerage operation prevents the investment banking department from providing information to analysts on the brokerage side who may be writing recommendations on a company stock. Prohibiting recommendations of the stock of companies that are clients of the investment banking department is an alternative, but answer A states that this prohibition would be permanent, which is not the best answer. Once an offering is complete and the material nonpublic information obtained by the investment banking department becomes public, resuming publishing recommendations on the stock is not a violation of the Code and Standards because the information of the investment banking department no longer gives the brokerage operation an advantage in writing the report. Answer C is incorrect because no exchange of information should be occurring between the investment banking department and the brokerage operation, so monitoring of such exchanges is not an effective compliance procedure for preventing the use of material nonpublic information. Q29-1 ★While at a bar in the financial district after work, Ellen Miffitt, CFA, overheard several employees at one of her competitors discussing how they would manipulate down the price of a thinly traded micro cap stock over the next few days. Miffitt’s clients had large positions of this stock and when she arrived at work the next day, she immediately sold 19 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 all of these holdings. As she had determined that the micro cap stock was suitable for all of her accounts, even at its previously higher price, Miffitt bought back her clients’ original exposure at the end of the week at the new, lower price. Which CFA Institute Standards of Professional Conduct did Miffitt least likely violate（综合） A. Market Manipulation B. Preservation of Confidentiality C. Material Nonpublic Information Solution: B Miffitt has not violated the confidentiality Standard. Even though she did not initiate the market manipulation, Miffitt added to the stock’s price movement when she sold into a declining market. By repurchasing the shares for her clients, she was seeking to take advantage of the manipulation and was in violation of Standard II (B). Miffitt has attempted to benefit her clients by trading on information that could affect the value of the micro cap stock and as such would be classified as material nonpublic information. Information that is known regarding orders for large trades before they are executed is considered material nonpublic information. Q30-1 ★Charlotte BILLO, a junior analyst in a regional brokerage firm, overheard three senior managers of a large listed company talking about a staff restructuring plan while she was waiting for her flight. The managers determined those who would be dismissed. Charlotte could not remember the names but was sure that they were just ordinary employees. After returning from her journey, she made a thorough research on the company and found that the company was likely to shut down a plant situated in her local town because of a great loss on a new product line. She launched immediately a recommendation Sell on the stock. Did she comply with the Standards? A. Yes, because the recommendation was based on mosaic theory and she made a diligent research. B. No, because she did not reach her conclusion on a reasonable basis because she did not remember the names of those who would be dismissed. C. No, because she took advantage of non-public material information. Solution: C The restructuring of staff should be considered material, and hierdetermination of ordinary can’t change the nature of materiality, so she can’t make investment recommendation using non-public material information. Q31-1 ★While waiting in the business class lounge before boarding an airplane, Becca Msafari, CFA, an equity analyst, overhears a conversation by a group of senior managers, including members of the board, from a large publicly listed bank. The managers discuss staff changes necessary to accommodate their regional expansion plans. Msafari hears several staff names mentioned. Under what circumstances could Msafari most likely use this information when making an investment recommendation to her clients? She can use the information: (2014 Mock 99-15) A. if the discussed changes are unlikely to affect investor perception of the bank. 20 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. under no circumstances. C. if she does not breach the confidentiality of the names of the staff. Solution: A To comply with the Code and Standards, a member or candidate cannot use material nonpublic information when making investment recommendations. The information overheard would not be considered material only if any public announcement of the staff removal would be unlikely to move the share price of the bank, nor would the regional expansion substantially impact the value of the bank. Q32-1 ★Claire Jones, CFA, is an analyst following natural gas companies in the United States. At an industry energy conference, the chief financial officer of Alpine Energy states that the company is interested in making strategic acquisitions. At a separate event, Alpine's head of exploration commented that he is bullish on natural gas production prospects within northeastern Pennsylvania. Jones is aware that Alpine currently has very little exposure to this region. She also knows another company in her universe, Pure Energy, Inc. is based in northeastern Pennsylvania and controls significant assets in the area. Pure Energy is highly leveraged, and Jones believes it will need to raise additional capital or partner with another firm to move to the production phase with their assets. Jones attempts to contact Alpine's chief executive officer with an unrelated question and is told he is unavailable because he is on a business trip to northeastern Pennsylvania. Jones updates her research on Pure Energy and then recommends the stock to Lisa Wong, CFA, a portfolio manager, who purchases significant positions in client accounts. The following week, Pure Energy announces it has entered into an agreement to be purchased by Alpine for a significant premium. Has either Jones or Wong most likely violated standards with regard to the integrity of capital markets? (2014 Mock 99-17) A. Yes, Jones' recommendation is based on insider information B. Yes, both Jones and Wong have acted on insider information C. No Solution: C Jones has used the mosaic theory to combine nonmaterial, nonpublic information with material public information. Key points of Material nonpublic information： R40-1 如果持有MNI，不能利用或促使他人利用MNI进行投资 R41-1 ★判断material的条件: 来源可靠，对股价影响明确 R42-1 比如：Substance and materiality  Earnings  M&A, acquisitions, tender offers, or joint ventures  Changes in assets, Changes in management  Innovative products, processes, or discoveries  New licenses, patents, registered trademarks, or regulatory approval/rejection of a 21 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 product  Developments regarding customers or suppliers (., the acquisition or loss of a contract)  Changes in auditor notification or the fact that the issuer may no longer rely on an auditor’s report or qualified opinion  defaults on senior securities, calls of securities for redemption, repurchase plans, stock splits, changes in dividends, changes to the rights of security holders, public or private sales of additional securities, and changes in credit ratings  Bankruptcies  Significant legal disputes  Government reports of economic trends (employment, housing starts, currency information, etc.)  Orders for large trades before they are executed.  竞争对手的预测不能认为是MNI R43-1 其他情形：  有名的公司或者分析师对股价的研究对市场有影响，算是material  suppliers：从供应商处了解到一个公司的信息，如果来源是可靠的，则算是MNI，不能使用；如果是自己观察到的，属于Mosaic理论，可以使用。竞争者的分析，不算material。  不管通过什么途径，公开发行的报告就是public（失误引起的提前发行，算不算做公开发布？算, can use for trading）  如果公司在分析师会议上内幕信息，怎么办？Can’t use.  Selective disclosure may violate MNI. If MNI was disclosed selectively, the listed company should issue a press release or reach public dissemination. R44-1 Mosaic Theory：可以使用material public information and non-material non-public information，但必须save and document all the research R45-1 ★Simply because the public in general find the conclusions material does not require that the analyst make his/her work public. Investors who are not clients of the analyst can either do the work themselves or become clients of the analyst for access to the analyst’s expertise. R46-1 ★公司如果拥有MNI，不必禁止所有自营交易（Proprietary trading），  如果是做市商market maker，remain passive to the market, take only the contra side of unsolicited customer trades；  In risk arbitrage trading, Best to stop; If not stop, prove the adequacy of their internal procedures and must document firm trades. R47-1 ★Achieve public dessemination  If material, should try to achieve public dissemination.  Encourage the firm to make it public, if not possible, report only to designated supervisory and compliance personeel within her firm.  not invest on MNI, or induce insider to disclose MNI R48-1 Adopt compliance procedures.  encourage firms to adopt compliance procedures to prevent the misuse of MNI.  Particularly important is improving compliance in such areas as the review of 22 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 employee and proprietary trading, documentation of firm procedures, and the supervision of interdepartmental communications in multi-service firms.  Compliance procedures should suit the particular characteristics of a firm, including its size and the nature of its business. R49-1 The minimum elements of such firewall include, but are not limited to, the following:  ★substantial control of interdepartmental communications, preferably through a clearance area in either the compliance or legal department;  review of employee trading through the maintenance of “watch,” “restricted,” and “rumor” lists;  documentation of the procedures designed to limit the flow of information between departments and of the actions taken to enforce those procedures;  ★heightened review or restriction of proprietary trading while a firm is in possession of material nonpublic information. R50-1 Physical separation of departments R51-1 Prevention of personnel overlap R52-1 ★A reporting system  authorized people review and approve communications between departments.  consult a designated compliance officer to determine whether sharing the information is necessary and how much information should be shared.  If the sharing is necessary, the compliance officer should coordinate the process of “looking over the wall”  A single supervisor or compliance officer should have the specific authority and responsibility of deciding whether or not information is material and whether it is sufficiently public to be used as the basis for investment decisions.  Ideally, the officer is independent. R53-1 ★Personal trading limitations.  Consider restrictions or prohibitions on personal trading and carefully monitor proprietary trading.  Require employees to make periodic reports of their own transactions and transactions made for the benefit of family members  Securities should be placed on a restricted list when a firm has or may have MNI.  a watch list shown to only the few people responsible for compliance should be used to monitor transactions in specified securities.  watch list in combination with a restricted list is a common means of ensuring effective control of personal trading. R54-1 ★Record maintenance.  Multi-service firms should maintain written records of the communications between various departments.  Firms should place a high priority on training and should consider instituting comprehensive training programs, particularly for employees in sensitive areas. R55-1 ★Communication to all employees.  Written compliance policies and guidelines should be circulated to all employees of a firm. 23 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Policies and guidelines should be used in conjunction with training programs aimed at enabling employees to recognize MNI.  Sufficient training to either make an informed decision or to realize they need to consult a supervisor or compliance officer before engaging in questionable transactions. P7-1 Market Manipulation Q33-1 A. L. Guzdar is a portfolio manager at Woodstock Investments (WI). Guzdar manages a billion-dollar hedge fund and two large mutual funds. Market declines caused significant losses for all of the accounts. Unable to find bids for certain thinly-traded stocks, Guzdar traded the stocks between the accounts to provide liquidity and pricing. Guzdar least likely violates the CFA Institute Standard relating to: A. Misrepresentation. B. Market Manipulation. C. Loyalty, Prudence, and Care. Solution: C Guzdar least likely violated the Standards relating to Loyalty, Prudence, and Care as he attempted to provide liquidity to his clients. However, Guzdar’s actions inflated trading volumes and distorted prices and thus violated the Standards relating to Market Manipulation. Guzdar violated the Standards relating to Misconduct because market manipulation reflected adversely on his professional integrity. Guzdar may also violate the Standards relating to Misrepresentation if he misrepresented the actual liquidity and value of the stocks held in the portfolios. Q34-1 ★Lin Liang, CFA, is an investment manager and an auto industry expert. Last month, Liang requested securities regulators to open an investigation into accounting irregularities at Road Rubber Company (RRC) despite having no basis for the request. Shortly before he spoke to the regulators, Liang shorted RRC stock for his clients. Once the regulators opened an investigation, Liang leaked this information to multiple sources in the media. When news of the investigation became public, ‘the share price of RRC immediately dropped 30%. Liang then covered the short positions and made $5 per share for his clients. Liang least likely violated which of the CFA Institute Standards of Professional Conduct? （2012 Mock85） A. Misconduct. B. Market Manipulation. C. Priority of Transactions. Solution: C C is correct because the member has engaged in information-based manipulation of RRC stock. Members and candidates must refrain from “pumping up” (or down in this case) the price of an investment by issuing misleading positive (negative) information for their or their clients’ benefit. In addition, the member would be in violation of Standard I (A) Knowledge of the Law, because he has not acted with professionalism and integrity. The member has not violated Standard VI (B) 24 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Priority of Transactions because this concerns client investment transactions having priority over member or candidate investment transactions and is not applicable here. Q35-1 ★Richard Cardinal, CFA, is the founder of Volcano Capital Research, an investment management firm whose sole activity is short selling. Cardinal seeks out companies whose stocks have had large price increases. Cardinal also pays several lobbying firms to update him immediately on any legislative or regulatory changes that may impact his target companies. Cardinal sells short those target companies he estimates are near the peak of their sales and earnings and that his sources identify as facing legal or regulatory challenges. Immediately after he sells a stock, Cardinal conducts a public relations campaign to disclose all of the negative information he has gathered on the company, even if the information is not yet public. Which of Cardinal’s following actions is least likely to be in violation of the CFA Institute Standards of Professional Conduct? （2012 Mock84） A. Selling stock short B. Trading on information from lobbyists C. Disclosing information about target companies Solution: A A is correct because selling stock short is a management strategy and does not necessarily violate any aspect of the Code and Standards. Key points of Market manipulation: R56-1 定义：distort prices or artificially inflate trading volume with the intent to mislead market participants R57-1 ★The intent of the action is critical to determine whether it is a violation of this standard. 需要注意什么时候是违反的，出于什么样的目的是不违反的: (for tax and inefficiency) 利用市场的非有效赚钱，是否违反？为了税收的目的，是否违反？No!!!  一家交易所与做市商签署协议，要求做市商保证最低交易量，同时，交易所承诺佣金折让。如果他们的目的旨在操纵市场，则违反了II(B)；如果他们的目的旨在活跃市场，且此协议对外公布，则不违反II(B)。 R58-1 以操纵为目的的信息发布（information based)和交易(Transaction based)都是违反的；  Info-based: spreading false or misleading information  Transaction-based: transactions that deceive or would be likely to mislead market participants by distorting the price-setting mechanism of financial instruments P8-1 Loyalty, Prudence and Care Q36-1 According to the Standards of Practice Handbook, a member who is an investment manager is most likely to breach his duty to clients by: (Vote proxies in the best interest of beneficiaries and clients) A. habitually voting with management on proxies that relate to non-routine governance issues B. disclosing confidential client information to the CFA Institute PCP C. using client brokerage to purchase goods or services that are used in the investment 25 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 decision making process Solution: A A fiduciary who votes blindly with management on non-routine governance issues may breach their duty to clients by violating the standard that relates to loyalty, prudence, and care. Permitted by laws, members/candidates should provide information to PCP investigation. Q37-1 ★Jorge Lopez, CFA, is responsible for his bank’s proxy voting on behalf of the bank’s asset management clients. Lopez recently performed a cost-benefit analysis, showing that voting all proxies might not benefit the bank’s clients. Based on this analysis, Lopez changes the proxy voting policies and procedures without informing anyone else of the change. Lopez now votes client proxies on the side of management on all issues with the exception of major mergers where a significant impact on the stock price is expected. Lopez least likely violated the CFA Institute Standards of Professional Conduct regarding: （2012 Mock85） A. cost-benefit analysis. B. voting with management. C. proxy voting policy disclosures. Solution: A A is correct because there is no violation of Standard III (A) Loyalty, Prudence, and Care by performing a cost-benefit analysis showing that voting all proxies might not benefit the client, and concluding voting proxies may not be necessary in all instances. However, even though voting proxies may not be necessary in all instances, part of a member’s or candidate’s duty of loyalty under Standard III (A) Loyalty, Prudence, and Care includes voting proxies in an informed and responsible manner, which is not being done by Lopez by automatically voting with management on the majority of issues. In addition, members and candidates should disclose to clients their proxy-voting policies, including any changes to that policy as required by Standard III (A) Loyalty, Prudence, and Care, which has not been done. Q38-1 ★One of the discretionary accounts managed by Farnsworth is the Jones Corporation employee profit-sharing plan. Jones, the company president, recently asked Farnsworth to vote the shares in the profit-sharing plan in favor of the slate of directors nominated by Jones Corporation and against the directors sponsored by a dissident stockholder group. Farnsworth does not want to lose this account because he directs all the account's trades to a brokerage firm that provides Farnsworth with useful information about tax-free investments. Although this information is not of value in managing the Jones Corporation account, it does help in managing several other accounts. The brokerage firm providing this information also offers the lowest commissions for trades and provides best execution. Farnsworth investigates the director issue, concludes that the management-nominated slate is better for the long-run performance of the company than the dissident group's slate, and votes accordingly. Farnsworth: （原版书Reading2-14） A. violated the Standards in voting the shares in the manner requested by Jones but not in 26 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 directing trades to the brokerage firm. B. did not violate the Standards in voting the shares in the manner requested by Jones or in directing trades to the brokerage firm. C. violated the Standards in directing trades to the brokerage firm but not in voting the shares as requested by Jones. Solution：B This question relates to Standard III (A) Loyalty, Prudence, and Care—specifically, a member's or candidate's responsibility for voting proxies and the use of client brokerage. According to the facts stated in the question, Farnsworth did not violate Standard III(A). Although the company president asked Farnsworth to vote the shares of the Jones Corporation profit-sharing plan a certain way, Farnsworth investigated the issue and concluded, independently, the best way to vote. Therefore, even though his decision coincided with the wishes of the company president, Farnsworth is not in violation of his responsibility to be loyal and to provide care to his clients. In this case, the participants and the beneficiaries of the profit-sharing plan are the clients, not the company's management. Had Farnsworth not investigated the issue or had he yielded to the president's wishes and voted for a slate of directors that he had determined was not in the best interest of the company, Farnsworth would have violated his responsibilities to the beneficiaries of the plan. In addition, because the brokerage firm provides the lowest commissions and best execution for securities transactions, Farnsworth has met his obligations to the client in using this brokerage firm. It does not matter that the brokerage firm also provides research information that is not useful for the account generating the commission, because Farnsworth is not paying extra money of the client's for that information. Q39-1 ★Carter works for Invest Today, a local asset management firm. A broker that provides Carter with proprietary research through client brokerage arrangements is offering a new trading service. The broker is offering low-fee, execution-only trades to complement its traditional full-service, execution-and-research trades. To entice Carter and other asset managers to send additional business its way, the broker will apply the commissions paid on the new service toward satisfying the brokerage commitment of the prior full-service arrangements. Carter has always been satisfied with the execution provided on the full-service trades, and the new low-fee trades are comparable to the fees of other brokers currently used for the accounts that prohibit soft dollar arrangements. （原版书Reading2-28） A. Carter can trade for his accounts that prohibit soft dollar arrangements under the new low-fee trading scheme. B. Carter cannot use the new trading scheme because the commissions are prohibited by the soft dollar restrictions of the accounts. C. Carter should trade only through the new low-fee scheme and should increase his trading volume to meet his required commission commitment. Solution：A The question relates to Standard III(A)—Loyalty, Prudence, and Care. Carter believes the broker offers effective execution at a fee that is comparable with those of other brokers, so he is free to 27 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 use the broker for all accounts. Answer B is incorrect because the accounts that prohibit soft dollar arrangements do not want to fund the purchase of research by Carter. The new trading scheme does not incur additional commissions from clients, so it would not go against the prohibitions. Answer C is incorrect because Carter should not incur unnecessary or excessive "churning" of the portfolios (excessive trading) for the purpose of meeting the brokerage commitments of soft dollar arrangements. Q40-1 ★David Bravoria, CFA, is an independent financial advisor for a high net worth client with whom he had not had contact in over two years. During a recent brief telephone conversation, the client stated he wanted to increase his risk exposure. Bravoria subsequently recommended and invested in several high-risk funds on behalf of the client. Bravoria continued, as he had done in the past, to send to his client monthly, detailed itemized investment statements. Did Bravoria most likely violate any CFA Standards? A. No. B. Yes, with regard to investment statements. C. Yes, with regard to purchasing venture capital funds. Solution: C Bravoria violated Standard III (A) in not exercising Loyalty, Prudence and Care. Bravoria had not updated his client’s profile in over two years thus should not have made further investments, particularly in high risk investments until such time as he updated the client’s risk and return objectives, financial constraints and financial position. Bravoria provided his client with investment statements more frequently than that which is required; . quarterly so was not in violation of regular account information. Q41-1 ★Jack Steyn, CFA, recently became the head of the trading desk at a large investment management firm that specializes in domestic equities. While reviewing the firm’s trading operations, he notices clients give discretion to the manager to select brokers on the basis of their overall services to the management firm. Despite the client directive, Steyn would most likely violate Standard III (A) Loyalty, Prudence, and Care if he pays soft commissions for which of the following services from the brokers?（2013 mock morning session） A. Equity research reports B. Investment conference attendance C. Database services for offshore investments Solution: C C is correct because Standard III (A) Loyalty, Prudence and Care stipulates that the client owns the brokerage. Therefore members and candidates are required to only use client brokerage to the benefit of the clients (soft commissions policy). Because the firm specializes in domestic equity, an offshore investment database service would not benefit clients. Q42-1 ★Chris Rodriguez, CFA, is a portfolio manager at Nisqually Asset Management, which specializes in trading highly illiquid shares. Rodriguez has been using Hon Securities 28 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Brokers almost exclusively when making transactions for Nisqually clients, as well as for his own relatively small account. Hon always executes Rodriguez’s personal trades at a more preferential price than for Rodriguez’s clients’ accounts. This occurs regardless of whether or not Rodriguez personally trades before or after clients. Rodriguez should least likely do which of the following in order to comply with the CFA Institute Code of Ethics and Standards of Professional Conduct?（2013 mock afternoon session） A. Eliminate the exclusive trading arrangement. B. Trade client accounts before his own account. C. Average trade prices across all trading accounts. Solution: C C is correct because Rodriguez is in violation of Standard IV (A) Loyalty, which requires that, in matters related to their employment, members and candidates must act for the benefit of their employer and not deprive their employer of the advantage of their skills and abilities, divulge confidential information, or otherwise cause harm to their employer. Rodriguez should not accept the special treatment from Hon, and he should seek such favors for the clients of Nisqually, specifically the lower costs Rodriguez has been getting for his transactions. Rodriguez should not average transaction costs because his clients should be given the lower preferential prices according to Standard III (A) Loyalty, Prudence, and Care. Q43-1 ★★★Dimitri Kuznetsov, CFA, is a portfolio manager and holds shares of Barnikoff Limited and Matric Ventures in all client portfolios. Both companies have upcoming annual general meetings scheduled for the same day. The management of Barnikoff proposes to change its financial year-end from September to December, while Matric Ventures proposes to enter into a high-risk venture. The proxy voting policy clause in all client investment management agreements managed by Kuznetsov states, “When voting proxies provides a cost benefit to the client, the manager must vote a proxy.” Regarding the proxy votes for Matric and Barnikoff, Kuznetsov would least likely violate CFA Institute Standard III (A) Loyalty, Prudence, and Care if he votes:（MOCK92-15） A. with management. B. only the Matric proxy. C. only the Barnikoff proxy. Solution: B B is correct because Standard III (A) Loyalty, Prudence, and Care states: it is a member’s or candidate’s duty to vote proxies on behalf of clients in an informed and responsible manner. However, if a cost-benefit analysis shows voting all proxies may not benefit the client, voting all proxies may not be necessary. The member or candidate is responsible for informing all clients if this is the policy of the fund manager. The member or candidate must takes steps to disclose this proxy voting policy to clients. Voting the Barnikoff proxy does not appear to offer a benefit because the issue is not of a critical nature, while voting the proxy for Matric involves a material issue and is a benefit that should be voted on. 29 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Key points of Loyalty, prudence and care: R59-1 ★4类客户  Individuals: An investment manager manages the personal assets of an individual.  Beneficiary: When the manager is responsible for the portfolios of pension plans or trusts, the client is the beneficiaries of the plan or trust. The duty of loyalty is owed to the ultimate beneficiaries.  Mandate: In some situations, the actual client or beneficiaries may not exist. Members and candidates managing a fund to an index or an expected mandate owe the duty of loyalty, prudence, and care to the stated mandate.  Investing public: The client may be the investing public as a whole, the goals of independence and objectivity of research surpass the goal of loyalty to a single organization. R60-1 Develop client’s portfolios  should ensure that the client’s objectives and expectations of the account are realistic and suitable to their circumstances and that the risks involved are appropriate.  recommended investment strategies should relate to the long-term objectives and circumstances of the client.  检查investment manager or the firm的利益是否conflict with the best interests and objectives of the client  一定遵守any guidelines set by clients  投资决策要基于整个portfolio R61-1 ★Soft Commission Policies.  “soft dollars” or “soft commissions” should benefit clients, not investment manager.  If pay a higher commission without corresponding benefit to the client, violate  “directed brokerage” is OK, but still obligated to seek “best price” and “best execution”, and be assured by the client that the goods or services purchased from the brokerage will benefit the account beneficiaries. In addition, should disclose to the client that the client may not be getting best execution from the directed brokerage.  “Best execution” refers to a trading process that seeks to maximize the value of the client’s portfolio within the client’s stated investment objectives and constraints.如果客户执意要求directed brokerage，而不考虑利益的最大化，应该取得客户的书面同意 R62-1 ★Regular account submit to each client, at least quarterly, an itemized statement showing:  the funds and securities in the custody or possession plus all debits, credits, and transactions that occurred during the period;  where the assets are to be maintained, as well as where or when they are moved;  should separate the client’s assets from any others’ and their own assets. R63-1 Client approval.  If uncertain, should ask what he/she would expect or demand if the member/candidate was the client.  If in doubt, should disclose questionable matter in writing to the client and obtain client approval. R64-1 ★Should diversify unless diversification is not consistent with plan guidelines or is 30 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 contrary to the account objectives R65-1 Vote proxies in the best interest of beneficiaries and clients，并不是任何时候使用vote proxies都是有益的，如果考虑到成本和收益之间关系的话,可以放弃每次都投票。 (Blind voting是违反的). Should determine who is authorized and for the benefit of beneficiaries, should disclose any change in voting proxy policy.  who is authorized to vote shares，vote proxies in the best interests of clients and ultimate beneficiaries P9-1 Fair Dealing Q44-1 Clive Bowers, CFA, is a portfolio manager at Burlington Advisors (BA). Bowers manages two mutual funds along with a number of individual accounts. All of the portfolios, including the mutual funds, have similar return objectives, risk tolerances, and tax constraints. When Bowers allocates shares from lock trades, he fills the mutual fund orders first and often allocates the remaining shares to the individual accounts based on their portfolio size. When allocating shares from block trades, does Bowers violate any CFA Institute Standards? A. No B. Yes, with respect to suitability C. Yes, with respect to fair dealing Solution: C Members must deal fairly with clients when taking investment actions for them. By treating the mutual funds more favorably than the individual portfolios, Bowers violates the standard relating to fair dealing. Additionally, shares should be allocated on order size basis. Q45-1 ★★Monique Gretta, CFA, is a research analyst at East West Investment Band. Gretta has several long-standing relationships with mutual funds and institutional investors. Gretta often provides these clients with draft copies of her research before disseminating the information to all of the bank’s clients. This practice has helped Gretta avoid several errors in her reports and she believes it is beneficial to the rest of her client base. Regarding her research, Gretta least likely violated the CFA Institute Code of Ethics and Standards of Professional Conduct because: (Mock79-9) A. her report is a draft. B. Of her conflicts of interest C. this practice benefits clients. Solution: B. Even though the analyst is not treating all clients in an equitable manner, there is no indication she has breached any conflicts of interest.(No special interest relationship of conflicts) Q46-1 ★Monique Gretta, CFA, is a research analyst at East West Investment Bank. Previously, Gretta worked at a mutual fund management company and has a long-standing client relationship with the managers of the funds and their institutional investors. Gretta often 31 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 provides fund managers, who work for Gretta’s former employer, with draft copies of her research before disseminating the information to all of the bank’s clients. This practice has helped Gretta avoid several errors in her reports, and she believes it is beneficial to the bank’s clients, even though they are not aware of this practice. Regarding her research, Gretta least likely violated the CFA Institute Code of Ethics and Standards of Professional Conduct because: （2012 Mock84） A. her report is a draft. B. this practice benefits all clients. C. the long-standing client relationships are not disclosed. Solution: C C is correct because the analyst does not violate any of the Standards of Professional Conduct by having long-standing client relationships and generally is not required to disclose such relationships. However, the analyst is not treating all clients fairly as required by Standard III (B) Fair Dealing when disseminating investment recommendations; disclosure of the relationship with long-standing clients is not the issue. The analyst has advantaged some clients over others by providing advance information, and all clients do not have a fair opportunity to act on the information within the draft report. Members and candidates may differentiate their services to clients, but different levels of service must not disadvantage or negatively affect clients. Q47-1 ★Henrietta Huerta, CFA, writes a weekly investment newsletter to market her services and obtain new asset management clients. A third party distributes the free newsletter on her behalf to those individuals on its mailing list. As a result, it is widely read by thousands of individual investors. The newsletter recommendations reflect most of Huerta’s investment actions. After completing further research on East-West Coffee Roasters, Huerta decides to change her initial buy recommendation to a sell. To avoid violating the CFA Institute Standards of Professional Conduct it would be most appropriate for Huerta to distribute the new investment recommendation to: （2013 mock morning session） A. newsletter recipients first. B. asset management clients first. C. asset management clients and newsletter recipients simultaneously. Solution: B B is correct because according to Standard III (A) Loyalty, Prudence and Care members and candidates must place their clients’ interests first before their own interests. The temptation may be to release the changed recommendation to newsletter recipients simultaneously with or even before the asset management clients to try to obtain new clients. However, to avoid violating Standard III (A) Loyalty, Prudence and Care, Huerta must ensure any change in an investment recommendation is first distributed to her asset management clients before any newsletter recipients, who are not necessarily clients (that is, they receive the newsletter for free from a third party distribution list). Q48-1 ★Wouter Duyck, CFA, is the sole proprietor of an investment advisory firm serving a 32 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 middle-class retail clientele. Duyck claims to be different from his competitors because he conducts his own independent research. Duyck has hundreds of clients. He fully discloses that to simplify the management of all these accounts he has created a recommended list of stocks, from which he selects investments for all of his clients. Duyck's recommended list of stocks is obtained from his primary broker, who has completed due diligence on each stock. Duyck's recommended list least likely violates which of the following CFA Institute Standards of Professional Conduct? （2012 Mock85） A. Fair Dealing. B. Misrepresentation. C. Diligence and Reasonable Basis. Solution: A A is correct because Standard III (B) Fair Dealing concerns the fair treatment of clients when making investment recommendations or taking investment action, but there is no indication the advisor has discriminated against any clients regarding his recommendations as he invests all clients in the same universe of stocks. Possibly violate Suitability. Q49-1 ★Robin Herring, CFA, is a government bond research analyst at an independent credit rating agency. A competitor credit rating agency just downgraded the bonds of a government Herring follows. Herring notes all of the information in the competitor’s report was covered in his analysis published last week. In the past, Herring has been slow to downgrade bonds, so he starts to doubt his own analysis after seeing the competitor’s report. Herring decides to reissue his credit rating of this government bond and match the competitor’s downgrade. In his revised report, Herring states that new information has been made available to justify the downgrade. Herring posts the revision on the credit rating agency’s website and provides it by e-mail to all clients who received the original. Herring’s rating change least likely violated which of the following CFA Institute Code of Ethics and Standards of Professional Conduct? （2012 Mock84） A. Fair Dealing B. Communication with Clients C. Diligence and Reasonable Basis Solution: A A is correct because the analyst has dealt fairly with all clients by sending them an e-mail and posting his rating change on the credit rating agency’s website when making material changes to his prior investment recommendation; therefore, he has not violated Standard III (B) Fair Dealing. Clients should be treated fairly when material changes in a member’s or candidate’s prior investment recommendations are disseminated, which has been done. Q50-1 ★Sheila Schleif, CFA, is an equity analyst at an investment bank. Schleif uses a data-driven computer model in making her stock recommendations. Schleif discovers the model contains a coding error. If the coding error were corrected, her most recent buy recommendation would change to a sell. Schleif corrects the coding error, issues a bank-wide revision of her recommendation changing the buy to a sell, and then forwards 33 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 the revision to all bank clients who received the initial recommendation. Concerning her actions related to the coding error, Schlief most likely violated which of the following CFA Institute Standards of Professional Conduct? （2012 Mock85） A. Fair Dealing. B. Priority of Transactions. C. Diligence and Reasonable Basis. Solution: A A is correct as the analyst violated Standard III(B) Fair Dealing by selectively distributing the recommendation internally at the investment bank prior to communicating her recommendation to clients. This might also be a violation of Standard III(A) Loyalty, Prudence, and Care, which requires that members must act for the benefit of their clients and place their clients’ interests before their employer’s or their own interests. Q51-1 Bailey Watson, CFA manages 25 emerging market pension funds. He recently had the opportunity to buy 100,000 shares in a publicly listed company whose prospects are considered “above industry norm” by most analysts. The company’s shares rarely trade because most managers take a “buy and hold” strategy because of the company’s small free float. Before placing the order with his dealer, Watson allocated the shares to be purchased according to the weighted value of each of his clients’ portfolios. When it came time to execute the trades, the dealer was only able to purchase 50,000 shares. To prevent violating Standard III (B) Fair Dealing, it would be most appropriate for Watson to reallocate the 50,000 shares purchased by:（2013 mock morning session） A. reducing each pension fund’s allocation proportionately B. distributing them equally amongst all the pension fund portfolios C. allocating randomly but giving funds left out priority on the next similar type trade Solution: A A is correct because Standard III (B) Fair Dealing requires members and candidates to deal fairly and objectively with all clients. Certain clients cannot be favored over other clients when their investment objectives and circumstances are similar. Therefore, the most appropriate way to handle the reallocation of an illiquid share is to reduce each client’s proportion on a pro rata, or weighted basis. Q52-1 Miranda Grafton, CFA, purchased a large block of stock at varying prices during the trading session. The stock realized a significant gain in value before the close of the trading day, so Grafton reviewed her purchase prices to determine what prices should be assigned to each specific account. According to the Standards of Practice Handbook, Grafton's least appropriate action is to allocate the execution prices(2014 Mock 98-7) A. on a first-in, first-out basis with consideration of bundling orders for efficiency. B. across the participating client accounts at the same execution price. C. across the participating client accounts pro rata on the basis of account size. Solution: C 34 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 According to Standard III (B) best practices include allocating pro rata on the basis of order size, not account size. All clients participating in the block trade should receive the same execution price and be charged the same commission. Q53-1 ★Alexander Newton, CFA, is the chief compliance officer for Mills Investment Limited. Newton institutes a new policy requiring the pro rata distribution of new security issues to all established discretionary accounts for which the new issues are appropriate. The policy also provides for the exclusion of newly established discretionary accounts from the distribution until they have reached their one-month anniversary date. This policy is disclosed to all existing and potential clients. Did Newton most likely violate any CFA Institute Standards of Professional Conduct?(2014 Mock 98-18) A. Yes B. No, because the policy has been adequately disclosed to all existing and potential clients C. No, because the allocation policy is not inequitable under the standards Solution: A Under Standard III(B)-Fair Dealing, members and candidates should disclose to clients and prospective clients how they select accounts to participate in and how they determine the amount of securities each account will buy or sell. Trade allocation procedures must be fair and equitable, and disclosure of inequitable allocation methods does not relieve the member or candidate of this obligation. All discretionary accounts should be treated in the same manner. Treating newer accounts differently would be considered inequitable regardless of whether this policy is disclosed. Key points of Fair dealing： R66-1 fair不等于equal；如果equally，有可能违反fair dealing. R67-1 可以为不同的客户设置不同的服务等级，但是必须不对顾客造成负面影响。Different clients have different levels of service. 这是可以的，只要满足前提: not disadvantage others, disclose the service and make it available to those who needs R68-1 investment recommendation的发表可以有多种方式：brief update report, by addition to or deletion from a recommended list, or simply by oral communication，都必须确保all clients have a fair opportunity to act on every recommendation。  投资建议时，disclosure of inequitable allocation system, even accepted by clients, can’t be exempt from fair dealing for disclosure and acceptance. Disclose trade allocation procedures需要注意disclosure of inequitable allocation methods does not relieve the member of this obligation R69-1 发现是一个股票是Hot issue，给自己喜欢的顾客多配了一些，违反了Fair dealing； R70-1 ★把新的投资建议e-mail给顾客之后找大机构客户讨论细节，没有违反fair dealing R71-1 ★Investment action  When making investments in new offerings or in secondary financings, should distribute the issues to all customers who are suitable for the investment and consistent with the policies of allocating blocks of stock 35 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  对于oversubscribed issues：round-lot basis，forgo any sales to themselves or immediate families in order to free up additional shares for clients  If the investment professional’s family-member accounts are managed similarly to the accounts of other clients of the firm, these accounts should not be excluded from buying such shares.  Must make every effort to treat all individual and institutional clients in a fair and impartial manner.  Disclose to clients and prospective clients the documented allocation procedures in place and how the procedures would affect them.  Should not take advantage of their position to the detriment of clients. R72-1 Procedures  Limit the number of people who are privy to the fact that a recommendation is going to be disseminated  Shorten the time frame between decision and dissemination，Disseminate a short summary report including the conclusion might be published in advance  Publish guideline for pre-dissemination behavior  communicate recommendations both within the firm and to customers simultaneously.  Maintain a list of clients and their holdings  processing and executing orders on a first-in, first-out basis  giving all client accounts participating in a block trade the same execution price and charging the same commission  ★When the full amount of the block order is not executed, allocating partially executed orders among the participating client accounts pro rata on the basis of order size while not going below an established minimum lot size for some securities.  Allocate partially executed orders among client accounts pro rata based on order size (not account size), not below a minimum lot size  When allocating trades for new issues, obtaining advance indications of interest, allocating securities by client (rather than portfolio manager), and providing for a method for calculating allocations. P10-1 Suitability Q54-1 ★Abigail Unger, CFA, is a portfolio manager at Cascade Investments (CI). After thoroughly researching MBS and checking client investment objectives for appropriateness, Unger purchased two of the bonds for several clients. Following steep declines in MBS, several clients complain to CI, claiming the bonds were unsuitable investments. Has Unger violated any CFA Institute Standards? A. No. B. Yes, with respect to suitability. C. Yes, with respect to diligence and reasonable basis. Solution: A Unger exercised diligence in her research, had a reasonable basis for the investment, and confirmed the suitability of the investment for her clients. Her actions were consistent with the 36 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Standards. Q55-1 ★One fund manager found that a product was suitable for his clients and made a purchase for the clients. The transaction did not correspond exactly to the strategy of the firm determined at the beginning of the year which the client understood well. The manager decided to inform the client of the modification of the strategy in three months, when they would communicate with their clients about the strategies of the new years. Which standard did he most likely violate? A. Suitability B. Communication with clients C. Fair dealing Solution: A Standard III (C) Suitability requires that when members/candidates are responsible for managing a portfolio, they make only investment recommendations consistent with the stated objectives and constrains of the portfolio. The fund manager must have informed his/her clients and received permission before he made the investment which did not correspond exactly to the original strategy. By the way, not disclosing the change in strategy, violate V (B) communication. Q56-1 ★★★Frederic LUTHER, a salesperson, established an IPS for a client when he persuaded the client to direct his transactions to their firms. All Frederic is doing is to execute orders with some recommendations on choices made by the client. One day, the client made an order to purchase of some stocks that are not suitable for him. Frederic recommended the client take a second thought of his order, but the client insisted. At last, Frederic agreed to execute the order. Did Frederic comply with the Standards? A. Yes, because it is the client himself who is responsible for his own decision. B. No, because Frederic should assure all his client’s investments comply with the IPS. C. No, because Frederic should make his client understand what he is doing. Solution: A The responsibilities to gather information and to make a suitability analysis before making a recommendation or taking investment advice fall on those members/candidates in advisory relationship with clients. For unsolicited trade for individuals, if unsuitable, should refrain from trading or seek an affirmative statement from the client that suitability is not a consideration. Q57-1 ★Noor Mawar, CFA, manages a trust fund with the beneficiary being an orphaned 18-year-old student. The investment policy dictates that trust assets are expected to provide the student with a stable low risk source of income until she reaches the age of 30 years. Based on information from an internet blog, the student asks Mawar to invest in a new business venture she expects will provide high returns over the next 5 years. Mawar ignores the request, instead securing conservative investments to provide sufficient income. Did Mawar most likely violate the CFA Institute Code of Ethics and Standards of Professional Conduct? （2012 Mock83） 37 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. Yes B. No, because the client’s objectives were met C. No, because the investment time frame does not match the investment horizon Solution: B B is correct because the client is the trust, not the beneficiary. Mawar followed Standard III (C) Suitability by managing the trust assets in a way that would likely result in a stable source of income while keeping the risk profile low, thereby complying with the investment objectives of the trust. Q58-1 Molly Burnett, CFA, is a portfolio manager for a fund that only invests in environmentally friendly companies. A multinational utility company recently acquired one of the fund’s best performing investments, a wind power company. The wind power company’s shareholders received utility company shares as part of the merger agreement. The utility has one of the worst environmental records in the industry, but its shares have been one of the top performers over the past 12 months. Because the utility pays a high dividend every three months, Burnett holds the utility shares until the remaining two dividends are paid for the year then sells the shares. Burnett most likely violated the CFA Institute Standard of Professional Conduct concerning:（2012 Mock83） A. suitability. B. disclosure of conflicts. C. independence and objectivity. Solution: A A is correct because the utility is not a suitable investment for a fund that only invests in companies with good environmental records. Continuing to hold this investment, therefore, was a violation of Standard III (C) Suitability. Q59-1 ★Gardner Knight, CFA, is a product development specialist at an investment band. Knight is responsible for creating collateralized debt obligations (CDOs) consisting of residential mortgage bonds. In the marketing brochure for his most recent CDO, Knight provided a list of the mortgage bonds that the CDO was created from. The brochure also states that “ an independent third party, the collateral manger, had sole authority over the selection of all mortgage bonds used as collateral in the CDO.” However, Knight met with the collateral manager and helped her select the bonds for the CDO. Knight is least likely to be in violation of which CFA Institute Standards of Professional Conduct? (Mock79-8) A. Suitability B. Conflicts of interest C. Communications with Clients and Prospective Clients Solution: A. There is no indication the investment is unsuitable for investors. Key points of Suitability： 38 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R73-1 When in an advisory relationship  know clients, suitable and under portfolio; when to a specific mandate, consistent with stated objectives and constraints; suitality doesn’t prevent from losing value.  Make a reasonable inquiry into a client or prospective client’s investment experience, risk and return objectives, and financial constraints prior to making any investment recommendation or taking investment action, must reassess and update regularly  Judge the suitability in the context of the client’s total portfolio R74-1 ★If unsolicited trade is known unsuitable:  refrain from making the trade, or  seek an affirmative statement from the client that suitability is not a consideration R75-1 Developing an Investment Policy  gather client information at the inception of the advisory relationship  Information should be incorporated into a written investment policy statement (IPS) R76-1 Updating an Investment Policy  repeated at least annually and also prior to material changes  Client should fully disclose complete financial portfolio, including those portions not managed by the member or candidate，如果客户不如实汇报，无法进行suitability analysis R77-1 Need for Diversification  An investment with high relative risk may be suitable in the context of the entire portfolio or when the client’s stated objectives contemplate speculative or risky investments R78-1 Managing to an Index or Mandate  invest in a manner consistent with the stated mandate  not responsible for any individual investor，Only those who have advisory relationship are responsible for individual clients R79-1 IPS  client identification—(1) type and nature of client, (2) the existence of separate beneficiaries, and (3) approximate portion of total client assets under management;  investor objectives—(1) return objectives and (2) risk tolerance;  investor constraints—(1) liquidity needs, (2) expected cash flows, (3) investable funds, (4) time horizon, (5) tax considerations, (6) regulatory and legal circumstances, (7) investor preferences, prohibitions, circumstances, and unique needs, and (8) proxy voting responsibilities and guidance;  performance measurement benchmarks R80-1 Regular updates.  Objectives and constraints should be maintained and reviewed periodically to reflect any changes in the client’s circumstances  Should regularly compare constraints with capital market expectations to arrive at an appropriate asset allocation.  Annual review is reasonable unless business or other reasons, such as a major change in market conditions, dictate more frequent review.  Should document attempts to carry out review if circumstances prevent it. 39 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R81-1 ★The suitability test procedures should require the investment professionals to look beyond the potential return of the investment and include the following:  an analysis on the impact on the portfolio’s diversification,  a comparison of the investment risks with the client’s assessed risk tolerance,  the fit of the investment with the required investment strategy. P11-1 Performance Presentation Q60-1 ★Sisse Brimberg, CFA, is responsible for performance presentations at her investment firm. The presentation that Sisse uses states her firm: (1) deducts all fees and taxes; (2) uses actual and simulated performance results; (3) bases the performance on a representative individual account. Based on the above information, which of the following is the most appropriate recommendation to help Brimberg meet the CFA Institute Standards of Professional Conduct in her performance presentations? She should present performance based on: A. a gross of fee basis. B. actual not simulated results. C. a weighted composite for all similar portfolios. Solution: C In order to meet their obligations under Standard III (D), members should present the performance of the weighted composite of similar portfolios rather than using a single representative or all accounts, so this is the best selection of the options provided. Q61-1 ★ABC Investment Management acquires a new, very large account with two concentrated positions. The firm's current policy is to add new accounts for the purpose of performance calculation after the first full month of management. Cupp is responsible for calculating the firm's performance returns. Before the end of the initial month, Cupp noticed that one of the significant holdings of the new accounts was acquired by another company, causing the value of the investment to double. Because of this holding, Cupp decided to account for the new portfolio as of the date of transfer, thereby allowing ABC Investment to reap the positive impact of that month's portfolio return（.原版书 Reading 2-34） A. Cupp did not violate the Code and Standards because the GIPS standards allow composites to be updated on the date of large external cash flows. B. Cupp did not violate the Code and Standards because companies are allowed to determine when to incorporate new accounts into their composite calculation. C. Cupp violated the Code and Standards because the inclusion of the new account produces an inaccurate calculation of the monthly results according to the firm's stated policies. Solution：C Cupp violated Standard III (D)-Performance Presentations when he deviated from the firm’s stated policies solely to capture the gain from the holding being acquired. Answer A is incorrect because the firm does not claim GIPS compliance and the GIPS standards require external cash 40 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 flows to be treated in a consistent manner with the firm’s documented policies. Answer B is incorrect because the firm does not state that it is updating its ocmposite policies. If such a change were to occur, all cash flows for the month would have to be reviewed to ensure their consistent treatment under the new policy. Q62-1 Which of the following is a recommended procedure to make performance presentation? A. To prepare a format presentation of performance to audience. B. To clearly disclose whether performance is gross of fee or net of fee. C. To present performance based on a representative portfolio. Solution: B To meet Standard III (D), members/candidates should include disclosures that fully explain the performance results being reported, such as gross of fee or net of fee. Q63-1 ★Sam Snead, CFA, is the founder and portfolio manager of the Everglades Fund. In its first year the fund generated a return of 30%. Building on the fund’s performance, Snead created new marketing materials that showed the fund’s gross 1-year return as well as the 3-, and 5-year returns which he calculated by using back-tested performance information. As the marketing material is used only for presentations to institutional clients, Snead did not mention the inclusion of back-tested data. According to the Standards of Practice Handbook, did Snead violate any CFA Institute Standards of Professional Conduct? A. No. B. Yes, because he did not disclose the use of back-tested data. C. Yes, because he failed to deduct all fees and expenses before calculating the fund’s track record. Solution：B The Standard III (D) Performance Presentation prohibits members/candidates from making any statements that misrepresent the performance achieved by them or their firms and requires every reasonable effort to be made to ensure that performance information is fair, accurate, and complete. By failing to identify the simulated performance results, Snead violated the standard. Snead should have disclosed the fact that the returns were generated only in one year of the fund’s operation and the other performance information is back-tested. . Q64-1 ★Paper was recently terminated as one of a team of five managers of an equity fund. The fund had two value-focused managers and terminated one of them to reduce costs. In a letter sent to prospective employers, Paper presents, with written permission of the firm, the performance history of the fund to demonstrate his past success. (原版书Reading2-39) A. Paper did not violate the Code and Standards. B. Paper violated the Code and Standards by claiming the performance of the entire fund as his own. C. Paper violated the Code and Standards by including the historical results of his prior 41 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 employer. Solution：B Paper has violated Standard III(D)—Performance Presentation by not disclosing that he was part of a team of managers that achieved the results shown. If he had also included the return of the portion he directly managed, he would not have violated the standard. Thus, answer A is incorrect. Answer C is incorrect because Paper received written permission from his prior employer to include the results. Q65-1 Danielle Deschutes, CFA, is a portfolio manager and part of a ten-person team managing an indexed stock portfolio for institutional accounts. A competing firm, South West Index Managers (SWIM), asks Deschutes to interview with them and to bring her performance history to the meeting. Deschutes informs her employer about the interview and receives written permission to bring the performance history of the stock portfolio with her. When Deschutes shows up for the interview at SWIM she discloses that the performance numbers represent the work of her team and describes the role of each member. To bolster her credibility, she also provides the names of institutional accounts and related assets constituting the portfolio. In her interview at SWIM, Deschutes least likely violated the CFA Institute Standards of Professional Conduct regarding: （mock 85） A. her contribution to the portfolio’s returns. B. the stock portfolio’s performance history. C. providing details on the institutional accounts. Solution：B B is correct because Standard III(D) Performance Presentation does not prohibit showing past performance of funds managed at a prior firm as part of a performance track record as long as showing that record is accompanied by appropriate disclosures about where the performance took place and the person’s specific role in achieving that performance, which has been done in this case. Key points of Performance presentation: R82-1 Should be accurate, complete and fair;  Not misrepresent past performance or reasonably expected performance;  不可以说明或暗示有能力与过去业绩相同的收益;  Include terminated portfolio as part of performance history  weighted rate of return rather than a single performance R83-1 If the presentation is brief,  make available to clients and prospects, on request, the detailed information supporting that communication.  Best practice: brief presentations include a reference to the limited nature of the information provided. R84-1 推荐Apply GIPS standards，如果不遵循GIPS也可以  considering the knowledge and sophistication of the audience to whom a performance 42 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 presentation is addressed,  presenting the performance of the weighted composite of similar portfolios rather than using a single representative account,  including terminated accounts as part of performance history with a clear indication of when the accounts were terminated,  including disclosures that fully explain the performance results being reported：用模型模拟出来的业绩？Performance record from prior entity？gross of fees (investment management fee), net of fees, or after tax？  maintaining the data and records P12-1 Preservation of Confidentiality Q66-1 Jimmy Lee, CFA, is an investment banker in a country with strict confidentiality laws. He is working on an acquisition for Panda Mining Co. (PMC). While performing due diligence, Lee noticed that PMC had a number of questionable offshore partnerships. He investigated the legality of the partnerships and found evidence of illegal activity. According to the Standards of Professional Conduct, Lee’s best course of action would be to: A. Alert CFA institute. B. consults outside counsel. C. notify regulatory authorities. Solution: B Members must keep client information confidential and comply with applicable laws. If the applicable law requires disclosure of client information in certain circumstances, members must comply with the law. If applicable law requires members to maintain confidentiality, even if the information concerns illegal activities on the part of the client, members should not disclose such information. Lee’s best course of action would be to consult with outside counsel to determine applicable law. Q67-1 ★Townsend was recently appointed to the board of directors of a youth golf program that is the local chapter of a national not-for-profit organization. The program is beginning a new fund-raising campaign to expand the number of annual scholarships it provides. Townsend believed that many of her clients made annual donations to charity. The next week in her regular newsletter to all clients, she included a small section discussing the fund¬raising campaign and her position on the organization's board. Which of the following is correct regarding to Townsend?（原版书 Reading 2-40） A. Townsend did not violate the Code and Standards. B. Townsend violated the Code and Standards by soliciting donations from her clients through the newsletter. C. Townsend violated the Code and Standards by not getting approval of the organization before soliciting her clients. Solution: A 43 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Townsend did not provide any information about her clients to the leaders or managers of the golf program; thus, she has not violated Standard III (E) Preservation of Confidentiality. Providing contact information about her clients for a direct-mail solicitation would have been a violation.  Answer B is incorrect because the notice in the newsletter did not violate Standard III (E). Answer C is incorrect because the golf program’s fund-raising campaign had already begun, so discussing the opportunity to donate was appropriate. Q68-1 Lewis McChord, CFA, a research analyst, covers the auto industry at an investment bank. McChord recently read a report on an auto manufacturing company written by Pierce Brown. Brown’s report provided extensive coverage of the company’s newly launched products indicating that sales volume, not yet publicly available, would raise future profits. Intrigued by the report, McChord called a senior executive at the company whom she has known personally for years. The officer gave her specific details on new vehicle sales, indicating that profits would double in the current quarter. McChord added this data to Brown’s report and then circulated it within her firm as her own report. McChord least likely violated which of the following CFA Institute Code of Ethics and Standards of Professional Conduct?（Mock92-2） A. Misrepresentation B. Preservation of Confidentiality C. Material Nonpublic Information Solution: B B is correct because Standard III (E) Preservation of Confidentiality has not been violated. The analyst has a personal relationship with the officer of the auto company, and he is not a current, former, or prospective client, so there is no obligation for the analyst to maintain client confidentiality. However, the analyst did violate Standard I(C) Misrepresentation when she represented another analyst’s work as her own. In addition, the analyst violated Standard II(A) Material Nonpublic Information by including data in her research report on sales figures, which were material and nonpublic. Key points of Preservation of confidentiality： R85-1 keep information about current, former, and prospective clients confidential unless  The information concerns illegal activities on the part of the client;  Disclosure is required by law; or  The client or prospective client permits disclosure of the information. R86-1 III(E) is applicable when  receiving information because of special ability to conduct a portion of the client’s business or personal affairs, and  receiving information that arises from or is relevant to that portion of the client’s business that is the subject of the special or confidential relationship. R87-1 Status of Client  maintain the confidentiality of client records even after the client relationship has 44 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 ended. If a client or former client expressly authorizes the disclosure, may follow the terms of the authorization and provide the information. R88-1 遵守法律规定  If applicable law requires disclosure of client information in certain circumstances, members and candidates must comply with the law.  If applicable law requires maintaining confidentiality, even if the information concerns illegal activities on the part of the client, should not disclose.  When in doubt, should consult with compliance personnel or legal counsel before disclosing confidential information about clients. R89-1 Electronic Information and Security  not require members or candidates to become experts in information security technology, but they should have a thorough understanding of the policies of their employers. R90-1 When permissible under applicable law, shall consider the PCP an extension of themselves when requested to provide information about a client in support of a PCP investigation into their own conduct  Encouraged to cooperate with investigations into the conduct of others.  Any information turned over to the PCP is kept in the strictest confidence.  Will not be considered in violation of this standard by forwarding confidential information to the PCP. R91-1 The simplest, most conservative and effective way to comply with III(E) is to avoid disclosing any information received from a client except to authorized fellow employees who are also working for the client. R92-1 In some instances, however, a member/candidate may want to disclose information received from clients outside the scope of the confidential relationship and does not involve illegal activities. Before making such a disclosure, a member/candidate should ask the following:  In what context was the information disclosed? If disclosed, is the information relevant to the work?  Is the information background material that, if disclosed, will enable better service to the client? P13-1 Loyalty to Employer Q69-1 An employee is planning to leave his current employer and established a competitive company. He did not sign any non-compete agreement with his employer. According to the Standards, the employee should: A. Take advantage of client list of his current employer. B. Communicate with the clients of his current employer without using client list. C. Communicate with the clients one year after his resignation. Solution: B Standard IV (A) Duties to Employers prohibits soliciting employer’s clients prior to leaving. However simple knowledge of names of the clients is not confidential. Therefore, employees can 45 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 contact clients as long as they do not use any materials from his former employer, or have signed a non-compete agreement. Q70-1 Scott Campbell, CFA, developed a complex quantitative model for selecting mortgage bonds. Campbell was careful to document in writing all assumptions in the model and his reasoning for the assumptions. Another firm offered Campbell a position leading the startup of a mortgage bond research department. In his new position, Campbell created a similar model and supporting documents. Does Campbell violate any CFA Institute Standards? A. No. B. Yes, with respect to record retention. C. Yes, with respect to loyalty to employer. Solution: A The Standards do not impose a prohibition on the use of experience or knowledge gained at one employer from being used at another employer. As records created on behalf of an employer are the property of the firm and not the member, Campbell must take care not to use the property or records of his former employer when creating a model for his new employer. Q71-1 ★Jan Loots, CFA, quit his job as a portfolio manager at an investment firm with whom he had a non-solicitation agreement he signed several years ago. Loots received permission to take his investment performance history with him and also took a copy of the firm’s software-trading platform. Subsequently, Loots sent out messages on social media sites announcing he was looking for clients for his new investment management firm. Access to Loots’ social media sites is restricted to friends, family, and former clients. Loots least likely violated the CFA Institute Standards of Professional Conduct concerning his: （2012 Mock84） A. trading software. B. non-solicitation agreement. C. investment performance history. Solution: C C is correct because the portfolio manager received permission to use his investment performance history from his prior employer. The member violated his non-solicitation agreement by indicating his availability to new clients on several social media sites accessible by clients of his former employer, a violation of Standard IV(A) Loyalty, because he did not act for the benefit of his former employer. In this case, the member may cause harm to his former employer if his weekend messages result in clients moving to his new business from his former employer. The member also violated this standard by taking his employer’s property, trading software. Q72-1 Tonya Tucker, CFA, is a financial analyst at BC Corporation (BC). BC has numerous subsidiaries and is actively involved in mergers and acquisitions. Tucker analyzes HR Corporation (HR) and tells the CEO of BC that the acquisition of HR would be a good fit for 46 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 BC. After her discussion with the CEO, Tucker purchases 100,000 shares of HR at $200 per share. BC does not have any pre-clearance procedures, so the next time she meets the CEO, Tucker mentions she is a stockowner of HR. The CEO thanks her for this information but does not ask for any details. Two weeks later, Tucker sees a company-wide email from the CEO announcing BC’s acquisition of HR for $250 a share. Regarding her purchase of HR stock, Tucker most likely violated the CFA Institute Standards of Professional Conduct concerning: A. Loyalty. B. Market Manipulation. C. Material Nonpublic Information. Solution: A A is correct because even though the company does not have a stock pre-clearance procedure, trading the stock of a company the analyst recommended as an acquisition candidate is an act that violates Standard IV(A) Loyalty ,as she did not give her Employer the opportunity to take advantage of her skill/recommendation prior to buying the shares for her own portfolio. Q73-1 Elbie Botha, CFA, an equity research analyst at an investment bank, disagrees with her research team’s buy recommendation for a particular company’s rights issue. She acknowledges the recommendation is based on a well-developed process and extensive research but feels the valuation is overpriced based on her assumptions. Despite her contrarian view, her name is included on the research report to be distributed to all of the investment bank’s clients. To avoid violating any CFA Institute standards, it would be least appropriate for Botha to undertake which of the following?（2013 mock morning session） A. Leave her name on the report B. Insist her name is removed from the report C. Issue a new report based on her conclusions Solution: C C is correct because Standard IV (A) calls for employees to be loyal to their employer by not causing harm. If Botha released a contradictory research recommendation report to clients, it could possibly cause confusion amongst clients and embarrassment to the firm. Q74-1 ★Marc Davidson, CFA, works as a trust specialist for Integrity Financial. Davidson starts a part-time consulting business providing advice to trustees for a fee. He conducts this business on his own time and therefore did not notify Integrity Financial of his consulting. Davidson asks his assistant to compile a list of Integrity's clients and their contact information. The following month, Davidson is offered a similar role at Integrity's largest competitor, Legacy Trust Services, Inc. After he begins working at Legacy, his new manager arranges for him to meet with a number of prospective clients, many of whom are clients of Integrity. After meeting with Davidson, a number of former Integrity clients decide to transfer their business to Legacy. Did Davidson's action violate the Code and Standards?(2014 Mock 98-10) A. Yes, both Davidson's part-time consulting business and his meetings with Integrity clients 47 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 are violations of the Standards B. Yes, Davidson's part-time consulting business is a violation of the Standards C. No Solution: B Members and candidates are required to disclose any compensation arrangement to their employers that involves performing tasks or services that their employers can charge for. Disclosure is required even if the activities occur during non-work hours. Key points of Loyalty to employer： R93-1 Core rule is not to injure the firm, deprive of its profit, or deprive of the employee’s advantage of ability and skills R94-1 “Undertaking independent practice” means engaging in competitive business, as opposed to making preparations to begin such practice. R95-1 Should abstain from independent competitive activity that could conflict with the interests of their employer，必须告知雇主：  types of services they will render to prospective independent clients,  the expected duration of the services,  the compensation for the services  没有得到雇主同意不能进行independent practice R96-1 投资分析师，同时担任市长要披露吗？兼职教书可以吗？——考虑是否太耗时间 R97-1 在职揭发(whistleblowing). 如果为保护客户利益、市场诚信和其他非个人利益目标，是可以不将雇主利益放在首位的；In such instances, activities that would normally violate a member’s/candidate’s duty to his/her employer (such as contradicting employer instructions, violating certain policies and procedures, or preserving a record by copying employer records) may be justified. R98-1 ★独立的合同签约人(independent contractors)必须遵守与雇主所达成的协议 (oral or written agreement) R99-1 在辞职前，雇员不可以做的行为包括但不限于以下所列：  盗用(misappropriation)客户的商业秘密(trade secrets)；  盗用(misappropriation)client lists，Memorizing client lists (name and address) is not permitted, unless the info does not come from the records of former employer or violate noncompete agreement  滥用(misuse)保密信息(confidential information)；  辞职前劝诱(solicit)客户转移业务；  盗用(misappropriation)客户资料；  Self-dealing (appropriating for one’s own property a business opportunity or information belonging to one’s employer) R100-1 ★仅仅知道原雇主的客户名字是不属于机密unless deemed such by contract or law; R101-1 在雇主那儿学习的工作经验和技能是可以使用的, even if contract exists（.比如和原雇主签订合同说离职之后不能使用这些技能，但是实际是可以用的，因为这个合同本身就存在问题）；但是，在职过程中自己开发的模型不可以带走。 R102-1 自己电脑上或者纸质文件保存的工作资料要删除或归还公司 48 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R103-1 推荐公司执行Competition policy：  Must understand any restrictions placed by the employer on offering similar services outside the firm while still employed.  If an employer elects to have its employees sign a noncompete agreement, should ensure that the details are clear and fully explained prior to signing the agreement. R104-1 推荐公司执行Termination policy：  Should establish clear procedures regarding the resignation process, including addressing how the termination will be disclosed to clients and staff.  May also outline the procedures for transferring responsibilities of ongoing research responsibilities and account management R105-1 推荐公司执行Incident-reporting procedures  Should be aware of firm’s policies related to whistleblowing and encourage firms to adopt industry best practices. Many firms are required by regulatory mandates to establish confidential and anonymous reporting procedures that allow employees to report potentially unethical and illegal activities in the firm R106-1 Firms are encouraged to adopt a standardized classification structure for employees and indicate how each of the policies applies to each employee class P14-1 Additional Compensation Arrangements Q75-1 ★Alexandra Zagoreos, CFA, is the head of a government pension plan. Whenever Zagoreos hires a money management firm to work with the pension plan, she finalizes the deal over dinner at a nice restaurant. At these meals, Zagoreos also arranges for the money manager to provide her payments equal to 10% of the management fee the manager receives from the pension plan. Zagoreos keeps half of the payments for her own use and distributes the remainder as cash incentives to a handful of her most trusted staff. Zagoreos least likely violated which of the following CFA Institute Code of Ethics and Standards of Professional Conduct? A. Referral fees. B. Loyalty, Prudence and Care. C. Additional Compensation Arrangements. Solution：A As the money should not be accepted without receiving written consent from all parties involved, therefore Zagoreos is in violation of Standard IV (B) Additional Compensation Arrangements. However, there is no indication that the member has received compensation, consideration, or benefit received from, or paid to, others for the recommendation of products or services and therefore has not violated Standard VI (C) Referral Fees. Q76-1 Rachel Pederson, CFA, has managed the account of Olga Stefansson for the past decade and has a very good relationship with her client. Stefansson has a beach house in the Bahamas and offers Pederson and her family two free weeks at the house as a reward for the excellent returns generated in her account. Pederson is so busy at work that she does not tell anyone where she is going for vacation. When accepting Stefansson's offer, 49 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Pederson least likely violates the CFA Institute Standard relating to: A. Loyalty to Employer. B. Disclosure of Conflicts. C. Additional Compensation Arrangements. Solution：A The Standards require that members not accept gifts or compensation that might reasonably compete with their employer’s interest unless they obtain written consent from all parties involved. Arrangements such as that offered to Pederson may cause a conflict of interest or result in partiality that could impede Pederson’s independence and objectivity. By the way, all the conflict should be disclosed in order to maintain independence and objectivity if the conflict can’t be avoided. Q77-1 ★Buta Singh, CFA, has a large extended family and manages the portfolios of several family members. Singh does not charge the family members a management fee, but receives a small percentage of each portfolio’s profits. Singh accepted a position as portfolio manager for Bhotmange Investments to manage high net worth accounts .As the family portfolios were not normal client relationships, Singh did not inform his new employer of his side activity .With respect to the family portfolios; did Singh violate any CFA Institute Standards of Professional Conduct? A. No. B. Yes, because he failed to obtain consent from his employer. C. Yes, because he failed to disclose his new employment to his existing clients. Solution: B Members who plan to engage in independent practice for compensation should not render services until receiving written consent from their employer. Q78-1 Lin YAO, an analyst in a brokerage firm, can get a bonus at the end of every year based on the performance of the firm. Besides his salaries got from his own firm, he can also get some additional compensation from his clients in writing recommendations and referral fee from another companies. Lin disclosed all of the compensation, including his bonus, additional compensation and referral fees, and got permission from all parties involved. Which of these actions violate standards? A. None of them B. Additional compensation from clients who he is making a recommendation C. Referral fees Solution: A He has disclosed all arrangement and got permission from all parties involved. Key points of Additional compensation arrangement： R107-1 礼物包括从顾客或其他第三方收取的直接和间接的好处；只要造成了利益冲突，就50 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 不能收，除非obtain written consent from all parties involved R108-1 所有安排必须得到雇主的同意(No arrangement without the employer's approval)，从雇主之外收取的其他收益必须立即以书面形式(immediate written report)向雇主说明所收到收益和服务的详细情况 (amount and nature of consideration)； R109-1 披露的目的在于：雇主有权知道雇员的报酬情况来评估服务的真实成本和对雇员忠诚和客观的影响。 R110-1 Members/candidates must obtain permission for additional compensation/benefits because such arrangements may affect loyalty and objectivity and create potential conflicts of interest. disclose consent violate √ × IV(B) √ √ -- × × IV(B) VI(A) I(B), R111-1 make an immediate written report to employer specifying any compensation they propose to receive for services in addition to the compensation or benefits received from their employer R112-1 The details of the report should be confirmed by the party offering the additional compensation, including performance incentives by clients R113-1 The written report should state the terms of any agreement under which a member or candidate will receive additional compensation  Include the nature of the compensation, the approximate amount of compensation, and the duration of the agreement P15-1 Responsibility of Supervisors Q79-1 ★Wayne RUBY, a CFA Charterholder, is a director of brokerage department of a large investment bank. Someone told him that a member in his team, Max CHANG, often front-ran their clients. However, Max assured that the whistle-blower wanted to take his place. Wayne was going to lead an investigation on the affair. Before he could arrive at any conclusion, he permitted Max to stay on his current position with more closely supervision. Did Wayne comply with the Standards? A. Yes, because he was making an investigation. B. Yes, because he had strengthened the supervision. C. No, because he just permitted Max to stay on the current position before a conclusion was arrived. Solution: B According to Standard IV (C) Responsibilities of Supervisors, once a supervisor learns that an employee has violated or may have violated the law or the Code and Standards, the supervisor must promptly initiate an investigation to ascertain the extent of the wrongdoing while placing limitations on the wrongdoer’s activities. Q80-1 According to the Standards of Practice Handbook, a member with supervisory responsibilities violates the CFA Institute Standards of Professional Conduct when: 51 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. delegating supervisory duties. B. failing to prevent violations of the CFA Code and Standards. C. failing to establish and implement written compliance procedures. Solution: C Members with supervisory responsibility must make reasonable efforts to detect violations of laws, rules, regulations, and the Code and Standards. They exercise reasonable supervision by establishing and implementing written compliance procedures. Q81-1 ★Ileana Inkster, CFA, was recently offered a senior management position with the trust department of a regional bank. The department is new but the bank has plans to expand it significantly over the next few months; Inkster has been told she needs to aid that growth and has been asked to have her department conduct educational seminars and then pursue new business by follow-up contacts with the attendees. Inkster notices that advertisements for upcoming seminars, prepared by the marketing department, do not mention any investment products. The ads indicate attendees can "learn how to immediately earn $100,000 to their net worth." What is the first action Inkster most likely should take to avoid violating any CFA Institute Standard of Professional Conduct? (Mock79-16) A. Decline to accept the new position, B. Accept the position and revise the marketing material. C. Accept the position but bring the lack of procedures to the attention of senior management. Solution: A. The prospective supervisor's first step should be to bring the inadequate compliance system to the attention of the firm's senior managers and recommend corrective action before taking the position. This may be accomplished by the supervisor taking on an interim consulting role with the bank in order to implement adequate procedures before taking on the supervisory role. Q82-1 ★Kim Klausner, CFA, manages several hundred employees as the head of research for a large investment advisory firm. Klausner is a former securities regulatory official who, until recently, ensured that his department’s compliance program always met or exceeded those of its competitors. Klausner has delegated his supervisory responsibilities concerning compliance issues to Sue Chang. Klausner informed Chang that her responsibilities include ensuring that the firm has appropriate compliance procedures and is making reasonable efforts to detect and prevent violations of Rules, Regulations, and the Code and Standards. Klausner most likely violated the CFA Institute Standards of Professional Conduct by not telling Chang to consider（2012 Mock85） A. firm policies. B. legal restrictions. C. industry standards. Solution: B B is correct because a supervisor’s responsibilities under Standard IV (C) Responsibilities of 52 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Supervisors include instructing those subordinates to whom supervision is delegated about methods to prevent and detect violations of laws, rules, regulations, and the Code and Standards. Laws would also include legal restrictions. Q83-1 A member or candidate who has supervisory responsibility:（Notes P76） A. should place particular emphasis on enforcing investment-related compliance policies B. is responsible for instructing those to whom he has delegated authority about methods to detect and prevent violations of the law and the Code and Standards C. has complied with the Standards if she reports employee violations to upper management and provides a written warning to the employee to cease such activities Solution: B Members or candidates may delegate supervisory duties to subordinates but remain responsible for instructing them about how to detect and prevent violations. Reporting the violation and warning the employee are not sufficient to comply with Standard IV(C) Responsibilities of Supervisors. The supervisor must also take steps to prevent further violations while she conducts an investigation, such as limiting the employee's activity or increasing her monitoring of the employee. Supervisors should enforce investment-related and non-investment related policies equally. Q84-1 Abe Seneca, CFA, supervises a team of analysts who create index funds for institutional investors. When Seneca provides sales demonstrations to potential clients simulating the fund’s performance, the scenarios he prepares show outcomes based on assumptions reflecting upside bias and positive risk assessments. Gail Tremblay, CFA, an analyst in Seneca’s group, observes that the actual performance of these index funds is less than indicated in the scenario outcomes shown in the sales meetings. Seneca least likely violated which of the following CFA Institute Code of Ethics and Standards of Professional Conduct?（MOCK92-5） A. Loyalty B. Performance Presentation C. Responsibilities of Supervisors Solution: C C is correct because Standard IV (C) Responsibilities of Supervisors has not been violated; Seneca is not responsible for the supervision of any employees when he makes sales demonstrations to clients because he prepared the material himself. Seneca violated Standard IV (A) Loyalty by misleading potential investors on the performance they might achieve with the index funds, thereby causing reputational risk to his employer Seneca has also violated Standard III (D) Performance Presentation because the sales demonstrations he conducts do not provide a fair and accurate representation of performance that clients are likely to experience. Q85-1 ★Francesca Ndenda, CFA, and Grace Rutabingwa work in the same department for New Age Managers, with Rutabingwa reporting to Ndenda. Ndenda learns that Rutabingwa received a Notice of Enquiry from the Professional Conduct Program at CFA Institute 53 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 regarding a potential cheating violation when she sat for the CFA exam in June. As Rutabingwa's supervisor, Ndenda is afraid that Rutabingwa's behavior will be seen as a violation of the Code and Standards. Does Ndenda most likely have cause for concern? (2014 Mock 99-4) A. No, not until Rutabingwa is found guilty of cheating B. No, because her responsibilities do not apply C. Yes Solution: B A supervisor's responsibilities relate to detecting and preventing violations by anyone subject to their supervision or authority regarding activities they supervise. Ndenda had no way of detecting and/or preventing Rutabingwa from cheating during the CFA exam, if in fact that is what she did, because it was an event she did not attend. Q86-1 ★Madeline Smith, CFA, was recently promoted to senior portfolio manager. In her new position, Smith is required to supervise three portfolio managers. Smith asks for a copy of her firm's written supervisory policies and procedures but is advised that no such policies are required by regulatory standards in the country where Smith works. According to the Standards of PracticeHandbook, Smith's most appropriate course of action would be to: (2014 Mock 99-11) A. decline to accept supervisory responsibility until her firm adopts procedures to allow her to adequately exercise such responsibility. B. require her firm to adopt the CFA Institute Code of Ethics and Standards of Professional Conduct. C. require the employees she supervises to adopt the CFA Institute Code of Ethics and Standards of Professional Conduct. Solution: A According to guidance for Standard (IV(C), if a member cannot fulfill supervisory responsibilities because of the absence of a compliance system or because of an inadequate compliance system, the member should decline in writing to accept supervisory responsibility until the firm adopts reasonable procedures to allow the member to adequately exercise such responsibility. Key points of Responsibility of Supervisor： R114-1 make reasonable efforts to detect and prevent violations by anyone subject to their supervision R115-1 通过establishing and implementing the written compliance system and ensuring such system is followed through periodic review来执行reasonable supervision。 R116-1 在建立制度时，必须明确：What an adequate system is。 R117-1 如果将管理的职责委托给（delegate）他人，管理者不能免除监督管理的职责，且必须instruct 被委托的人how to detect and prevent the violations of laws,rules and code。 R118-1 对于inadequate的管理制度，管理者应提请上层注意并提出改进(corrective)建议。 54 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R119-1 如果由于不存在（nonexistent）制度或制度不完善(poor)，管理者必须以书面形式拒绝接受管理职责 until the firm adopts adequate system R120-1 Once knowing a potential violation, supervisor must promptly initiate an investigation.  Relying on employee’s statements or assurances that the wrongdoing will not recur is not enough.  Reporting the misconduct up the chain of command and warning the employee to cease the activity are also not enough.  Should take steps to ensure that the violation will not be repeated, by placing limits on the employee’s activities or increasing the monitoring of the employee’s activities R121-1 Detection Procedures  If adopted reasonable procedures and took steps to institute an effective compliance program, may not violate IV(C) if he does not detect violations that occur despite these efforts.  May violate IV(C) if he knows or should know that the procedures designed to detect and prevent violations are not being followed R122-1 Enforcement of Non-Investment-Related Policies.  Those who have supervisory responsibility should enforce policies related to investment and non-investment-related activities equally.  Establish policies related to attendance and acceptable workplace actions, such as mandatory vacations for specific positions. R123-1 Adequate procedure  Be clearly written and tailored to the firm’s operations  In plain language, easy to understand;  Designate a compliance officer;  Describe hierarchy of supervision and assign duties among supervisors;  Create a system of checks and balances;  Outline the scope of the procedures and procedures to document the monitoring and testing of compliance procedures;  Outline permissible conduct;  Delineate procedure for reporting violations and sanctions R124-1 Once the compliance program is instituted, the supervisor should:  Disseminate the contents of the program to personnel;  Periodically update procedures to ensure that the measures are adequate under the law;  Continually educate personnel regarding compliance procedures;  Issue periodic reminders of procedures to personnel;  Incorporate professional conduct evaluation in employee’s performance review;  Review the actions of employees;  Take steps to enforce procedures once violation occurred R125-1 Once violation is discovered, a supervisor should  Promptly respond;  Thoroughly investigate to determine the scope of the wrongdoing;  Increase supervision or place appropriate limitations on the wrongdoer pending the 55 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 outcome of the investigation P16-1 Diligence and Reasonable Basis Q87-1 ★★Meshack Bradovic, CFA, was recently hired as a credit analyst at a credit rating agency whose major clients include publicly listed companies on the local stock exchange. One of the clients is preparing to issue new bonds to finance a major factory project. Analysts are speculating that without the new factory the company would not survive the onslaught of competition from increasing imports; therefore, the company is counting on an upgraded credit rating to enhance the subscription level of the issue. Bradovic’s research suggests the creditworthiness of the company has severely deteriorated over the last year due to negative operating cash flows. Without conducting extensive research, Bradovic’s boss puts pressure on him to upgrade the credit rating to an investment grade rating. What course of action is most appropriate for Bradovic to prevent any violation of the CFA Code or Standards? A. Quit his position with the firm. B. Upgrade the rating but note his objections in writing. C. Disassociate with the credit rating report, the bond issue and the client. Solution A The boss’ insistence that all credit ratings be given an investment grade rating irrespective of the analysis undertaken indicates a systemic disregard for due diligence, reasonable basis and true representation. This shows a total disregard for the CFA Standards. Bradovic’s best course of action is to resign, as the company’s current practice of giving false credit ratings is likely to continue. Q88-1 ★Joyce La Valle, CFA is a portfolio manager at a global bank. La Valle has been told she should use a specific vendor for equity investment research that has been approved by the bank's headquarters. As La Valle is located in a different country, she is uncomfortable with the validity of the research provided by this vendor when it applies to her country and would like to use a local vendor on whom she has conducted due diligence. Which of the following actions concerning the research vendor should La Valle most likely take to avoid violating the CFA Institute Standards of Professional Conduct? A. Use the local research vendor. B. Use the bank-approved research vendor. C. Use both the local and the bank-approved research vendors. Solution: A When a member has reason to suspect that either secondary or third-party research or information comes from a source that lacks a sound basis, he/she must not rely on that information as indicated by Standard V(A) Diligence and Reasonable Basis. Q89-1 ★★Kirsten Kelso, CFA, is a research analyst at an independent research firm. Kelso is part of a team of analysts who focus on the automobile industry. Recently, Kelso 56 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 disagreed with two research "sell" recommendations written by her team even though she felt confident the research process was properly conducted. In discussions with several clients, Kelso states "even though my name is on the sell reports, these stocks are a buy because sales and share prices for both auto companies will rise significantly due to strong demand for their vehicles." Concerning the "sell" recommendations, which of Kelso's following actions would most likely violate the CFA Institute Standards of Professional Conduct? (Mock79-7) A. Dissociating from the report B. Distinguishing between fact and opinion C. Sharing her personal opinion of the stocks Solution: C. The analyst can express her disagreement with the team by documenting her difference of opinion, but it is inappropriate for the analyst to make selective disclosure. Members and candidates must make every effort to treat all individual and institutional clients in a fair and impartial manner. Q90-1 ★Sallie Lewis, CFA, is a research analyst covering the mining industry. Along with other analysts, Lewis visited the primary mine of Gold Rush Mines (GR). During the visit, a major piece of equipment failed and Lewis overheard an unidentified employee state that production would be stalled for six months. Lewis immediately filed a sell recommendation on GR without any additional research. Has Lewis violated any CFA Institute Standards? A. No. B. Yes, with respect to diligence and reasonable basis. C. Yes, with respect to material nonpublic information. Solution: B Lewis must investigate the reliability of the information before making an investment recommendation based on the information. Q91-1 After work each day, Shinichi Takada, CFA, runs a popular Internet blog where he comments on micro-cap stocks. The blog includes biology of Takada with his education and employment history. He receives no compensation for the blog. On the blog, Takada recommends purchases and sales of stocks based upon astrology. When blogging, Takada least likely violates CFA Institute Standard relating to: A. Fair Dealing. B. Loyalty, Prudence, and Care. C. Diligence and Reasonable Basis. Solution: A Takada’s use of astrology as a research methodology violates the Standards relating to Loyalty, Prudence, and Care as well as Diligence and Reasonable Basis. His research methodology and blog may also reflect poorly on his employer and cause the employer harm. Takada is least likely 57 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 to violate the Standard relating to Fair Dealing because the blog is a method of mass communication that makes Takada’s investment recommendations available to all readers simultaneously. Q92-1 ★★Rodney Rodrigues, CFA, is responsible for identifying managers to manage specific asset classes for his firm. In selecting external advisers or subadvisers, Rodrigues reviews the adviser’s investment process, established code of ethics, the quality of their published return information, and their compliance and internal control procedures. In completing his review, Rodrigues most likely violated the CFA Institute Standards of Professional Conduct regarding his due diligence on: （2012 Mock85） A. adherence to strategy. B. performance measures. C. internal control procedures. Solution: A A is correct because Standard V (A) Diligence and Reasonable Basis applies to the level of review necessary in selecting an external adviser or subadviser and would include reviewing the adviser’s adherence to its stated strategy. Q93-1 ★David Gunard, CFA, is an equity analyst at Curry Securities. He received an assignment to analyze Enterloch Corporation, of which the stocks were held by several of Curry’s clients. Gunard completed a thorough, fundamental analysis of Enterloch. Given his analysis and the sharp rise in the company’s stock price during the past year, Gunard concluded that the shares were substantially overvalued. After the approval of the report by Gunard’s supervisor, but prior to the release, Gunard called his father to suggest that he sell his Enterloch shares immediately. Gunard’s father informed him that he had disposed of his holding. According to the Standards of Practice Handbook, has Gunard violated the CFA Institute Standard of Professional Conduct relating to: Duties to clients? Reasonable basis? A. No Yes B. Yes No C. Yes Yes Solution: B By communicating this information to his father prior to the release of the report, Gunard failed to put the firm’s clients’ interests above his own. Nothing in the question indicates that he did not have a reasonable basis for his recommendation; he conducted a thorough fundamental analysis and his report was approved. The fact that Gunard’s father had disposed of the shares does not negate the fact that Gunard violated a duty to the firm’s clients. Q94-1 Alexandra Smirnov, CFA, is a pension consultant to the Springwell Pension Fund. After reviewing Springwell’s three-year performance presentation showing the fund’s underperformance relative to its investment objectives and agreed benchmarks, Smirnov recommends the fund hire new asset managers. Smirnov proposes the fund hire Newday 58 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Managers on the basis of recent meetings she has had with the firm. Lengthy discussions at these meetings included Newday’s investment strategy, its suitability to manage pension funds, its ability to adhere to its stated strategy, the firm’s historical investment performance, and its adoption of the CFA Institute Code of Ethics and Standards of Professional Conduct. Smirnov turned down Newday’s offer of an introduction fee when recommending its services but did not inform Springwell trustees of this offer. Which of the following CFA Institute Standards does Smirnov most likely violate?（MOCK92-14） A. Referral Fees B. Loyalty, Prudence, and Care C. Diligence and Reasonable Basis Solution: C C is correct because Smirnov violated Standard V (A) Diligence and Reasonable Basis because she recommended an external adviser without first understanding the adviser’s compliance and internal control procedures. She was correct in seeking to understand the proposed fund manager’s code of ethics, quality of performance returns, and ability to adhere to its stated investment strategy, but in order to complete her work, she also needed to perform due diligence regarding the firm’s compliance and internal control procedures. Q95-1 Delaney O'Keefe, a CFA candidate, is a portfolio manager at Bahati Management Company. The company is considering investing offshore for the first time, particularly in North America, on behalf of its clientele, who are all high-net-worth individuals. O'Keefe does not have experience in offshore investments, so she hires Mark Carlson, CFA, of Carlson Consulting, on the sole basis that he is a CFA charterholder, to undertake due diligence exercises on the top 10 portfolio managers in North America, ranked by assets under management (AUM). To avoid violating any Code and Standards, O'Keefe should most likely undertake(2014 Mock 98-9) A. a sampling of the suitability of North America for her clients. B. a due diligence exercise on Mark Carlson and Carlson Consulting. C. the due diligence exercise on the top 10 asset managers herself. Solution: B O'Keefe can delegate a due diligence exercise to a third party but must ensure the person or company hired to do so is competent and has the skills necessary to undertake a thorough and appropriate analysis. Although Carlson may be qualified to undertake this assignment, O'Keefe needs to take the necessary steps to ensure that he is indeed qualified. Just because a person is a CFA charterholder does not necessarily mean he or she is appropriate for the assignment. Q96-1 Lawrence Hall, CFA, and Nancy Bishop, CFA, began a joint research report on Stamper Corporation. Bishop visited Stamper's corporate headquarters for several days and met with all company officers. Prior to the completion of the report, Bishop was reassigned to another project. Hall used his and Bishop's research to write the report but did not include Bishop's name on the report, because he did not agree with and changed Bishop's conclusion included in the final report. According to the Standards of Practice 59 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Handbook, did Hall most likely violate any CFA Institute Standards of Professional Conduct?(2014 Mock 98-14) A. Yes, with respect to diligence and reasonable basis B. Yes, with respect to misrepresentation C. No Solution: C Members are in compliance with CFA Institute's Standard V(A)-Diligence and Reasonable Basis if they rely on the research of another party who exercised diligence and thoroughness. Because Bishop's opinion did not agree with the final report, disassociating her from the report is one way to handle this difference between the analysts. Key points of Diligence and Reasonable basis： R126-1 The requirements for research conclusions vary in relation to the role in investment decision-making process, but must make reasonable efforts to cover all pertinent issues when arriving at a recommendation R127-1 Provide supporting information to clients  enhance transparency R128-1 Defining Diligence and Reasonable Basis  In providing investment service, often use a variety of resources  考虑：current stage of the industry’s business cycle；company’s operating and financial history；mutual fund’s fee structure and management history；output and potential limitations of quantitative models；quality of the assets included in a securitization；appropriateness of selected peer-group comparisons  Can base decisions only on the information available at the time the decision is made. The steps taken in developing a diligent and reasonable recommendation should minimize unexpected downside events. R129-1 Secondary or Third-Party Research  检查Criteria in forming an opinion on whether research is sound，If suspect the soundness, must not rely on that information  May rely on others in the firm to determine soundness and use the information in good faith assuming the due diligence process was deemed adequate.  Should verify that the firm has a policy about the timely and consistent review of approved research providers to ensure the quality of the research.  If such policy not in place, should encourage development and adoption R130-1 ★Quantitatively Oriented Research.  Need to have an understanding of the parameters used in the model or quantitative research.  Although not required to be experts in technical aspects of the models, must be able to explain to their clients the importance of the quantitative research and how the results were used in the decision-making process.  Need to consider the time horizon of data input in financial models.  In development of a recommendation, may need to test the models by using volatility and performance expectations that represent scenarios outside the 60 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 observable databases.  In reviewing computer models or the resulting output, pay attention to the assumptions and rigor of the analysis to ensure that the model incorporates negative market events R131-1 Selecting External Advisers and Subadvisers  ensure that the firm has standardized criteria for reviewing external advisers，包含以下几方面  reviewing the adviser’s established code of ethics,  understanding the adviser’s compliance and internal control procedures,  assessing the quality of the published return information  reviewing the adviser’s adherence to its stated strategy R132-1 ★关于group research  The conclusions or recommendations of the group report represent the consensus of the group, but may not necessarily be the views of the member or candidate, even though his name is included on the report  如果不同意结论，但是consensus opinion has a reasonable and adequate basis and is independent and objective，那么need not decline to be identified with the report  如果不同意结论，而且not confident in the process, should dissociate from the report whether it does not reflect his opinion or not  Always recommending “hot” issue indicates NO reasonable basis R133-1 Establish a policy requiring that research reports, credit ratings, and investment recommendations have a basis that can be substantiated as reasonable and adequate R134-1 Develop detailed, written guidance for analysts and review committees for judging reasonable and adequate basis of a particular recommendation R135-1 Develop measurable criteria for assessing the quality of research, the reasonableness and adequacy of the basis for any recommendation or rating, and the accuracy of recommendations over time R136-1 Develop detailed, written guidance that establishes minimum levels of scenario testing of all computer-based models used in developing, rating, and evaluating financial instruments R137-1 Develop measurable criteria for assessing outside providers R138-1 Adopt a standardized set of criteria for evaluating the adequacy of external advisers. The policy should include how often and on what basis the allocation of funds to the adviser will be reviewed P17-1 Communication with Clients and Prospect Clients Q97-1 ★Jimmi Alvarez, CFA, is the founder of an investment advisory firm serving high net worth investors. For the past decade, Alvarez has invested his clients’ money in mid-cap stocks. After much research, Alvarez determines that small-cap stocks are undervalued and moves a portion of all of his clients’ assets into these stocks. Alvarez plans to inform his clients of this change with their year-end statements in three months. Has Alvarez violated any CFA Institute Standards? A. No. 61 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. Yes, with respect to misrepresentation. C. Yes, with respect to communication with clients and prospective clients. Solution: C According to the Standards, members must promptly disclose to clients any changes to their investment process. Alvarez should notify his clients promptly of the change in his investment process and strategy. Q98-1 ★★Colin Caldwell, CFA, is the chief investment officer of Northwest Mutual Fund, whose investment objective is to invest in fixed income emerging market securities. Caldwell allocates the fund’s assets primarily to bonds of commodity producers in emerging markets and invests in a combination of several different investments to ensure an acceptable level of risk. The allocation is clearly disclosed in all fund communications. High volatility in the commodities markets at the start of the year makes Caldwell pessimistic about returns, so he shifts the fund into emerging market and . government securities, positions he maintains at the end of the year. This change is noted in the next annual report to fund shareholders. Caldwell’s investment change least likely violated the CFA Institute Code of Ethics and Standards of Professional Conduct concerning: （2012 Mock84） A. diversification. B. communication with clients. C. investments outside his mandate. Solution: A A is correct because the investment officer has invested in a combination of several different investments to ensure an acceptable level of risk rather than having all assets in a single investment, and he has sought a reasonable amount of diversification. However, the shift into emerging market and . government securities was communicated to clients in the annual report and not on an ongoing basis, in violation of Standard V (B) Communication with Clients and Prospective Clients. Additionally, the investment officer has not followed the investment style previously communicated to fund investors (., to invest in fixed income emerging market securities), specifically, when he invested in . government securities, a violation of Standard III (C) Suitability. Q99-1 ★Mailaka Securities (MS) advertises the use of a “bottom up” investment style in its marketing material. Recently, MS senior management decided to switch to a “top down” approach, citing the fact that it is less labor intensive. All other aspects of the research process are to remain the same. The head of research at MS, Mara Cherogony, CFA, was instructed to supervise the implementation of the new procedures, to notify clients of the changes, and to revise the text of marketing materials when new material was produced. Which of the following CFA Standards pertaining to Investment Analysis, Recommendations and Actions is Cherogony least likely in danger of violating? A. Supervisory Responsibility. B. Communication with Clients. 62 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. Diligence and Reasonable Basis. Solution: C Research can still be considered diligent and having a reasonable basis if done using a “top down” research methodology as opposed to a “bottom up” methodology. Violates Standard V (B) – Communication with Clients for not promptly disclosing the change. As a supervisor, Cherogony is responsible for ensuring compliance with the Code and Standards. Key points of Communication with Clients and Prospective Clients: R139-1 Distinguish between fact and opinion  “…will be…” fact  “…may be …” opinion R140-1 Informing Clients of the Investment Process  Keep clients informed on an ongoing basis about changes to the investment process.  Understanding the basic characteristics of an investment is important in judging suitability on a stand-alone basis, it’s especially important in determining the impact each investment will have on the characteristics of a portfolio.  Should inform clients about the specialization or diversification expertise of external advisers. R141-1 ★交流有很多方式，包括in person, over the call, or by the computer。If recommendations are in capsule form (such as a recommended stock list), should notify clients that additional information and analyses are available upon request R142-1 Include limitations of the analysis and conclusions in the report R143-1 Distinction between Facts and Opinions in Reports  If not indicate that earnings estimates, changes in the dividend outlook, and future market price information are opinions subject to future circumstances, thus fail to separate past from future and violate V(B).  In the case of complex quantitative analyses, analysts must clearly separate fact from statistical conjecture and should identify the known limitations of an analysis R144-1 Changes in style, ceilings, committee, universe of investment should disclose to the clients and prospect clients. 如果投资过程发生了改变，如改变了投资方法，用DDM改为指数化投资、由个人决策到委员会决策等，都必须向Clients and prospects进行披露 P18-1 Record Retention Q100-1 Guillermo Sandoval, CFA, owns an asset management firm with offices downtown, To minimize rent expenses, each year Sandoval ships the previous year’s research records to a nearby warehouse. There, the reports are digitized and stored in both electronic and hard-copy forms. After five years, all paper copies are destroyed and only electronic copies are retained. Are Sandoval’s record-retention procedures in compliance with the CFA Institute Standards of Practice? A. Yes. B. No, because he did not retain the copies in his offices. 63 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. No, because he failed to retain the original documents. Solution: A The Standards do not require on-site storage. Q101-1 ★An analyst made a recommendation. As required by the firm, all documents written on paper are destroyed in five years but the documents in hard disk should be retained for ten years. The analyst recorded all documents in a movable hard disk while keeping paper documents as required. Did the analyst comply with the Standards? A. Yes, because he keep record retention for a sufficient period. B. No, because he destroyed paper documents in less than seven years. C. No, because he should not use a movable hard disk to record documents. Solution: A Trap: Seven years is recommended if no legal requirement for record retention. Q102-1 Gregor Pavlov, CFA, is a fund manager working for the general partner of a new private equity fund. Pavlov includes in the fund marketing material his performance history from his previous employer. He received permission from his former employer to take his historical return figures and the supporting research reports he used to make the related investment decisions. Did Pavlov most likely violate the CFA Institute Code of Ethics and Standards of Professional Conduct?（MOCK92-17） A. No. B. Yes, regarding Loyalty. C. Yes, regarding Record Retention. Solution: C C is correct because even though Pavlov had his former employer’s permission to take his performance record and supporting research reports with him, he does not have the underlying performance data to support those historical return calculations and is, therefore, most likely in violation of Standard V (C) Record Retention. Key points of Record Retention: R145-1 ★必须保留得出投资结论和投资操作的所有研究记录，这些记录是公司的财产；  如果当地没有明确的规定，CFA协会要求记录必须保留7年;  If applicable law requires 5-year record, 保存5年 R146-1 Records can be maintained either in hard copy or electronic form; R147-1 Records Are Property of the Firm  Records created in professional activities are the property of the firm. When leaving the firm, cannot take those records, including originals or copies of supporting records of his work, to the new employer without the express consent of the previous employer.  Cannot use historical recommendations or research reports created at the previous 64 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 firm because the supporting documentation is unavailable.  For future use, must re-create the supporting records at the new firm through public sources, or directly from covered company, and not from memory or sources through previous employer unless with permission. R148-1 The responsibility to maintain records that support investment action generally falls with the firm rather than individuals  Must archive research notes and other documents, either electronically or in hard copy, that support their current investment-related communications.  Doing so will assist their firms in complying with requirements for preservation of internal or external records. P19-1 Disclosure of Conflicts Q103-1 ★★Yao Tsang, CFA, has a large percentage of his net worth invested in the Australian mining company Outback Mines, which he has held for many years. Tsang is in the process of moving to a new employer where he will be responsible for initiating research on . domestic mining companies. Shortly after his move, Tsang is asked to complete a research report on Outback Mines. In order to meet the CFA Institute Standards of Professional Conduct concerning his stock holding, which of the following is the most appropriate action for Tsang to take? A. Disclose his stock holding to his employer and to clients. B. Sell his stock holdings to eliminate any potential conflict of interest. C. Refuse to write the report and ask his employer to assign another analyst to complete the analysis. Solution: A Even though the best practice is to avoid conflicts, when conflicts cannot be reasonably avoided, full disclosure should be made as required by Standard VI (A). As the stock in question has been held for many years, it may not be practical to sell it due to things like tax consequences. Since the analyst has been hired to initiate coverage of mining companies, it is unlikely that another analyst at that firm would be as competent in completing a research report on mining companies. Q104-1 As the Managing Director of a commercial bank, a CFA charterholder sat on a board meeting of a publicly listed company that the bank had lent a large sum of money. The purpose of the board meeting was to renegotiate the terms of the loan due to the pending restructuring of the company. The next day, all of the Managing Director’s shares of the publicly listed company are sold on the stock exchange, the sell order having been given two days prior to the meeting. According to the Standards of Practice Handbook, the CFA charterholder was least likely in violation of which CFA Institute Standards of Professional Conduct? A. Disclosure of Conflicts. B. Priority of Transactions. C. Material Nonpublic Information. 65 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B The Candidate did not violate Standard VI (B) Priority of Transactions as he was only trading on his own account, not those of his clients or employer. Q105-1 Carolina Ochoa, CFA, is the chief financial officer at Pantagonia Computing. Ochoa is currently the subject of an inquiry by Pantagonia’s corporate investigations department. The inquiry is the result of an anonymous complaint accusing Ochoa of falsifying travel expenses for senior management related to a government contract. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, it is most appropriate for Ochoa to disclose the allegations:（2012 Mock84） A. on her Professional Conduct Statement. B. to CFA Institute when the investigation concludes. C. to CFA Institute if the allegations are proven correct. Solution: A A is correct because members and candidates must self-disclose on the annual Professional Conduct Statement all matters that question their professional conduct, such as involvement in civil litigation or criminal investigations or being the subject of a written complaint. Q106-1 ★★Beth Kozniak, a CFA candidate, is an independent licensed real estate broker and a well-known property investor. She is currently brokering the sale of a commercial property on behalf of a client in financial distress. If the client’s building is not sold within 30 days, he will lose the building to the bank. A year earlier, another client of Kozniak’s had expressed interest in purchasing this same property. However, she is unable to contact this client, nor has she discovered any other potential buyers. Given her distressed client’s limited time frame, Kozniak purchases the property herself and foregoes any sales commission. Six months later, she sells the property for a nice profit to the client who had earlier expressed interest in the property. Does Kozniak most likely violate the CFA Institute Standards of Professional Conduct? （2012 Mock83） A. No B. Yes, she did not disclose her potential conflicts of interest to either client. C. Yes, she profited on the real estate to the detriment of her financially stressed client. Solution: A A is correct because Kozniak does not appear to have violated any CFA Institute Standards of Professional Conduct. Because she is known in the market for investing and brokering property and both parties have worked with Kozniak in the past, both parties would know of her interests. In addition, in both cases she acts for her own account as a primary investor, not as a broker. She buys the property for her own portfolio and then sells the property from her own portfolio. Therefore, Kozniak did not violate Standard VI (A) Disclosure of Conflicts. When she purchased the property for her portfolio, she saved her client from losing the building to the bank and did not charge a sales commission. Because the sale of the property to her other client did not take place until six months after her purchase and she was unable to contact the client who had 66 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 earlier expressed interest prior to her purchase, she cannot be accused of violating any loyalty, prudence, or care to either client (Standard III (A) Loyalty, Prudence, and Care). Q107-1 ★Raymond Ortiz, CFA, provides investment advice to high-net-worth investors. Ortiz has just completed an analysis of Continental Wheat, a manufacturer of wheat-based food products. He rated the company a long-term hold for investors seeking growth and income. Ortiz’s analysis included a review of the company’s management team, financial data, pro forma financial positions, dividends and dividend policy, and a comparison of Continental with its competitors. Although he does not tell anyone, five years ago, Ortiz worked for and managed the commodities derivatives trading unit of Continental. As part of his compensation at Continental, he received stock, which he still owns. Based upon his research, Ortiz recommends Continental to clients who have a moderate risk tolerance. Two weeks later Continental announces its quarterly earnings are 30% less than a year ago. Consequently, shares of Continental drop by 50%. Ortiz most likely violated the CFA Institute Code of Ethics and Standards of Professional Conduct related to his stock: （2012 Mock84） A. research. B. ownership. C. recommendation. Solution: B B is correct because there is a violation of Standard VI (A) Disclosure of Conflicts; the analyst worked for Continental and still has ties to the company in the form of his stock ownership. Q108-1 ★Jamison is a junior research analyst with Howard & Howard, a brokerage and investment banking firm. Howard & Howard's mergers and acquisitions department has represented the Britland Company in all of its acquisitions for the past 20 years. Two of Howard & Howard's senior officers are directors of various Britland subsidiaries. Jamison has been asked to write a research report on Britland. What is the best course of action for her to follow? （原版书Reading2-3） A. Jamison may write the report but must refrain from expressing any opinions because of the special relationships between the two companies. B. Jamison should not write the report because the two Howard & Howard officers serve as directors for subsidiaries of Britland. C. Jamison may write the report if she discloses the special relationships with the company in the report. Solution：C This question involves Standard VI(A)—Disclosure of Conflicts. The question establishes a conflict of interest in which an analyst, Jamison, is asked to write a research report on a company that is a client of the analyst's employer. In addition, two directors of the company are senior officers of Jamison's employer. Both facts establish that there are conflicts of interest that must be disclosed by Jamison in her research report. Answer B is incorrect because an analyst is not prevented from writing a report simply because of the special relationship the analyst's 67 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 employer has with the company as long as that relationship is disclosed. Answer A is incorrect because whether or not Jamison expresses any opinions in the report is irrelevant to her duty to disclose a conflict of interest. Not expressing opinions does not relieve the analyst of the responsibility to disclose the special relationships between the two companies. Q109-1 When Abdullah Younis, CFA, was hired as a portfolio manager at an asset management firm two years ago, he was told he could allocate his work hours as he saw fit. At that time, Younis served on the board of three non-public golf equipment companies and managed a pooled investment fund for several members of his immediate family. Younis was not compensated for his board service or for managing the pooled fund. Younis’ investment returns attract interest from friends and co-workers who persuade him to include their assets in his investment pool. Younis recently retired from all board responsibilities and now spends more than 80% of his time managing the investment pool for which he charges non-family members a management fee. Younis has never told his employer about any of these activities. To comply with the CFA Institute Standards of Professional Conduct with regards to his business activities over the past two years, Younis would least likely be required to disclose which of the following to his employer?（2013 mock morning session） A. Board activities B. Family investment pool management C. Non-family member management fees Solution：A A is correct because golf equipment is a business independent of the financial services industry such that any board obligations would not likely be considered a conflict of interest requiring disclosure according to Standard IV (B) Additional Compensation Arrangements. Standard IV (B) requires members and candidates to obtain permission from their employer before accepting compensation or other benefits from third parties for the services that might create a conflict with their employer’s interests. Managing investments for family and non-family members could likely create a conflict of interest for Younis’ employer and should be disclosed to his employer. Q110-1 Anna Saar, CFA, is the head of compliance for Tranne Advisory Services, a regional financial services group including asset management, investment banking, and stock brokerage entities. Reviewing a draft client investment management agreement for the asset management unit, she is concerned the relationships between the firm’s various business units are not properly disclosed. To prevent violating CFA Institute Standard VI (A) Disclosure of Conflicts, which of the following should least likely be addressed in the investment management agreement?（MOCK92-18） A. The group subsidizes staff loans for share purchases. B. Management fees are frequently loss leaders for brokerage. C. Asset managers are likely to support corporate finance deals. Solution：A A is correct because the group subsidizing staff loans for the purchase of shares is not a conflict 68 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 of interest for clients because it is a funding mechanism and does not interfere with objectivity when rendering investment advice or taking investment action. However, share purchases by staff would still require disclosure and reporting requirements as per Standard VI (A) Disclosure of Conflicts and Standard VI (B) Priority of Transactions, respectively. Q111-1 Umi Grabbo, CFA, is a highly regarded portfolio manager for Atlantic Advisors, a mid-sized mutual fund firm investing in domestic securities. She has watched the hedge fund boom and on numerous occasions suggested her firm creates such a fund. Senior management has refused to commit resources to hedge funds. Attracted by potential higher fees associated with hedge funds, Grabbo and several other employees begin development of their own hedge fund to invest in international securities. Grabbo and her colleagues are careful to work on the fund development only on their own time. Because Atlantic management thinks hedge funds are a fad, she does not inform her supervisor about the hedge fund creation. According to the Standards of Practice Handbook, Grabbo should most likely address which one of the Codes and Standards immediately? (2014 Mock 99-2) A. Additional Compensation Arrangements B. Priority of Transactions C. Disclosure of Conflicts Solution: C According to Standard VI(A) Disclosure of Conflicts, Grabbo should disclose to her employer her hedge fund development because this activity could possibly interfere with her responsibilities at Atlantic. In setting up a hedge fund, Grabbo was not acting for the benefit of her employer. She should have informed Atlantic she wanted to organize the hedge fund and come to some mutual agreement on how this process would occur. Key points of Disclosure of interest： R149-1 must make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or interfere with respective duties to their clients, prospective clients, and their employer R150-1 ensure that such disclosures are prominent, are delivered in plain language, and communicate the relevant information effectively  ★Best practice is to update disclosures when the nature of a conflict of interest changes materially。 R151-1 If an analyst was asked to cover the company,而且他inherit该公司股票  must disclose if continue to follow  Best practice: assign another analyst to follow up the company R152-1 Restrict personal trading, outside board membership, and related activities to prevent situations that could give the appearance of a conflict of interest. R153-1 Disclosure to Clients：corporate financing；market making relationship；Security holding；Directorship；Individual relationship 69 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R154-1 Also disclose fee arrangements, subadvisory arrangements or situations involving nonstandard fee structures. Equally important is to disclose arrangements in which the firm benefits directly from recommendations R155-1 部门间的冲突  Internal conflict between R&D and IBanking  External conflict with listed firms  Broker-sponsored limited partnerships to invest venture capital R156-1 持股的冲突  May prohibit from owning any such securities  overly burdensome.  Sell-side disclose ownership in stock recommended, buy-side disclose procedures for reporting requirements for personal transactions R157-1 Conflicts as a Director  Duties owed to clients and to shareholders of the company  Investment personnel as a director receive the securities or options  Board service receiving MNI R158-1 performance arrangement的披露  Firms are encouraged to include information on compensation package in firms’ promotional literature.  If fee based on capital gains or capital appreciation (performance fee), should disclose;  If outstanding options exist for incentives, should disclose the amount and expiration date of these options as a footnote to any research report published R159-1 Incentive fees should not be in conflict with the interests of clients’  If Yes, should disclose to clients;  If employer not permit disclosure, should dissociate, or quit the job P20-1 Referral Fees Q112-1 ★Yip Wai Yin, a CFA Candidate, is an independent mutual fund sales agent. For every front-end load product she promotes, Yip receives a portion of the front-end fee as commission at the time of sale. For every back-end load fund she sells, Yip receives a smaller commission paid at the end of the year. Yip always informs her clients she is paid a commission as an agent, but does not provide details of the compensation structure. When pitching her favored front-end load product line, she tells clients 20% of her commission is always invested in the same fund as proof of her confidence in the fund she recommends. Which CFA Code of Standards with regard to Conflicts of Interest does Yip least likely violate? A. Referral Fees. B. Disclosure of Conflicts. C. Priority of Transactions. Solution: C Yip’s investments do not adversely affect the interest of the clients and therefore do not violate the Priority of Transactions requirement. A Candidate having the same investment positions does 70 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 not always create a conflict of interest and in some instances, having an aligned investment portfolio can be beneficial to the client. Q113-1 ★Fred Brubacher, CFA, is an analyst at Van City Bank (VCB). Brubacher receives compensation for referrals to the banks brokerage and personal financial-planning divisions. His recent referrals are long-time clients from his previous employer, and Brubacher does not mention VCB’s referral arrangement. Does Brubacher violate any CFA Institute Standards? A. No. B. Yes, with respect to misrepresentation. C. Yes, with respect to conflicts of interest. Solution: C Compensation or other benefits received for the recommendation of products or services represents a conflict of interest. According to the Standards, Brubacher must disclose the referral fee arrangement. Q114-1 Which of the following statements is a stated purpose of disclosure in Standard VI(C)—Referral Fees? （原版书Reading2-25） A. Disclosure will allow the client to request discounted service fees. B. Disclosure will help the client evaluate any possible partiality shown in the recommendation of services. C. Disclosure means advising a prospective client about the referral arrangement once a formal client relationship has been established. Solution: B Answer B gives one of the two primary reasons listed in the Handbook for disclosing referral fees to clients under Standard VI(C)¬Referral Fees. (The other is to allow clients and employers to evaluate the full cost of the services.) Answer A is inconsistent because Standard VI(C) does not require members or candidates to discount their fees when they receive referral fees. Answer C is inconsistent with Standard VI(C) because disclosure of referral fees, to be effective, should be made to prospective clients before entering into a formal client relationship with them. Q115-1 Neiman Investment Co. receives brokerage business from Pick Asset Management in exchange for referring prospective clients to Pick. Pick advises clients-in writing, at the time the relationship is established-of the nature of its arrangement with Neiman. With regard to this practice, Pick has:（Notes P94） A. complied with the Code and Standards. B. violated the Code and Standards by failing to preserve the confidentiality of the agreement with Neiman. C. violated the Code and Standards by participating in an agreement that creates a conflict of interest. Solution: A 71 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Pick has not violated the Standards. The referral arrangement is fully disclosed to clients before they agree to do business with Pick. Therefore, clients can fully assess the effect of the agreement on the referral and how the agreement may affect their accounts before hiring Pick as their asset manager. Q116-1 Jackson Barnes, CFA, works for an insurance company providing financial planning services to clients for a fee. Barnes has developed a network of specialists, including accountants, lawyers, and brokers who contribute their expertise to the financial planning process. Each of the specialists is an independent contractor. Each contractor bills Barnes separately for the work he or she performs, providing a discount based upon the number of clients Barnes has referred. What steps should Barnes take to be consistent with the CFA Institute Standards of Professional Conduct? （mock 85） A. Have his independent contractors approved by the insurance company. B. List the consideration he receives from the specialists on monthly client invoices. C. Inform potential clients about his arrangement with the contractors before they agree to hire him. Solution: C C is correct because the referral arrangements should be disclosed to clients “before entry into any formal agreement for services” and not after the fact. This allows potential clients to consider whether the arrangement causes them any potential harm as a result of the arrangement (., higher fees and potential conflicts of interests). Key points of Referral Fee： R160-1 disclosure的目的在于让客户和雇主评估：1）any partiality shown in any recommendation of services ；2）the full cost of the services; R161-1 Disclose to the clients being referred and employer if necessary；Disclose nature of consideration R162-1 Encourage employers to develop procedures for referral fees R163-1 Firm may completely restrict such fees，if not restrict, should indicate the appropriate steps for requesting approval. R164-1 Employers should have investment professionals provide to the clients notification of approved referral fee programs and provide the employer regular (at least quarterly) updates on the amount and nature of compensation received. R165-1 Summary: disclosure of referral fee to clients or employers Situations Employer Clients and prospects Inter-firm referral √ √ Inter-department referral × √ Salesperson promotion × × Funds manager promotion × ×(best practice √) P21-1 Priority of Transaction Q117-1 ★Teresa Avila, CFA, is a micro cap investment analyst at a hedge fund. The fund 72 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 requires Avila to hold any securities that she recommends for the fund in her own account as well. The president of the fund has stated, “We require our analysts to eat their own cooking”. As Avila has such a small account, whenever she trades for her own portfolio, she combines the transactions with those of the hedge fund, so that she is sure to have her account aligned with the fund. Has Avila violated any CFA Institute Standards of Professional Conduct? A. No. B. Yes, related to Misconduct. C. Yes, related to Priority of Transactions. Solution: C Standard VI (B) requires that investment transactions for clients and employers have priority over transactions in which members have beneficial ownership. By executing her own accounts transactions with those of the hedge fund, the analyst has violated this standard. Micro cap securities can be thinly traded and easily influenced by changes in the volume of activity, so the analyst may benefit when she combines her transactions with the funds, and she should let the fund execute its orders before she makes changes to her account. Q118-1 ★Eric Pantoja is enrolled as a candidate in the CFA examination program. He works as an assistant for Chehalis Investments (CI). Pantoja saw CI’s purchase list and purchased several of the recommended stocks. Pantoja least likely violates the CFA Institute Standard relating to: A. Misconduct. B. Priority of Transactions. C. Diligence and Reasonable Basis. Solution: C Pantoja least likely violates the Standard relating to Diligence and Reasonable Care because he is taking investment actions on his own behalf rather than on behalf of clients. His actions violate the Standards relating to Priority of Transactions (he trades ahead of his employer and its clients), Loyalty to Employer (his actions cause harm to his employer), and Misconduct (his actions reflect adversely on his professional integrity). Q119-1 ★Spencer Rivers, CFA chart holder, manages the accounts of an institution, the employer and his parents. His father does not pay for the investment service fee. When IPOs become available, how should he do? A. Allocate to the institution client and to the employer. B. Allocate to the institution client, his father and the employer. C. Allocate to the institution client, the employer and his father Solution: A Investment transaction for clients must have priory over investment transactions for employers. Although his father dose not pay for the investment service fee, his father’s account still is not client comparable to other clients (normal fee-paying account). 73 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q120-1 ★★Kazuya Kato, CFA, is a widely followed economist at a global investment bank. When Kato opines on economic trends, markets react by moving stock valuations considerably. When Kato received information of a temporary oversupply of rare earth metals, he issued a forecast that price trends for rare earth metals would be down significantly on a long-term basis. Kato also secretly sold his report to a widely followed Internet site. Prior to issuing this forecast, Kato emailed all portfolio managers at his bank with a copy of his report indicating that his opinion would be reversed shortly so there would be trading opportunities. Kato least likely violated which of the following CFA Institute Code of Ethics and Standards of Professional Conduct? A. Market Manipulation. B. Priority of Transactions. C. Additional Compensation Arrangements. Solution: B The Priority of Transactions Standard has not been violated as it relates to investment transactions for clients and employers having priority over Member/Candidate transactions. There is no indication in this case that transactions have occurred as a result of the report being issued by the economist. Although it is reasonable to expect there will be transactions, it is only when these happen that a violation will have occurred. Q121-1 ★A broker overheard that his firm was going to execute a block of large order on a thinly traded stock. The order was so large that it would pull the stock price to a historically high level. He retuned and made a front-running. Which of the Standards did he violate? A. Standard II (A): Material Non-public Information B. Standard VI (B): Priority of Transactions C. Both Standard II(A): Material Non-public Information and Standrd VI(B): Priority of transactions Solution: C The activity his firm intends to do will significantly influence the price of that stock, so it is considered an MNI. He should place his clients and employer’s interest before himself. So he violates Standard VI (B): Priority of Transactions. Q122-1 Chan Liu, CFA, is the new research manager at the Pacific MicroCap Fund. Liu observed the following activities after she published a research report on a thinly traded micro cap stock that included a “buy” recommendation: （2012 Mock84）  Pacific traders purchased the stock for Pacific’s proprietary account and then purchased the same stock for all client accounts; and  Pacific marketing department employees disseminated positive, but false, information about this stock in widely read Internet forums. Liu notes the stock’s price increased more than 50% within a period of two days and was then sold for Pacific’s account. Which of the following steps is most appropriate for Liu to 74 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 take to avoid violating the CFA Institute Code of Ethics and Standards of Professional Conduct? A. Report the observed activities to her employer. B. Remove her name from the micro cap stock research report. C. Publicly refute the false information posted on Internet forums. Solution: A A is correct because certain staff at Liu’s employer appear to be engaged in front running, a violation of Standard VI (B) Priority of Transactions, and market manipulation, a violation of Standard II (B) Market Manipulation. If Liu observes these violations without taking steps to notify her employer, she will be in violation of Standard I (A) Knowledge of the Law. Liu should know that the conduct observed is likely a violation of applicable laws, rules, and regulations and is a violation of the CFA Institute Code and Standards. Her first step, therefore, should be to attempt to stop the behavior by bringing it to the attention of the employer through a supervisor or the firm’s compliance department. Inaction may be construed as participation or assistance in the illegal or unethical conduct. Q123-1 ★Margie Germainne, CFA, is a risk management consultant who has been asked by a small investment bank to recommend policies to prevent bank employees from front running client orders. These clients generally invest in one or more of the bank’s large cap equity unit trusts. To ensure compliance with the CFA Institute Standards of Professional Conduct, Germainne should least likely recommend which of the following? Employees should be restricted from trading: （2012 Mock83） A. equity related securities. B. without prior permission. C. during established time periods. Solution : A A is correct because while Standard VI (B) Priority of Transactions is designed to prevent any potential conflict of interest or the appearance of a conflict of interest with respect to personal transactions, it does not ban employees from trading securities. A ban on all equity related securities could be excessively restrictive to employees and unnecessary if appropriate personal transaction policies and procedures are in place. Q124-1 Ralph Salley, a Level I candidate in the CFA Program, is explaining Standard VI(B) Priority of Transactions, to his supervisor. Salley states, "The Standard recommends, but does not require, that members and candidates should not participate in initial public offerings. The Standard also recommends that trades for accounts of family members be made after those for other clients, but before those for the account of the members and candidates responsible for executing the transactions." Salley's explanation of the Standard is:（Notes P94） A. correct. B. incorrect, because the Standard does not recommend that trades for family members be made after those for other clients. 75 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. incorrect, because the Standard requires that members and candidates not participate in initial public offerings. Solution : B Standard VI(B) Priority of Transactions recommended that members and candidates avoid the appearance of conflict of interest by not participating in IPOs. If a family member is a fee-paying client, the member or candidate should treat them like any other client, not giving any advantage or disadvantage to their accounts. Q125-1 Kam Bergeron, CFA, is an equity portfolio manager who often takes time off in the afternoon to play golf with important clients. Today, Bergeron is on the golf course when his game is interrupted by a phone call from his office. The call is from Bergeron's assistant, who notifies him of a steep and accelerating market decline. Bergeron, eager to get back to his golf game, tells his assistant to raise cash by selling 15% of all clients’ holdings. Bergeron instructs his assistant to first sell the most liquid stocks in each client’s portfolio and then do the same for his personal account. Bergeron is least likely to be in violation of which of the CFA Institute Standards of Professional Conduct? A. Suitability B. Priority of transactions C. Diligence and reasonable basis Solution : B B is correct, as there is no indication a violation of Standard VI (B) Priority of Transactions occurred. The Standard concerns transactions for clients having priority over employees’ transactions and is not applicable in this case because the manager gives instructions to sell his personal holdings after those of his clients. Key points of Priority of Transaction: R166-1 Investing public > Client > employer > individual（beneficial owner） R167-1 Avoiding Potential Conflicts  Conflicts between the client’s interest and an investment professional’s personal interest may occur.  Although conflicts of interest exist, it’s OK for individual managers, advisers, or fund employees making money from personal investments as long as：1）the client is not disadvantaged by the trade；2）the investment professional does not benefit personally from trades undertaken for clients；3）comply with applicable regulatory requirements R168-1 Standards for Nonpublic Information  Prohibit from conveying nonpublic information to any person whose relationship to the member or candidate makes him a beneficial owner of the person’s securities. Must not convey this information to any other person if the nonpublic information can be deemed material R169-1 ★Family accounts  Family accounts that are client accounts should be treated like any other firm account, 76 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 should not be disadvantaged because of that relationship.  Disadvantage parents who are normal fee-paying clients: violate III (B) fair dealing  If a member/candidate has a beneficial ownership in the account, however, the member or candidate may be subject to pre-clearance or reporting requirements of the employer or applicable law. R170-1 推荐程序  Limited participation in equity IPOs  Restrictions on private placement  Establish blackout/restricted periods  Best method：1）disclosure of personal holdings/beneficial ownerships at least annually；2）Providing duplicate confirmations of transactions；3）preclearance of participation in IPOs  Once trading restrictions are in place, must be enforced  Disclosures of policies P22-1 Responsibilities as a CFA Institute Member or CFA Candidate; Reference to CFA institute, designation Q126-1 ★The basic structure for enforcing the CFA Institute Code and Standards under its Professional Conduct Program is not formed by which of the following? The CFA Institute’s: A. Bylaws B. Rules of procedures C. Board of Governors Solution: C Although the Board of Governors maintains oversight and responsibility for the PCP, the Institute’s Bylaws and Rules of Procedure form the basic structure for enforcement of the Code and Standards. Q127-1 Tammi Holmberg is enrolled to take the Level I CFA exam. While taking the exam, the candidate on Holmberg's immediate right took a stretch break and a piece of paper from his pocket fell onto Holmberg's desk. Holmberg glanced at the paper and realized there was information written on the paper, which included a formula Holmberg needed for the question she was working on. Holmberg had not memorized this formula and could not complete the question without this information. Holmberg pushed the paper off her desk and used the formula to complete the question. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, Holmberg most likely: A. compromised her exam. B. was free to act on the information that fell on her desk. C. is responsible for notifying exam proctors of her neighbor's violation. Solution: A Holmberg's conduct compromised the validity of her exam and violated Standard VII (A). Her 77 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 conduct was also a violation of the rules and regulations of the CFA Program, the Candidate pledge, and the CFA Institute Code and Standards. Q128-1 ★A CFA charterholder is the fund manager for a non-profit organization. During a presentation regarding the restructuring of their investment portfolio’s asset allocation, the Head of the Finance Committee questions the manager. As part of his response, the manager states, “I am a CFA charterholder. I know what I’m talking about, and you should do what I say”. According to the Standards of Practice Handbook, has the charterholder violated any of the CFA Institute Standards of Professional Conduct? A. No. B. Yes, Responsibilities as a CFA Institute Member. C. Yes, Communication with Clients and Prospective Clients. Solution: B 由于他在和Head of the Finance Committee交流的时候说“I am a CFA charterholder. I know what I’m talking about, and you should do what I say”，这违反了Responsibilities as a CFA Institute Member，因为作为CFA charterholder应该对自己的designation和reference做出合理的表述，例如“CFA charterholders achieve better performance results”，而不能没有任何原因的，而且毫不客气的，牛气冲冲地只说我是CFA charterholder，我知道我自己在说什么，你只要按照我说的去做就可以了。这样违反了Responsibilities as a CFA Institute Member。 Q129-1 Dorre, CFA, just founded her own investment company. On a TV advertisement, she said: “through the CFA program, I improved my investment skill”. On that TV show, she also assured that all her client’s investment return will increase with higher level investment skill gained from CFA program. According to Code and Ethics and Standards of Practice Handbook, which of following is allowed? Improve my investment skill Increase clients’ investment return A. yes no B. no no C. no yes Solution: A Standard VII is intended to prevent promotional efforts that make promises or guarantees that are tied to the designation. Statement referencing CFA institute, the CFA designation, or the CFA program must not over-promise the competency of an individual or over promise future investment result. “Improving skill” is allowed as long as this statement is true and is not linked to performance or does not imply superior ability. The “assure” statement prominently links the first statement to superior performance is not allowed. Q130-1 The Standards of Practice Handbook is least likely to require a member to disclose which of the following to clients and prospective clients? A. Underwriting relationships. B. Service on a publicly-traded company’s board of directors. C. Obligation to abide by CFA Institute Code of Ethics and Standards of Professional Conduct. 78 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C The Standards do not require members to disclose to clients and prospective clients their obligation to abide by the Code and Standards. Q131-1 ★Vishal Chandarana, an unemployed research analyst, recently registered for the CFA Level I exam. After two months of intense interviewing, he accepts a job with a stock brokerage company in a different region of the country. While posting on his social networking webpage he brags about how being a CFA Candidate really helped him get a job. He adds he was so relieved his new employer didn't ask about his being fired from his former employer. Which CFA Code of Ethics or Standards of Professional Conduct did Chandarana least likely violate? (Mock79-14) A. Integrity B. Duties to Employers C. Reference to the CFA Program Solution: C. There is no evidence that Chandarana violated Standard VII(B) with regard to his being a CFA Candidate. It does appear that Chandarana did not act with integrity when he hid information that could potentially harm his new employer's reputation, thus violating Standard I(C), Professionalism (Misrepresentation), and Standard IV(A), Duty to Employers (Loyalty). Q132-1 Pia Nilsson is a sole proprietor investment advisor. The economic recession has reduced the number of clients she advises and caused revenues to decline. As a result, Nilsson has not paid her CFA Institute membership dues for the past two years. When a national financial publication recently interviewed Nilsson, she indicated that up until two years ago she had been a CFA charterholder and a CFA Institute member in good standing. In addition, she stated the completion of the CFA Program enhanced her portfolio management skills and enabled her to achieve superior returns on behalf of her clients. Which of Nilsson's following actions most likely violated the CFA Institute Standards of Professional Conduct? （2012 Mock83） A. Nonpayment of CFA Institute membership dues B. Attributing her superior returns to participation in the CFA Program C. Indicating that being a CFA charterholder has enhanced her portfolio management skills Solution: B Because it is a violation of Standard VII (B) Responsibilities as a CFA Institute Member or CFA Candidate to claim the CFA charter helped her to achieve superior returns. Q133-1 Rule has worked as a portfolio manager for a large investment management firm for the past 10 years. Rule earned his CFA charter last year and has decided to open his own investment management firm. After leaving his current employer, Rule creates some marketing material for his new firm. He states in the material, "In earning the CFA charter, a highly regarded credential in the investment management industry, I further enhanced 79 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 the portfolio management skills learned during my professional career. While completing the examination process in three consecutive years, I consistently received the highest possible scores on the topics of Ethics, Alternative Investments, and Portfolio Management." Has Rule violated Standard VII(B)—Reference to CFA Institute, the CFA Designation, and the CFA Program in his marketing material? （原版书Reading2-29） A. Rule violated Standard VII(B) in stating that he completed the exams in three consecutive years. B. Rule violated Standard VII(B) in stating that he received the highest scores in the topics of Ethics, Alternative Investments, and Portfolio Management. C. Rule did not violate Standard VII(B). Solution: B According to Standard VII(B)—Reference to CFA institute, the CFA Designation, and the (TA Program, CFA Program candidates do not receive their actual scores on the exam. Topic and subtopic results are grouped into three broad categories, and the exam is graded only as "pass" or "fail”. Although a candidate may have achieved a topical score of "above 70 percent," she or he cannot factually state that she or he received the highest possible score because that information is not reported. Thus, answer C is incorrect. Answer A is incorrect as long as the member or candidate actually completed the exams consecutively. Standard VII(B) does not prohibit the communication of factual information about completing the CFA Program in three consecutive years. Q134-1 Samantha Donovan, CFA, is an exam proctor for the Level II CFA exam. The day before the exam is to be administered, Donovan faxes a copy of one of the questions to two friends, James Smythe and Lynn Yeats, who are Level II candidates in the CFA program. Donovan, Smythe, and Yeats had planned the distribution of an exam question months in advance. Smythe used the fax to prepare for the exam. Yeats, however, had second thoughts and threw the fax away without looking at its contents. Which of the following statements is most likely correct?（Notes P93） A. Smythe violated the Code and Standards, but Yeats did not. B. Donovan violated the Code and Standards, but Smythe did not. C. Donovan and Yeats both violated the Code and Standards. Solution: C In this situation, Donovan, Smythe, and Yeats all violated Standard VII(A) Conduct as Members and Candidates in the CFA Program. The Standard prohibits conduct that compromises the integrity, validity, or security of the CFA exams. Donovan clearly breached the exam security. Smythe and Yeats both compromised the integrity of the exams by planning to use the actual exam question to gain an advantage over other candidates. Even though Yeats did not ultimately use the information to study for the exam, she participated in a scheme to cheat on the CFA exam. Key points of Responsibilities as a CFA Institute Member/Candidate; Reference to CFA institute, 80 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 designation R171-1 ★violations include:  Cheating on the CFA exam or other CFA Institute’s exams.  Not complying with rules and policies of the CFA program.  Divulging the confidential information to others.  Improperly using the designation.  Misrepresenting information on Professional Conduct Statement of the CFA.  Cheating on the CFA exam, violate VII(A), I(D). R172-1 VII(A) 会员或候选人的行为（Conduct as Members and Candidates)。成员或候选人不得从事任何有损于CFA协会和CFA称号名誉和声望，以及CFA考试公正性和含金量的行为。CFA考试或者其它任何考试中作弊都属于违反。 R173-1 over-promise the competency of an individual和over-promise future investment results as lower risk, higher performance都不可以。 R174-1 The order of CFA and CPA has nothing to do. R175-1 如果要获得使用CFA称号的权利，必须满足几个条件：是CFA协会的在册会员，按时交会费（Membership due），依次通过CFA的三次考试，按时完成并提交年度述职报告（annual conduct report） R176-1 在名片上，CFA的字体大小不能超过自己名字的字体大小 R177-1 CFA是形容词，不是名词，不能说有几个CFAs R178-1 唯一正确的表述是：CFA，Chartered Financial Analyst；其他说法都不对，如cfa, , CFA-typed, China-CFA R179-1 CFA mustn't be used as part of the name of the firm. R180-1 Shoundn't cite the expected date of exam completion and award of charter. R181-1 只通过三级考试，没有持证的人不可以自称CFA. R182-1 广告中，如果说明三次考试一次就通过，只要陈述是事实就可以了；但是，如果说CFA持证人有高超的投资业绩，则违反了VII (B)； R183-1 如果好几年没交会费，虽然以前是持证人，在名片后如果写CFA，违反了VII (B)。 R184-1 成员不需要向clients and prospective clients披露duty to comply with the Code。 R185-1 持证人可以在个人的名片和个人的letter head上使用CFA，但公司不可以。 Contrast between some similar standards: R186-1 I(C) focuses on performance presentation, so guarantee the investment performance with volatile return, misrepresentation of service and qualification, and plagiarism violate this standard R187-1 III(D) focuses on the statement of performance to clients, so the misleading statement concerning performance, including give clients the hint that they can earn the historical yield, violate this standard R188-1 V(B) focuses on disclosing the member‘s own changes for clients, letting clients know their information, and differenciating between fact and opinion I(C) Misrepresentation 所有的不正当陈述：服务范围、资质；不允许抄袭等 III(D) Performance presentation 业绩的不正当陈述 V(B) Communication with Clients and 向客户披露自身的变化，并Prospective Clients 且区分事实与意见 81 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R189-1 违反的递推性：IV(B) →VI(A) →I(B)；III(D) →I(C) R190-1 III(B) focuses on constraining the fairness of the order of transaction between clients R191-1 VI(B) focuses on the order of transaction among clients, individuals and employers III(B) Fair Dealing 客户之间的交易优先顺序 VI(B) Priority of Transactions 客户>雇主>个人 R192-1 IV(B) focuses on disclosing the additional compensation from clients and the third-party to the employer R193-1 VI(A) focuses on disclosing the possible interest conflict to clients and public, so that clients can have right judgments IV(B) Additional Compensation 为雇主的利益，向其披露额Arrangements 外收入 VI(A) Disclosure of conflicts 为客户及公众的利益，向其披露额外收入 P23-1 GIPS Verification Q135-1 ABC Investment Management Company claims compliance with GIPS, but the GIPS compliance is not verified. Does this company comply with GIPS? A. Yes. B. No, because the company should be verified. C. No, because the internal control personnel should conduct the verification work. Solution: A. Firms are encouraged to pursue independent verification from a third party on a firm-wide basis, verification is not an obligation. P1-1 GIPS Composite Q136-1 ★A GIPS-compliant investment firm presents its historical record for a global growth stock composite. Which of the following method is least likely to violate the CFA institute Standard? A. Excluded terminated accounts. B. No portfolio below minimum asset level is included. C. Use a top-performing portfolio as representative of firm’s results. Solution: B According to GIPS composite construction, A, C are not permitted. Q137-1 Which of the following is a key characteristic of the Global Investment Performance Standards (GIPS)? The GIPS Standards: A. rely on the integrity of input data. B. consist of required provisions for firms to follow to achieve best practice. C. must be applied with the goal of achieving excellence in performance presentation. 82 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A A key characteristic of the Standards is that the Standards rely on the integrity of input data. The accuracy of input data is critical to the accuracy of the performance presentation. Q138-1 ★★Fundamental Asset Managers (FAM) claims compliance with the CFA Institute Global Investment Performance Standards (GIPS) and manages both discretionary and nondiscretionary accounts. Alma Dzuya, CFA, includes all discretionary, fee-paying value and growth accounts when constructing a composite for FAM. Does the composite Dzuya constructed most likely meet GIPS criteria? (Mock79-11) A. Yes. B. No, because value and growth accounts are included, C. No, because nondiscretionary accounts are not included. Solution: B. A composite must include all actual, fee-paying, discretionary portfolios managed in accordance with the same investment mandate, objective, or strategy. By including both value and growth accounts, the composite is made up of portfolios with different investment mandates or strategies. Q139-1 ★★For periods beginning on or after 1 January 2011, the aggregate fair value of total firm assets most likely includes all: （2012 Mock83） A. fee-paying discretionary accounts. B. fee- and non-fee-paying discretionary accounts. C. fee- and non-fee-paying discretionary and non-discretionary accounts. Solution: C C is correct because for periods beginning on or after 1 January 2011, total firm assets must include the aggregate fair value of all discretionary and non-discretionary assets managed by the firm. This includes both fee-paying and non-fee-paying portfolios (). Q140-1 Firms claiming GIPS compliance must make every reasonable effort to provide a compliant presentation to which of the following? （2012 Mock83） A. Existing clients B. Prospective clients C. Both existing and prospective clients Solution: B B is correct because GIPS standards () state “firms must make every reasonable effort to provide a compliant presentation to all prospective clients. As long as a prospective client has received a compliant presentation within the previous 12 months, the firm has met this requirement. It is a GIPS recommendation, not a requirement, that all clients receive a compliant presentation on an annual basis (). 83 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q141-1 According to the Fundamentals of Compliance section of the Global Investment Performance Standards, issues that a firm must consider when claiming compliance include all of the following except: （原版书 Reading4-2） A. replicating performance B. properly defining the firm C. documenting firm policies and procedures used in establishing and maintaining compliance with the Standards Solution: A Replication of performance is not included in the Fundamentals of Compliance section within the GIPS standards. Q142-1 In countries where new local laws relating to calculation and presentation of investment performance conflict with GIPS standards, firms who have claimed GIPS compliance should most likely: （mock 83） A. stop claiming GIPS compliance B. follow local laws, continue to claim GIPS compliance, and disclose conflicts C. continue to claim GIPS compliance, disclosing non-compliance with new laws Solution: B B is correct because where local laws and regulations regarding calculation and presentation conflict with GIPS standards, firms must abide by the local laws and regulations. They are still allowed to claim GIPS compliance but must disclose areas where the local requirements conflict with those of the GIPS standards. Q143-1 Which of the following is least likely a requirement of the GIPS standards? Firms are required to(2014 Mock 98-16) A. include all discretionary, fee-paying portfolios in at least one composite. B. present a minimum of five years of annual investment performance compliant with the GIPS standards. C. have their performance records verified by an independent third party. Solution: C It is a recommendation but not a requirement that firms obtain independent third-party verification to claim GIPS compliance. Firms are required to include all discretionary, fee-paying portfolios in at least one composite. They must also present a minimum of five years of annual investment performance compliant with the GIPS standards. Key points of GIPS： R194-1 Misleading practices that hinder performance comparability:  Representative accounts-showing a top-performing protfolio as representative of firm's results.  Survivorship bias-excluding wark performance. 84 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Varing time periods- showing performance for selected time periods with outstanding returns. R195-1 Complying with the GIPS standards is voluntary R196-1 Only an investment management firm that actually manage assets can claim compliance with the Standards  Plan sponsors & consultants  can’t claim compliance unless actually manage assets.  Software (and vendor of software) cannot be compliant  can assist firms in compliance with GIPS R197-1 Firm-wide and full compliance  Can’t be achieved on a single product or composite.  Two options: (1) Fully comply with all requirements; (2) Not comply with all requirements and not claim compliance R198-1 Benefit 2 groups: investment management firm and prospective clients R199-1 ★关于composite  A composite is a grouping of individual discretionary portfolios representing a similar investment strategy, objective, or mandate  A composite, such as Global Equities, must include all portfolios (current and past) that the firm has managed in accordance with this particular strategy.  The firm should identify which composite each managed portfolio is to be included in before the portfolio’s performance is known. R200-1 Verification  Verification is the review of an investment management firm’s performance measurement processes and procedures by an independent third-party “verifier”  Whether the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis.  Whether the firm’s processes and procedures are designed to calculate and present performance results in compliance with the GIPS standards.  A single verification report is issued in respect of the whole firm; verification cannot be carried out for a single composite. R201-1 Firm的定义  The definition should reflect the “distinct business entity” that is held out to clients and prospects as the investment firm.  GIPS are ethical standards for performance presentation which ensure fair representation of results and full disclosure R202-1 Include all actual fee-paying, discretionary portfolios in composites for a minimum of 5 years or since firm or composite inception. After presenting five years of compliant data, the firm must add annual performance each year going forward up to a minimum of 10 years R203-1 No partial compliance and only full compliance can be claimed R204-1 Firms are required to use certain calculation and presentation standards and make specific disclosures, . composite  asset weighted R205-1 GIPS contain both required and recommended provisions R206-1 Follow the local laws for cases in which a local or country-specific law or regulation 85 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 conflicts with GIPS , but disclose the conflict R207-1 Nine major sections of GIPS  0. Fundamentals of compliance  1. Input data  2. Calculation methodology  3. Composite construction  4. Disclosure  5. Presentation and reporting  6. Real estate  7. Private equity  8. Wrap fee/Separately Managed Account Portfolios R208-1 0. Fundamentals of compliance  Firms must document their policies and procedures used in establishing and maintaining compliance with the GIPS standards  Statements referring to the performance of a single, existing client portfolio as being “calculated in accordance with the Global Investment Performance Standards” are prohibited, except when a GIPS-compliant firm reports the performance of an individual client’s portfolio to that client  Firms must make every reasonable effort to provide a compliant presentation to all prospective clients. Must not choose to whom they present a compliant presentation. As long as a prospective client has received a compliant presentation within the previous 12 months, the firm has met this requirement.  Firms must provide a compliant presentation for any composite listed on the firm’s list of composite descriptions to any prospective client on request.  Firms must be defined as an investment firm, subsidiary, or division held out to clients or prospective clients as a distinct business entity.  For periods after January 2011, total firm assets must be the aggregate fair value of all discretionary and non-discretionary assets managed by the firm.  Changes in a firm’s organization must not lead to alteration of historical composite performance.  When the firm jointly markets with other firms, the firm claiming compliance with the GIPS standards must be sure that it is clearly defined and separate relative to other firms being marketed, and that it is clear which firm is claiming compliance.  Fair Value: the amount at which an investment could be exchanged in a current arm’s length transaction between willing parties in which the parties each act knowledgeably and prudently  Valuation hierarchy: 1) market price 2) market price for similar investment 3) market-based inputs for pricing the investment 4) subjective unobservable inputs for pricing the investment R209-1 1. Input data  For periods beginning on or after I January 2011, portfolios must be valued in accordance with the definition of fair value and the GIPS Valuation Principles. R210-1 2. Calculation methodology 86 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Firms must calculate time-weighted rates of return that adjust for external cash flows. Both periodic and sub-period returns must be geometrically linked R211-1 3. Composite construction  All actual, fee-paying, discretionary portfolios must be included in at least one composite. Although non-fee-paying discretionary portfolios may be included in a composite (with appropriate disclosure), non-discretionary portfolios must not be included in a firm’s composites.  Firms must not link performance of simulated or model portfolios with actual performance. R212-1 5. Presentation and reporting  At least 5 years of performance (or since inception if less than five years) that meets the requirements of the GIPS standards. After a firm presents a minimum of five years of GIPS compliant performance, the firm must present an additional year of performance each year, building up to a minimum of 10 years of GIPS compliant performance.  Firms must not link non-GIPS-compliant performance for periods beginning on or after 1 January 2000 to their GIPS-compliant performance. Firms may link non-GIPS-compliant performance to GIPS-compliant performance provided that only GIPS-compliant performance is presented for periods beginning on or after 1 January 2000. R213-1 7. Private Equity  Firms must calculate the annualized since-inception internal rates of return (SI-IRR) R214-1 8. Wrap fee/separately managed account (SMA) portfolios  Wrap fee: A type of bundled fee and are specific to a particular investment product.  A wrap fee portfolio is sometimes referred to as a “Separately managed account” (SMA) or “managed account.” 87 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 2-Quantitatives P1-2 Interest rate Q1-2 ★The nominal (quoted) annual interest rate on an automobile loan is 10%. The effective annual rate of the loan is %. The frequency of compounding periods per year for the loan is closest to:（mock85-19） A. weekly. B. monthly. C. quarterly. Solution: B The effective annual return is: EAR = (1 + Periodic interest rate)m-1 For weekly compounding2, (1 + / 525) — 1 = = % For monthly compounding, (1 + / 1212 )— 1 = = % For quarterly compounding, (1 + / 44 )— 1 = = % Thus, the correct answer is monthly compounding. R1-2 Required rate of return: the return that investors and savers require to get them to willing lend their funds; affected by the supply and demand of funds in the market.  Discount rate: the interest rate we use to discount payments to be made in the future.  Opportunity cost: the benefit from the second best choice at the same risk level.  B两个证券公司对同一个股票估值，使用相同的现金流预测，得出不一样的价格。原因： 使用的required rate of return 不一样。 R2-2 Decompose required rate of return: Interest rate r eal risk free rate expected inflation rate risk premium Real risk free rate: compensation for consumption delay  Expected inflation rate: 要注意不是historical inflation rate, 因为利率是向前看的。  Risk premium: Default risk premium, liquidity risk premium, maturity risk premium. ·Real risk free risk=(1) ·Nominal risk free risk=(1)+(2), also called risk free rate. ·Required rate of return=(1)+(2)+(3) P2-2 Time Value of Money Q2-2 Rachel Kelly, 24 years old, is planning for retirement. Kelly’s annual consumption expenditures are currently $30,000. She assumes her consumption expenditures will increase with the rate of inflation, and she expects the average inflation rate is 3% until she retires at the age of a life expectancy of 93 years and constant expenditures in retirement, the amount Kelly must accumulate by her retirement date, assuming an 8% rate of return on her retirement account, is closest to: A. $423,000. B. $1,176,000. C. $1,552,000. 88 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B The annual expense will go to 30,000×=110,. Since her expenditure is constant after she retires. PMT=-110,，FV=0，T=25，I/Y=8， CPT PV=1,175,758. Q3-2 A couple plans to pay their child’s college tuition for 4 years starting 18 years from now. The current annual cost of college is C$7,000, and they expect this cost to rise at an annual rate of 5 percent. In their planning, they assume that they can earn 6% annually. How much must they put aside each year, starting next year, if they plan to make 17 equal payments? A $2, B $2, C $3, Solution: A Step1: calculate the CF since 18, CF18=7000*(1+5%)18=16846, CF19=7000*(1+5%19)=17689,… Step 2: PV of tuition (4 CF since 18) at year 17 C$16,846 (1,06-1) + C$17,689 (1-2 .06)+ C$18,573 (-3) + C$19,502 (-4 )=$62,677 Step 3: Calculate PMT Input FV=C$62,677, PV=0, I/Y=6, N=17, then CPT PMT= C$2, In summary, the couple will need to put aside C$2, each year if they start next year and make 17 equal payments. Q4-2 ★For planning purposes, an individual wants to be able to spend €80,000 per year, at the end of each year, for an anticipated 25 years in retirement. In order to fund this retirement account, he will make annual deposits of €6,608 at the end of each of his working years. What is the minimum number of such deposits he will need to make to fund his desired retirement? Use 6% interest compounded annually for all calculations. A. 29 payments B. 40 payments C. 51 payments Solution: B B is correct. Using a financial calculator, first calculate the needed funds at retirement: N = 25, I/Y = 6, PMT = 80,000, FV = 0; calculate PV to be 1,022,668. Then use 1,022,668 as the FV of the accumulation phase annuity as per: I/Y = 6, PV = 0, PMT = - 6,608, FV = 1,022,668; calculate N. N is 40. Q5-2 ★★A borrower is considering three competing mortgage loan offers from her bank The amount borrowed on the mortgage is $100,000 with monthly compounding. Mortgage type Nominal(stated)annual interest Year in which rate first rate at initiation of the loan adjusts 30-year fixed rate 5% N/A 89 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 15-year fixed rate % N/A 30-year 3/5 adjustable rate % 3 mortgage(ARM) The rate on the ARM resets at the end of the year 3. Assuming the ARM is reset at % (. the remaining balance on the loan will now be repaid with % nominal annual interest), which of the three loans will have the smallest monthly payment after the rate reset at the end of year 3? (Mock85-26) A. 30-year ARM. B. 15-year fixed-rate loan. C. 30-year fixed-rate loan. Solution: C After year 3 the 30-year fixed-rate loan has the lowest payment. The loan payments, summarized in the table, are calculated using a financial calculator following the table. Loan Initial Payment ($) Payment after 3 years($) 30-year fixed 15-year fixed ARM Payment on the 30-year fixed is: N = 12×30= 360; I/Y= (5/12) = ; PV= -100,000; FV = 0; calculate PMT= Payment on the 15-year fixed is: N = 12×15= 180: I/Y= ( = ; PV =-100,000; FV=0; calculate PMT= Calculations for the ARM Initial payment N = 12×30 = 360; I/Y = ( / 12) = ; PV = -100,000; FV = 0; calculate PMT = Balance at end of year 3: N = 12×27 = 324;I/Y = ( / 12) = ; FV = 0; PMT = ; calculate PV = 94, Payment after the end of year 3: N = 324; I/Y = ( / 12) = ; PV = 94,; FV = 0; calculate PMT = R3-2 Annuities的计算：FV, PV, required payment  N = number of periods  I/Y = interest rate per period  PMT = amount of each periodic payment  FV= 0  Compute (CPT) present value (PV) 考察方法：计算——N, I/Y, PMT, FV, PV中任意给定四个，求另外一个 P3-2 HPR计算 Q6-2 An analyst gathered the following information about a common stock investment: Date Amount Stock purchase 15 January 2007 90 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Cash dividend 14 July 2007 Stock sale 15 July 2007 The holding period return on the common stock investment is closest to: A. % B. % C. % Solution: B HPR = (P1 – P0 + D1)/P0, where P0 is the initial investment, P1 is the price received at the end of the holding period, and D1 is the cash paid by the investment at the end of the holding period. In this case: HPR = (54 - 48 + 4) / 48 = %. The HPR is not annualized for holding periods shorter than a year. R4-2 概念：Total return an investor earns between the purchase date and the sale or maturity date. R5-2 公式：HPR = P1-P0 D = 0P1 D 0P0P-10Notes: 这个指标没有年度化，所以不同的HPR是不具可比性的。 P4-2 rBD，HPY，EAY，rMM的计算及相互转化 Q7-2 ★A money manager has $1,000,000 to invest for one year. She has identified two alternative one-year certificates of deposit (CD) shown below: Compounding frequency Annual interest rate CD1 Quarterly % CD2 Continuously % Which CD has the highest effective annual rate (EAR) and how much interest will it earn? Highest EAR Interest earned A. CD1 $82,432 B. CD2 $82,746 C. CD2 $83,287 Solution: B Quarterly: EAR= - 1= - 1 = = % Interest = $1,000,000×% = $82,432 Continuous: EAR = = = % Interest = $1,000,000 x % = $82,746 Therefore, the CD paying % compounded continuously offers the highest effective annual rate. Q8-2 An investor buys a T-bill at 98,000 with 50 days to maturity. The par value of this T-bill is 100,000. The money market yield is closest to: （2012年12月考题回顾） A. % 91 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. % C. % Solution: B Money market yield = [ (par value – purchase price) / purchase price] * (360/50) = [(100,000 – 98,000)/98,000] * (360 / 50) = % R6-2 掌握几种收益率的计算：rBD，HPY，EAY，rMM，并且知道相互之间的转化  1). PV=FV*(1-rBD*36t0) 2). FV=PV*(1+rMM*36t0) 4)2*+HRY=(1+BEY)365FV-PV+D2 HPR=PV1 5). rMM=rBD1t-360*rBD 6). FV=(1+EAR )365*PV 1+HRY=(1+EAR)36t57). 单利时用t复利时用t 360365 注：对于同一笔投资来说，rBD＜ rMM ＜EAY<Rc R7-2 EAR(考察方法：计算——算EAR，或者是算计息次数)  EAR = (1+ periodic rate)m – 1  那么如果是semi, m=2; 如果是quarterly, m=4; 如是weekly, m=52  如果是连续复利，公式则变为EAR = eannual int yr P5-2 Time-weighted return and Money-weighted return Q9-2 ★A fund’s holding period yield is as follows: Quarter 1 10% Quarter 2 9% Quarter 3 3% The value of the fund is $6,700,000 at the beginning of the fourth quarter, and the investor receives dividend of $200,000 at the end of 2007. At the end of the fourth quarter, the value of the fund is $6,100,000, the time-weighted return of 2007 is: A. 13%. B. 15%. C. 16%. Solution: C Yield in Quarter 4: (200,000+6,100,000-6,700,000)/6,700,000= % Time-weighted return: (1+10%)(1+9%)(1+3%)(%) – 1=16% 92 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q10-2 ★★An analyst collected the return of a portfolio for consecutive three years: Year 1 10% Year 2 4% Year 3 -2% The fund manager made an investment at the beginning of every year. Compared with the money-weighted return, the time-weighted return is: A. Greater. B. Less. C. Same. Solution: A Time-weighted return: 1υ.04 0.υ9 81 % 因为每年初都投资，而每年的投资收益率下降，则MWRR相对来讲比较小。 假设每年初都投资1元，则现金流分别为: IRR为％ t 0 1 2 3 CFt +1 +1 +1 -[(1*(1+10%)+1)*+1]*= Q11-2 Which of the following statements least likely represents a characteristic of the time-weighted rate of return? It is: A. not affected by the timing of cash flows. B. used to measure the compound rate of growth of $1 over a stated measurement period. C. defined as the internal rate of return on an investment portfolio, taking into account all inflows and outflows. Solution: C. The money-weighted rate of return is the IRR of an investment’s net cash flows. Q12-2 ★An analyst gathered the following information about a common stock investment: Date Amount Stock purchase (1) 15 January 2006 € Stock purchase (1) 15 January 2007 € Stock sale (2@106) 15 January 2008 € The stock does not pay a dividend. The money-weighted and time-weighted rates of return on the investment are closest to: Money-weighted rate Time-weighted rate of return of return A. % % B. % % C. % % Solution: C 93 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Cash outflow of €86 occurs at t=0, another outflow of €94 occurs at t=1, and an inflow of €212 occurs at t=2. Using a financial calculator, the IRR of these cash flows is %. The time-weighted rate of return is the geometric mean of the annual rates of return in the stock irrespective of the amounts invested in the various time periods. The rate of return for the first period is (94 - 86)/ 86 = % and for the second period is (106 - 94)/ 94 = %. The geometric mean is ( x ) - 1 = %. Q13-2 An investor purchases one share of stock for $85. Exactly one year later, the company pays a dividend of $ per share. This is followed by two more annual dividends of $ and $ in successive years. Upon receiving the third dividend, the investor sells the share for $100. The money-weighted rate of return on this investment is closest to: (Mock84-28) A. %. B. %. C. %. Solution: B The money-weighted rate of return is the internal rate of return (IRR) of the cash flows associated with the investment. Use the cash flow (CF) function of a financial calculator and enter CF0 = –85, CF1 = 2, CF2 = , and CF3 = . Calculate the IRR. The answer is %. Q14-2 A fund manager invests a project. His initial investment is $10,000. Six month later, he invests another $900 into this project, and the total value of this project becomes $11,600 immediately. At the end of the year, he withdraws all of fund from this project with $11,300. What is the fund manager’s time-weighted rate of return? （2012年12月考题回顾） A. % B. % C. % Solution: C HPY1=(11600-900-10000)/10000=7% HPY2=(11300-11600)/11600=% TWRR (1 7% )(12. 5 9%)1 4. 23% Q15-2 ★Which of the following return calculating methods is best for evaluating the annualized returns of a buy–and–hold strategy of an investor who has made annual deposits to an account for each of the last five years?(原版书R44-4) A. Geometric mean return. B. Arithmetic mean return. C. Money–weighted return. Solution: A The geometric mean return compounds the returns instead of the amount invested. 94 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q16-2 An analyst gathers the following information about the performance of a portfolio ($ millions): Quarter Value at Beginning of Quarter Cash Inflow (Outflow) Value at End (Prior to Inflow or Outflow) at Beginning of Quarter of Quarter 1 2 3 () 4 The portfolio’s annual time-weighted rate of return is closest to: (2014 Mock 99-24) A. 32%. B. 27%. C. 8%. Solution: A The time-weighted rate of return is calculated by computing the quarterly holding period returns and linking those returns into an annual return as follows: Value ($ millions) at Beginning of Value ($ millions) Quarter Holding Period Return Quarter (Considering at End of Quarter Inflows and Outflows) 1 + = ( – ) / = % 2 + = ( – ) / = –% 3 – = ( – ) / = % 4 + = ( – ) / = –% The time-weighted return (TWR) is found as follows: TWR (1 9. 09 %)(1 υ 4% )(13 3υ.33% ) ( %υ)1 32%(rou n de d ) R8-2 TWRR =(1+HPR1)*(1+HPR2)*…*(1+HPRn) R9-2 ★TWRR and MWRR:  Time-weighted rate of return:几何平均，用于预测下一年的收益率  Money-weighted rate of return: IRR  TWRR: Not be influenced by the timing and direction of CF, so it’s an objective indicator of investment managers’ performance;  MWRR: However, if can control the timing and direction, MWRR is the best indicator to measure the return. R10-2 概念：the money weighted return applies the concept of IRR to investment portfolio. The IRR based on the cash flows related to the investment. R11-2 步骤及公式：Firstly, determine the timing of each cash flow; then, using the calculator to compute IRR, or using geometric mean. R12-2 ★Only appropriate for the investment when manager can control the timing and direction 95 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 of CF. R13-2 ★rBD is not representative of the return earned by the investor, the reason is as following:  It is simple interest, not compounded interest  It's based on face value, not purchase price--it is not the true yields  It's based on 360-day year, rather than 365. R14-2 ★Performance measurement with means  The geometric mean of past annual return is the appropriate measure of past performance  The arithmetic mean is the statistically best estimator of the next year’s returns P6-2 Describe, calculate, and interpret quartiles, quintiles, deciles, and percentiles Q17-2 Which of the following statements is most accurate? A. The first quintile generally exceeds the median. B. The first quintile generally exceeds the first decile. C. The first quintile generally exceeds the first quartile. Solution: B The first quintile is the 20th percentile. The first decile is the 10th percentile, the first quartile is the 25th percentile, and the median is the 50th percentile. While it is possible that these various percentiles or some subsets of them be equal (for example the 10th percentile possibly could be equal to the 20th percentile), in general the order from smallest to largest would be: first decile, first quintile, first quartile, median. P7-2 Measures of mean Q18-2 ★If the observations in a data set have different values, is the geometric mean for that data set less than that data set's: (原版书R7-20) Harmonic mean? Arithmetic mean? A No No B No Yes C Yes No Solution: B Unless all the values of the observations in a data set have the same value, the harmonic mean is less than the corresponding geometric mean, which in turn is less than the corresponding arithmetic mean. In other words, regarding means, typically harmonic mean < geometric mean < arithmetic mean. P8-2 Measure of dispersion Q19-2 ★An analyst gathered the following annual return information about a portfolio since its inception on 1 January 2003: Year Portfolio return 2003 % 2004 % 96 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 2005 % 2006 % 2007 % The portfolio’s mean absolute deviation and variance of annual returns, respectively, for the five-year period are closest to: Mean absolute deviation variance A. % B. % C. % Solution: A 1. Compute the mean portfolio return = ( + + + - )/ 5 = %； 2. MAD = (|| + || + || + || + | |) / 5 = % 3. Variance= [( – ) + ( – ) + ( – ) + ( – )] / 5 ≈ 4. The population variance calculation is appropriate because the analyst is analyzing all the annual returns on the portfolio since its inception. Q20-2 ★The following ten observations are a sample drawn from an approximately normal population: Observation 1 2 3 4 5 6 7 8 9 10 Value -3 -11 3 -18 18 20 -6 9 2 -16 The sample standard deviation is closest to: （Mock85-21） A. . B. . C. . Solution: C The sample mean is: X nƒ Xi/n ( 3 1 1 3 18 18 20 69 21 6 )/1 0 2 .00 /1 iThe sample variance is: S2 nƒ (Xi X )2/n1 iThe sample standard deviation is the (positive) square root of the sample variance, Value mean [value-()] Difference Square -3 -11 3 -18 18 20 -6 97 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 9 2 -16 Sum of Squared differences 1, Divided by n-1 Square root R15-2 Measure of dispersion:  Range=highest value-lowest value  NƒX Π MAiD i 1 N Nƒ(X Π)i ς2 i 1 (for population) N Nƒ(X X)i S2 i 1 (for sample) n 1 ★Coefficient of variation: measures the amount of dispersion in a distribution relative to the distribution's mean. It can be used to measure the risk per unit of return. R16-2 MAD 和 Variance掌握计算和比较：  nƒX-XMi AD i 1 n Nƒ(X-X)2i s2 i 1 n 1 ★理解：variance比MAD要好，因为variance是连续的，处处可导。MAD计算的是绝对值，相对比较繁琐。但是variance和MAD都是表示风险的。考到MAD的计算，这是好几年没有预估到的考点，一定要注意到MAD＜= ς P9-2 Correlation and covariance Q21-2 Which of the following statements best describes the relationship between correlation and covariance? The correlation between two random variables is their covariance standardized by the product of the variables: A. variances. B. standard deviations. 98 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. coefficient of variation. Solution: B The correlation between two random variables is equal to the covariance between the variables divided by the product of the variables’ standard deviations. Q22-2 ★The joint probability of returns, for securities A and B, are as follows: Joint Probability Function of Security A and Security B Returns. (Entries are joint probabilities) Return on security B =30% Return on security B20% Return on security A= 25% 0 Return on security A= 20% 0 The covariance of the returns between securities A and B is closest to: A. 3%. B. 12%. C. 24%. Solution: B Expected return on security A= x 25% + x 20% = 15% + 8% = 23% Expected return on security B= x 30% + x 20% = 18% + 8% = 26% Cov (RA, RB) = [(25% - 23%)(30% - 26%)] + [(20% - 23%)(20% - 26%)] = (2% x 4%) + (-3% x -6%)= 12%. Q23-2 ★An analyst gathered information about three economic variables, He noted that whenever variable A increased by one unit, variable B increased by units but variable C decreased by units. The correlation between variables A and B and the correlation between variables A and C respectively, are closest to: Correlation between variables A and B Correlation between variables A and C A B C A. Answer A B. Answer B C. Answer C Solution: C The relationship between variables A and B is perfect positive correlation () and the relationship between variables A and C is perfect negative correlation (). 99 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q24-2 ★The correlation coefficient that indicates the weakest linear relationship between variables is: (原版书R8-20) A. B. C. Solution: B Correlations near positive exhibit strong positive linearity; correlations near negative exhibit strong negative linearity. Correlations of zero indicate no linear relation between variables. The closer the correlation is to zero, the weaker is the linear relationship. R17-2 Covariance:  Covariance measures how one random variable moves with another random variable  The covariance of RA with itself is equal to the variance of RA  Covariance ranges from negative infinity to positive infinity  COV(X,Y) E [(X-E(X))(Y-E(Y))] COV(X,X) E [(X-E(X))(X-E(X))] ς2(X) Cov(RA,RB)= ƒ P(ƒRA,i,RB,j)(RA,i-ERA)(RB,j-ERB)ijR18-2 Correlation:  Correlation measures the linear relationship between two random variables  ρ=COV(A,B) / (σAσB)  Correlation has no units, ranges from –1 to +1, standardization of covariance  If ρ=0, this indicates? R19-2 理解: 介于[-1, 1]; 在portfolio中，负相关的产品进行组合可以分散风险  If ρx, y =1, the two random variables have perfect positive linear correlation. This means one random variable will move in proportion in response to the movement of another random variable.  If ρx, y =-1, the two random variables have perfect negative linear correlation. This means one random variable will move in proportion but in opposite direction to the movement of another random variable.  Ifρx, y =0, the two random variables have no linear correlation. This means movement of one random variable cannot be used to predict the movement of another random variable. P10-2 CV & Sharpe Ratio Q25-2 ★If the risk-free rate is equal to zero and the mean is less than the standard deviation, compared with Sharp ratio, the coefficient of variation is? A. Greater. B. Same. C. Less. 100 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A Sharpe ratio = [expected return (mean) – risk-free rate]/standard deviation = mean/standard deviation; CV = standard deviation/expected return. The mean is less than the standard deviation, so compared with Sharp ratio, the coefficient of variation is GREATER. Q26-2 The coefficient of variation is useful in determining the relative degree of variability of different data sets if those data sets have different: (原版书R7-23) A. means or different units of measurement. B. means, but not different units of measurement. C. units of measurement, but not different means. Solution: A The coefficient of variation is a relative measure of risk (dispersion) and is useful for both data sets that have different means and for data sets that do not have the same unit of measurement. Q27-2 ★An analyst gathered the following information: Portfolio Mean Return (%) Standard Deviation of Returns (%) 1 2 3 If the risk-free rate Of return is percent, the portfolio that had the best risk-adjusted performance based on the Sharpe ratio is: (原版书R7-24) A. Portfolio 1. B. Portfolio 2. C. Portfolio 3. Solution: B The Sharpe ratio is the mean excess return (mean return less risk-free rate of percent) divided by the standard deviation of the portfolio. It is highest for portfolio 2 with a Sharpe ratio of = . For portfolio 1, the Sharpe ratio is = and for portfolio 3 the Sharpe ratio is = . Q28-2 An analyst gathered the following information: Portfolio Mean Return (%) Sharpe retio (%) 1 2 If the risk-free rate of return is percent, which portfolio’s coefficient of variance is larger? （2012年12月考题回顾） A. Portfolio 1 B. Portfolio 2 C. The same Solution: A 101 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Sharpe ratio = [E(Rp) - rf]/ ς, based on the Sharpe ratio formula, we can get the sigma = [E(Rp) - rf]/ Sharpe ratio, ς1=(%-3%)/%=%, ς2= (%-3%)/%=%. CV = ς / X, CV1= %/% = , CV2=%/%=. The portfolio 1’s CV is larger. R20-2 Coefficient of variation measures the amount of dispersion in a distribution relative to the distribution’s mean. (relative dispersion)  CV S XX 100% υR21-2 The sharp ratio measures excess return per unit of risk.  SharpeRaRtio P Rf ςP P11-2 Skewness and Kurtosis Q29-2 A distribution with mode , median , mean 2, the distribution can be described as: A. long tail in the left and positively skewed. B. long tail in the right and negatively skewed. C. long tail in the left and negatively skewed. Solution: C As mean < median < mode, the distribution has long tail in the left and negatively skewed. Q30-2 An analyst gathered the following information about the return distribution for two portfolios during the same time period： Portfolio skewness kurtosis A B The analyst stated that the distribution for Portfolio A is more peaked than a normal distribution and that the distribution for Portfolio B has a long tail on the left side of the distribution. Is the analyst’s statement correct with respect to: Portfolio A Portfolio B A. No No B. No Yes C. Yes No Solution: A The kurtosis of a normal distribution is 3. If the kurtosis is greater than 3, the distribution is more peaked than a distribution with a kurtosis less than 3. A distribution with a positive skewness has long right tail while that with a negative skewness has a long left tail. 102 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q31-2 Which of the following statements is least likely accurate? A. A distribution has leptokurtic if its kurtosis is 3. B. A lognormal distribution has a positive skewness. C. A lognormal distribution is bounded by zero at left tail. Solution: A. A normal distribution has a kurtosis of 3. Leptokurtic describes a distribution that is more peaked than a normal distribution when kurtosis is more than 3. A lognormal distribution has a range that is greater than zero. Q32-2 Two distributions have the same mean. One is negative skew, the other is positive skew. Which one has the larger median? （2012年12月考题回顾） A. Distribution with negative skew B. Distribution with positive skew C. The same Solution: A. As shown in the following figure, the median is smaller than the mean for the positive skew. In contrast, the median is larger than the mean for the negative skew. Mode<Median<Mean Mean<Median<Mode Positive (right) skew Negative (left) skew Therefore, if the two means equal, the median of the negative skew is larger than that of positive skew. Q33-2 ★When we calculate the kurtosis, what is the power of the kurtosis? （2012年12月考题回顾） A. 2 B. 3 C. 4 Solution: C Sample kurtosis is measured using deviations raised to the fourth power. n1 ƒ(X X4i)i 1 Sample kurtosis =ns4 103 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Skewness掌握概念： R22-2 概念：refer to the extent to which a distribution is not symmetrical. R23-2 种类：Positively skewed – skewed right and long right tail (mean>median>mode) Negatively skewed – skewed left and long lower tail (mean<median<mode) R24-2 理解：Positive skewness is good choice for investors.(Because the surprise values are mostly on the positive side.) R25-2 Kurtosis掌握概念：  概念：refer to the extent to which a distribution is not symmetrical.  种类：leptokurtic，normal and platykurtic 理解：kurtosis>3，也就是leptokurtic代表尖峰肥尾:more peak, extreme outcome is greater可能在考试中会和skew合并考核综合知识 P12-2 Relative Frequencies and Cumulative Relative Frequencies Q34-2 An analyst gathered the following information about the price-earning (P/E) ratios for the common stocks held in a foundation’s portfolio: Interval P/E range Frequency I 24 II 48 III 22 IV 16 The relative frequency and the cumulative relative frequency, respectively, for interval III are closest to: Relative frequency Cumulative relative frequency A. 20% 85% B. 22% 36% C. 22% 85% Solution: A The relative frequency is the number of observations in an interval divided by the total number of observations. For Interval III, relative frequency = 22 / 110 = 20%. The cumulative relative frequency is the sum of the relative frequencies of the relevant class and all the classes before it. For Interval III, the cumulative relative frequency = (24 + 48 + 22) / 110 =%≈ 85%. Relative Frequencies and Cumulative Relative Frequencies： R26-2 Relative frequency is calculated by dividing the absolute frequency of each return interval by the total number of observations. R27-2 Cumulative relative frequency is calculated by summing the absolute or relative frequencies at the lowest interval and progressing through the highest. P13-2 Empirical, a priori, or subjective probability Q35-2 ★If an analyst estimates the probability of an event for which there is no historical record, this probability is best described as： A. Objective. 104 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. Empirical. C. Subjective. Solution: C since there is no historical data, the estimates can only be based on the subjective estimate of the analyst. P14-2 Properties of Probability Q36-2 ★The probability of price change is as follows: Price change Price increase What is the probability that the two situations happen simultaneously? A. B. C. Solution: B. 注意陷阱！Price change includes price increase. Q37-2 ★If events A and B are mutually exclusive, then: A. P(A|B)=P(A). B. P(AB) = P(A) ×P(B). C. P(A or B)= P(A) + P(B). Solution: C There is no intersection of events when events are mutually exclusive, P(AB) = P(A) x P(B) is only true for independent events. Note that since A and B are mutually exclusive (cannot both happen), P(A |B) and P(AB) must both be equal to zero. Q38-2 If two events, A and B, are independent and the probability of A does not equal the probability of B (., P (A)≠ P(B)), then the probability of event A given that event B has occurred (., P(A∣B)) is most accurately described as:（Mock 79 – 24） A. P(A) B. P(B) C. P(A I B) Solution: A Two events, A and B, are independent if and only if P(Al B)=P(A) or, equivalently, P(A I B)=P(B). The wording of the question precludes P(A)=P(B); therefore, responses B and C cannot be correct. Q39-2 ★An analyst finds that the probability of stock A outperform the market is 60%. What is the odds for of the stock A underperform the market? (2012年12月考题回顾) 105 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. 2/3 B. 1/3 C. 3/2 Solution: A The probability of underperform = 1 – 60% =40% The odds for of underperform = 40% / 60% = 2/3 Q40-2 ★★An analyst gathered the following information: the probability of economy prosperity is 75%, the probability of economy recession is 25%. For a company, when the economy is prosperity, there is 10% of probability that its EPS is $ and 90% of probability that the EPS is $. However, when the economy is recession, there is 25% of probability that the EPS is $ and 75% of probability that the EPS is $. What is the variance of this company’s EPS, when the economy is recession? (2012年12月考题回顾) A. B. C. Solution: C When the economy recession: E(EPS) = 25% * 2 + 75% *4 = Var(EPS) = 25% * ( )+ 75% * () = Properties of Probability掌握基本公式： R28-2 “×” rule: P(AB)=P(B)×P(A|B); if A and B are independent: P(A|B)=P(A), P(B|A)=P(B), P(AB) = P(A) × P(B) R29-2 “+” rule: P(A or B)=P(A) + P(B) - P(AB) R30-2 mutually exclusive vs. independent events  For mutually exclusive events: P(A or B) = P(A)+ P(B)  For independent events: P(A or B) = P(A)+ P(B)- P(A)×P(B)  注意：不独立未必互斥，互斥一定不独立。 R31-2 Odds for an event: 表示一个事件发生的相对可能性。  Odds for an event: P(E)/(1-P(E))  Odds against an event: (1-P(E)) /P(E) P15-2 Uniform Random Variable and a Binomial Random Variable Q41-2 Which of the following best describes the discrete uniform distribution? The discrete uniform distribution: A. has a finite number of specified outcomes. B. is based on the Bernoulli random variable. C. has an infinite number of unspecified outcomes. Solution: A 106 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The discrete uniform distribution is known as the simplest of all probability distributions. It is made up of a finite number of specified outcomes and each outcome is equally likely. Uniform Random Variable and A Binomial Random Variable掌握概念及理解： R32-2 Uniform random variable is one for which the probabilities for all possible outcomes for a discrete random variable are equal. F(Xn) = np(X) R33-2 Binomial random variable defined as the number of “successes” in a given number of trials, whereby the outcome can be either “success” or “failure”. P(x)=P(X=x)=Cnxpx(1-p)n-x P16-2 Normal distribution Q42-2 The random variable X distributed with μ=, and standard deviation = , what is the probability that X will be smaller than 0? (2012年12月考题回顾) A. B. C. Solution: C Here we want to know P(X<0), which is the area under the curve to the left of the z-value corresponding to X = 0 The z-value for X=0 is: Z = (x-μ)/ ς = ()/=-1 That is 0 is 1 standard deviation below the mean value of . Form the z-table we have F (-1) = 1- F(1) = = Q43-2 An analyst stated that, all else equal, increasing sample size will decrease both the standard error and the width of the confidence interval. The analyst's statement is correct in regard to: (原版书 R10-22) A. both the standard error and the confidence interval. B. the standard error, but incorrect in regard to the confidence interval. C. the confidence interval, but incorrect in regard to the standard error. Solution: A All else equal, a larger sample size will decrease both the standard error and the width of the confidence interval. In other words, the precision of the estimate of the population parameter is increased. Q44-2 A variable is normally distributed with a mean of and a variance of . Calculate the probability of observing a value of negative or less. That is, calculate P (X1 ≤ ) given X is distributed as N(5, 4). Use this excerpt from the cumulative distribution function for the standard normal random variable table to calculate your answer. Cumulative Probabilities for a Standard Normal Distribution 107 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P(Z≤X)=N(x)for x≥0 or P(Z≤z)=N(z)for z≥0 X or Z 0 0 .8729 0 .8907 0 .9207 … 0 .9940 0 .9 9 5 5 0 .9966 0 .9975 0 .9979 0 .9982 0 .9984 0 .9987 The calculated value is closest to: (Mock85-30) A. % B. %. C. %. Solution: A First standardize the value of interest, —, for the given normal distribution: Z = (X - ) / Π = (- ς0 - )/2 = use the given table of values to find the probability of a Z value being standard deviations below the mean (., when z ≤ 0). The value is 1 — P(Z ≤ +). In this problem, the solution is: 1 — = = % R34-2 Normal distribution:  Standardization: if X~N(µ , σ²), then X~ N(0,1)  Symmetrical distribution: skewness=0, kurtosis=3  A linear combination of normally distributed random variable is also normally distributed.  The tails get thin and go to zero but extend infinitely. P17-2 Central Limit Theorem Q45-2 According to the central limit theorem, a sampling distribution of the sample mean will be approximately normal only if the: A. sample size n is large. 108 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. variance of the underlying distribution is known. C. population mean of the underlying distribution is known. Solution: A According to the central limit theorem, the sample mean of a population described by any probability distribution can be determined if the sample size n is sufficiently large, ., equal to or greater than 30. This process is used to estimate the population mean and standard deviation, which usually are unknown. Q46-2 If the distribution of the population from which the samples are drawn is positively skewed, and given that the sample size is large, the sampling distribution of the sample means is most likely: (mock84-20) A. approximately normally distributed. B. to have a variance equal to that of the entire population. C. to have a mean smaller than the mean of the entire population. Solution: A The central limit theorem establishes that the sampling distribution of sample means will be approximately normal, will have a mean equal to the population mean, and will have a variance equal to the population variance divided by the sample size. R35-2 Central Limit Theorem  Definition: The sampling distribution of the sample mean approaches a normal distribution as the sample size becomes large(>=30);  The mean of sample mean distribution=μ，The variance of sample mean distribution =σ2/n R36-2 Standard error of the sample mean  Known population variance =σ/n1/2  Unknown population variance=s/n1/2 P18-2 binomial model Q47-2 ★Assume that a stock’s price over the next two periods is as shown below. Time = 0 Time = 1 Time = 2 S0 = 100 Su = 110 Suu= 121 Sd = 92 Sud,du= Sdd= The initial value of the stock is $100. The probability of an up move in any given period is 40% and the probability of a down move in any given period is 60%. Using the binomial model, the probability that the stock’s price will be $ at the end of two periods is closest to: A. 16%. B. 24%. C. 48%. 109 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C Across two periods, there are four possibilities: an up move followed by an up move ($ end value), an up move followed by a down move ($ end value), a down move followed by an up move ($ end value), and a down move followed by a down move ($ end value). The probability of an up move followed by a down move is times equals . The probability of a down move followed by an up move is times also equals . Both of these sequences result in an end value of $. Therefore, the probability of an end value of $ is 48%. Q48-2 Assume that a stock’s price over the next two periods is as shown below. Time=0 Time=1 Time=2 S0=80 Su=88 Suu= Sd=72 Sud,du= Sdd= The initial value of the stock is $80. The probability of an up move in any given period is 75% and the probability of a down move in any given period is 25%. Using the binomial model, the probability that the stock’s price will be $ at the end of two periods is closest to: A. %. B. %. C. %. Solution: B Across two periods, there are four possibilities: an up move followed by an up move ($ end value), an up move followed by a down move ($ end value), a down move followed by an up move ($ end value), and a down move followed by a down move ($ end value). The probability of an up move followed by a down move is times equals . The probability of a down move followed by an up move is times also equals . Both of these sequences result in an end value of $. Therefore, the probability of an end value of $ is ( + ) = %. P19-2 Discrete and continuous random variables Q49-2 ★Which of the following is a discrete random variable considering a company’s stock? (2012年6月考题回顾) A. Quoted price B. Rate of return C. Price-to-earning ratio Solution: A A discrete random variable can take on at most a countable number of possible values. Stocks traded on the stock exchange are quoted in ticks of $. Quoted stock price is thus a discrete random variable with possible values $0, $, $,…… 110 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R37-2 Discrete and continuous random variables  Discrete random variables: the number of possible outcomes can be counted, and for each possible outcome, there is a measurable and positive probability.  Continuous variables: the number of possible outcomes is infinite, even if lower and upper bounds exist.  P (x)=0 even though x can occur.  P (x1<X<x2) P20-2 Ratio, ordinal, interval, nominal Q50-2 An analyst gathered the price-earnings ratios (P/E) for the firms in the S&P 500 and then ranked the firms from highest to lowest P/E. She then assigned the number 1 to the group with the lowest P/E ratios, the number 2 to the group with the second lowest P/E ratios, and so on. The measurement scale used by the analyst is best described as: A. ratio. B. ordinal. C. interval. Solution: B The analyst is using an ordinal scale which involves sorting data into categories based on some characteristic, such as the firms’ P/E ratios. R38-2 Ratio, ordinal, interval, nominal各自的意义是什么  Nominal scales: weakest level of measurement, categorize data but do not rank them, only has mode.  Ordinal scales: stronger level of measurement, sort data into categories that are ordered with respect to some characteristics. Has mode and median.  Interval scales: provide not only ranking but also assurance that the differences between scale values are equal, no absolute zero, can add and deduct.  Ratio scales: the strongest level of measurement. Have absolute zero; can do all kinds of calculations.  Notes: 一般CFA协会会给出具体场景，让考生判断属于哪种类型 P21-2 Chebyshev’s Inequality Q51-2 Using Chebyshev’s inequality, what is the minimum proportion of observations from a population of 500 that must lie within two standard deviations of the mean, regardless of the shape of the distribution? A. 71%. B. 75%. C. 89%. Solution: B Chebyshev’s inequality holds for any distribution, regardless of shape, and states that the minimum proportion of observations located within k standard deviations of the mean is equal 111 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 to 1 - 12/ k. In this case, k=2 and l - 1/4= or 75%. Q52-2 What is the minimum percentage of any distribution that will lie within (+ -) standard deviations of the mean? （2012年12月考题回顾） A. % B. % C. % Solution: B Applying Chebyshev’s inequality, we have 1-1/K2=1-1/=% R39-2 Chebyshev’s Inequality掌握计算及理解：  P(x- δkΠ)（ 1对 τ任意1k 一2ς 组观测值，个体落于均值周围k个标准差之内的概率不小于1 1 任意k＞1） k2 This relationship applies regardless of the shape of the distribution. P22-2 Safety First Ratio Q53-2 On 1 January 2004, the value of an investor's portfolio is $89,000. The investor plans to donate $6,000 to charity organization and pay $2,000 to his insurance account on 31 December 2004, but meanwhile he does not want the year-end portfolio value to be below $89,000. If the expected return on the existing portfolio is 12% with a variance of , the safety-first ratio that would be used to evaluate the portfolio based on Roy's criterion is closest to: A. B. C. Solution: A Roy's safety-first criterion states that the optimal portfolio minimizes the probability that the return of the portfolio falls below some minimum acceptable level. This minimum acceptable level is called the "threshold" level. Symbolically, Roy's safety-first criterion can be stated as: Maximize the SFR where SFR = [E(Rp) - RL] / σ Where: Rp = portfolio return; RL = threshold level return RL=8000/89000=%, SFR = (12%%)/( ) = Q54-2 At the end of the current year, an investor wants to make a donation of $20,000 to charity but does not want the year-end market value of her portfolio to fall below $600,000. If the shortfall level is equal to the risk-free rate of return and returns from all portfolios considered are normally distributed, will the portfolio that minimizes the probability of failing to achieve the investor's objective most likely have the:（原版书R9-21） 112 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Highest safety-first ratio? Highest Sharpe ratio? A. No Yes B. Yes No C. Yes Yes Solution: C The portfolio with the highest safety-first ratio minimizes the probability that the portfolio return will be less than the shortfall level (given normality). In this problem, the shortfall level is equal to the risk-free rate of return and thus the highest safety-first ratio portfolio will be the same as the highest Sharpe ratio portfolio. Q55-2 An investor currently has a portfolio valued at $700,000. The investor’s objective is long-term growth, but she will need $30,000 by the end of the year to pay her son’s college tuition and another $10,000 by year-end for her annual vacation. The investor is considering three alternative portfolios: Standard Expected Deviation of Portfolio Return Returns Safety-First Ratio 1 2 3 14% 22% Using Roy’s safety-first criterion, which of the alternative portfolios most likely minimizes the probability that the investor’s portfolio will have a value lower than $700,000 at year-end?(2014 Mock 98-28) A. Portfolio 1 B. Portfolio 3 C. Portfolio 2 Solution: B The investor requires a minimum return of ($30,000 + $10,000)/$700,000, or %. Roy’s safety-first model uses the excess portfolio’s expected return over the minimum return and divides that excess by the standard deviation for that portfolio: Safety-first ratio=[E(Rp)-Rl]/ σp, where E(RP) is the expected return of portfolio P, RL is the minimum return required by the investor, and σp is the standard deviation of returns of portfolio P. Portfolio Safety-First Ratio 1 2 3 (14% – %)/22% = The portfolio with the highest safety-first ratio minimizes the probability that the investor’s portfolio will have a value lower than $700,000 at year end. The highest safety-first ratio is associated with Portfolio 3: . 113 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R40-2 SFR掌握计算及理解：  [E(Rp) - RL] /σ the bigger, the better  For P(Rp<RL)min, the optimal portfolio minimizes the probability that the return of portfolio falls below some minimum acceptable level, simply, minimize P(Rp<RL). R41-2 区分于Sharpe ratio  SFRatio= E(Rp)-RL♠←/ ςp ≡… Sharpe ratio= RP R♠ F←/sP ≡… Sharpe ratio will be a special case of SFR if rL r F Sharpe ratio只能用于Rank，没有实在含义；当小于零时，可能会得到错误的结论。 P23-2 Lognormal Distribution Q56-2 An analyst stated that normal distributions are suitable for describing asset returns and that lognormal distributions are suitable for describing distributions of asset prices. The analyst's statement is correct in regard to: (原版书R9-20) A. both normal distributions and lognormal distributions. B. normal distributions, but incorrect in regard to lognormal distributions. C. lognormal distributions, but incorrect in regard to normal distributions. Solution: A A normal distribution is suitable for describing asset returns. However, the normal distribution is not suitable for asset prices because asset prices cannot be negative. The lognormal distribution is bounded by zero (skewed to the right) and is suitable for describing distributions of asset prices. R42-2 Lognormal distribution  Definition: If lnX is normal, then X is lognormal, which is used to describe the price of asset  Right skewed  Bounded from below by zero P24-2 The desirable properties of an estimator Q57-2 ★When an analyst is unsure of the underlying population distribution, which of the following is least likely to increase the reliability of parameter estimates? (mock83-31) A. Increase in the sample size B. Use of point estimates rather than confidence intervals C. Use of the t-distribution rather than the normal distribution to establish confidence intervals 114 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B Point estimates are not as reliable as confidence interval estimates. A conservative approach to confidence intervals relies on the t-distribution rather than the normal distribution, and use of the t-distribution will increase the reliability of the confidence interval. Increasing the sample size increases the reliability of the confidence interval. Q58-2 If the accuracy of a sample enhances when the size is becoming larger, which of the characteristic does it represent? A. Unbiasedness. B. Consistency. C. Efficiency. Solution: B A consistent estimator is one for which the accuracy of the parameter estimate increases as the sample size increases. Unbiasedness represents that the variance of its sampling distribution is smaller than all the other unbiased estimators of the parameter you are trying to estimate. An unbiased estimator is also efficient if the variance of its sampling distribution is smaller than all the other unbiased estimators of the parameter you are trying to estimate. Q59-2 ★An analyst determines that approximately 99% of the observations of daily sales for a company are within the interval from $230,000 to $480,000 and that daily sales for the company are normally distributed. If approximately 99% of all the observations fall in the interval μ±3σ, then using the approximate z-value rather than the precise table, the standard deviation of daily sales for the company is closest to(2014 Mock 98-34) A. $83,333. B. $41,667. C. $62,500. Solution: B Given that sales are normally distributed, the mean is centered in the interval. MeanUnder a normal distribution, 99% of the observations will be approximately plus or minus three standard deviations. Next, use the following formula: Z=(X-μ)/σ or, by rearranging: σ=(X-μ)/Z, where Z = 3, X = $480,000, and μ = $355,000. Thus, ($480,000 – $355,000)/ = $41,667. Alternatively, use Z = –3, X = $230,000, and μ = $355,000: ($230,000 – $355,000)/(–) = $41,667. R43-2 Concept of sampling and estimation 115 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Methods of sampling: simple random sampling, stratified random sampling.  Sampling error: sampling error of mean=sample mean-population mean. R44-2 ★The desirable properties of an estimator：  Unbiasedness: expected value of the estimator is equal to the parameter that are trying to estimate  Efficiency: for all unbiased estimators, if the sampling dispersion is smaller than any other unbiased estimators, then this unbiased estimator is called efficient.  Consistency: the accuracy of the parameter estimate increases as the sample size increases. (the standard deviation of the parameter estimate decreases as the sample size increases)  As the sample size increases, the standard error of the sample mean falls. R45-2 Point estimation: the statistic, computed from sample information, which is used to estimate the population parameter R46-2 Interval estimation:  Level of significance （alpha）  Degree of Confidence （1－alpha）  Confidence Interval = [ Point Estimate +/- (reliability factor) ×Standard error] R47-2 Biases in sampling  Data-mining bias: refers to results where the statistical significance of the pattern is overestimated because the results were found through data mining. To detect this bias, out-of-sample test and economic signifcance testing.  Sample selection bias: some data is systematically excluded from the analysis, usually because of the lack of availability.  Survivorship bias: usually derives from sample selection for only the existing portfolio are included  Look-ahead bias: occurs when a study tests a relationship using sample data that was not a available on the test date.  Time-period bias: time period over which the data is gathered is either too short or too long. If the time period is too short, research results may reflect phenomena specific to that time period, or perhaps even data mining. If too long, cannot find the law. P25-2 Bayes’ Formula Q60-2 ★As from the record of CFA Institute and GARP, the passthrough rate of CFA level I exam is 40%, and the passthrough rate of FRM exam is 50%. And as an investigation led by the two institutes, among the people who has passed the FRM, the passthrough rate of CFA level 1 exams is 60%. So what is the passthough rate of FRM members who has also passed the CFA level 1 exam before? A. 48% B. 60% C. 75% Solution: C P(CFA I|FRM) =60%, P(FRM)=50% 116 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P(CFA I and FRM)= P(CFA I|FRM) × P(FRM) = 60% × 50% = 30% P(FRM)P(CFA I and FRM CFA IPC)30%FA75%( I)40R48-2 Bayes’ Formula掌握计算：  Updated probability = (probability of new information for given event / unconditional probability of new information) prior prob. of event, posterior probability（后验概率）  PAB P(A1)P(BA1)(1)P(A1)P(BA1) P(A2)P(BA2) Updated probability: By Bayes’s formula, we can update a given set of prior probabilities for a given event in response to the arrival of new information. PP(O I)(IO)=PυP(I)(O ) 如果有必要，在考试中需要画出二叉树，或者是概率图形帮助解题 快速诊断仪 机器说有病 机器说没病 如果人真有病 如果人真没病 现 一个人诊断为有病，问其真有病的概率？ P26-2 Hypothesis Testing Q61-2 When an investigator wants to test whether a particular parameter is larger than a specific value, the null and alternative hypothesis are best defined as: A. H0: θ = θ0 versus Ha: θ ≠ θ0 B. H0: θ ≤ θ0 versus Ha: θ > θ0 C. H0: θ ≥ θ0 versus Ha: θ < θ0 Solution: B 117 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A positive “hoped for” condition means that we will only reject the null (and accept the alternative) if the evidence indicates that the population parameter is greater than θ0. Thus, H0: θ ≤ θ0 versus Ha: θ > θ0 is the correct statement of the null and alternative hypotheses. Q62-2 William Adams wants to test whether the mean monthly returns over the last five years are the same for two stocks. If he assumes that the returns distributions are normal and have equal variances, the type of test and test statistic are best described as: A. Paired comparisons test, t-statistic. B. Paired comparisons test, F-statistic. C. Difference in mean test, t-statistic. Solution: A Since return of two stocks are correlated, paired comparisons test is adopted. Paired comparison test is used when samples are not independent, and t-statistic is used. Q63-2 An analyst wants to test the samples selecting from a population are random or not, he should choice: (2012年6月考题回顾) A. T-test χ-test C. nonparameter test Solution: C Test the selected samples are random or not, nonparameter test should be used. Q64-2 Independent samples drawn from normally distributed populations exhibit the following characteristics: Sample Size Sample mean Sample standard deviation A 25 200 45 B 18 185 60 Assuming that the variances of the underlying populations are equal, the pooled estimate of the sample variance is 2,. The t-test statistic appropriate to test the hypothesis that the two population means are equal is closest to: (mock84-29) A. . B. . C. . Solution: B The t statistic for the given information (normal populations, variances assumed equal) is calculated as: (X1X 2) 1Π Πt2 S22p Spn1n2Where 118 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 (n1)2 in( this case we have: ssn1)s221121pnn222(251)45 s(181) (00 185) 0t Q65-2 ★An analyst collects the following data related to paired observations for Sample A and Sample B. Assume that both samples are drawn from normally distributed populations and that the population variances are not known(mock83-28). Paired Observation Sample A Value Sample B Value 1 25 18 2 12 9 3 -5 -8 4 6 3 5 -8 1 The t-statistic to test the hypothesis that the mean difference is equal to zero is closest to: A. . B. . C. . Solution: C First, calculate the mean difference: d 1 ƒ ndiThen, calculate the sample variance and the standard error of the mean difference: S ƒ(d d. i)22dn 1SSdd nthen, calculate the t-statistic: . d u tdzSdIn this case, the mean difference is . The sample variance is . The standard error of the mean difference is . The t-statistic is . Q66-2 An analyst stated that as degrees of freedom increase, a t-distribution will become more peaked and the tails of the t-distribution will become less fat. Is the analyst's statement 119 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 correct with respect to the t-distribution: (原版书R10-21) Becoming more peaked? Tails becoming less fat? A No Yes B Yes No C Yes Yes Solution: C As degrees of freedom increase, the t-distribution will more closely resemble a normal distribution, becoming more peaked and having less fat tails. Q67-2 As the degree of freedom increases, the tails of t-distribution will be: (2012年12月考题回顾) A. Thinner B. Fatter C. No change Solution: A The t-distribution is flatter and has thicker tails than the standard normal distribution. As the degrees of freedom get larger, the shape of t-distribution approaches standard normal distribution. The tail will become thinner. Q68-2 The null hypothesis is most appropriately rejected when the p-value is(2014 Mock 98-27) A. close to zero. B. negative. C. close to one. Solution: A The p-value is the smallest level of significance at which the null hypothesis can be rejected. The smaller the p-value, the stronger the evidence against the null hypothesis. P-values close to zero strongly suggest that the null hypothesis should be rejected. R49-2 Hypothesis testing: TestStatistic Samplestatistics Hypothesizedvalue stanarderrorofthesamplestatistic Test Statistic follows Normal, T, Chi Square or F distributions  Test Statistic has formula. Calculate it with the sample data.  This is the general formula but only for Z and T distribution R50-2 Student’s t-distribution: Degrees of freedom (df)=n-1  Symmetrical  Less peaked than a normal distribution (“fatter tails”)  As the degrees of freedom gets larger, the shape of t-distribution approaches 120 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 standard normal distribution R51-2 T-test 和Z-test的不同应用： When sampling f m a: Test Statistic S all sample (n<30) Large sample (n>=30) Normal distribution with known variance z-Statistic z-Statistic Normal dist ibut on with unknown variance t-Statistic t-Statistic/z Nonnormal distribution with known variance not available z-Statistic Nonnormal distribution with unknown not available t-Statistic/z variance Test type Assumptions HTest-statistic Critical value 0 Normally distributed population, known population variance μ=0 Z x 0Π N(0,1) ς/nNormally distributed population, unknown population variance μ=0 xt Π t(n-1) 0s/nIndependent populations, Mean unknown population variances μ−μ=0 12t t(n1 + n2 - 2) hypothesis assumed equal testing Independent populations, unknown population variances μ−μ=0 12t t not assumed equal Samples not independent, μ=0 dd t(n-1) paired comparisonst test sdfor example, two returns of For example, the same population after and before stocks in the market, the return an event, or comparison with the two different of gas and that of oil styles, which are affected by the same macro factors. Normally distributed population σ²= ς02 2Variance Φ2 (n 1)s Φ2(n 1) ς20hypothesis testing Two independent normally σF(n1²=σ2² 1 1,n2 1) distributed populations F s2 1s22 P27-2 Type I and Type II Errors Q69-2 Which of the following statements about hypothesis testing is most accurate? A. A type II error is to reject the null when it is actually true. B. The significance level equals one minus the probability of a Type I error. C. A two-tailed test with a significance level of 5% has z-critical values of ±. 121 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C Type I error is the rejection of the null hypothesis when it’s actually true, while Type II error is the failure to reject the null hypothesis when it’s actually false. Significance level (α) is the probability of making a Type I error. Power of a test is the probability of correctly rejecting the null hypothesis when it is false Q70-2 All else equal, is specifying a smaller significance level in a hypothesis test likely to increase the probability of a: (原版书R11-16) Type I error? Type II error? A No No B No Yes C Yes No Solution: B Decrease the significance level can increase type II error and decrease type I error. Q71-2 All else equal, is increasing the sample size for a hypothesis test likely to decrease the probability of a: (原版书R11-17) Type I error Type II error A Yes No B No Yes C Yes Yes Solution: C The only way to avoid the trade-off between the two types of errors is to increase the sample size; increasing sample size (all else equal) reduces the probability of both types of errors. From the reading on sampling and estimations, all else equal, a larger sample size will decrease both the standard error and the width of the confidence interval. In other words, the precision of the estimate of the population parameter is increased. Q72-2 Which of the following decisions by an analyst would most accurately describe a Type II error? A. An analyst rejects a true null hypothesis. B. An analyst rejects a false null hypothesis. C. An analyst does not reject a false null hypothesis. Solution: C Failing to reject a false null hypothesis results in Type II error. Q73-2 ★If the probability that fail to reject the null hypothesis when it’s actually false increases, how about the confidence level? (2012年12月考题回顾) A. Increase B. Decrease C. No change 122 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A When the probability of Type II error increase, the probability of Type I error will decrease, which means that the significance level (α) will decrease. The confidence level = 1- significance level. Therefore, the confidence level will increase. R52-2 Type I and Type II error  Type I error: 拒真，reject the null hypothesis when it’s actually true  Type II error: 取伪，fail to reject the null hypothesis when it’s actually false  Significance level (α): the probability of making a Type I error Significance level =P(Type I error)=P(H0×|H0√)  Power of a test: the probability of correctly rejecting the null hypothesis when it is false Power of a test = 1−P(Type II error)= P(H1√|H1√) P(Type II error)=P(H1×|H1√)  要掌握decision rule：包括critical value 和p value P28-2 Technical Analysis Assumption Q74-2 Why is technical analysis especially useful in the analysis of commodities and currencies? A. Valuation models cannot be used to determine fundamental intrinsic value for these securities. B. Government regulators are more likely to intervene in these markets. C. These types of securities display clearer trends than equities and bonds do. Solution: A Commodities and currencies do not have underlying financial statements or an income stream; thus, fundamental analysis is useless in determining theoretical values for them or whether they are over- or undervalued. Q75-2 For the following, which one is not the assumption of technical analysis? （2012年12月考题回顾） A. The historical information can affect the current analysis. B. Supply and demand does not determine the prices. C. Prices can be projected with charts and other technical tools. Solution: B For the assumption of technical analysis, supply and demand determine the price. P29-2 Charts Q76-2 In analyzing a price chart, high or increasing volume most likely indicates which of the following? A. Predicts a reversal in the price trend. B. Predicts that a trendless period will follow. 123 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. Confirms a rising or declining trend in prices. Solution: C Rising volume shows conviction by many market participants, which is likely to lead to a continuation of the trend. Q77-2 A downtrend line is constructed by drawing a line connecting: A. the lows of the price chart. B. the highs of the price chart. C. the highest high to the lowest low of the price chart. Solution: B A downtrend line is constructed by drawing a line connecting the highs of the price chart. P30-2 Chart Patterns Q78-2 ★In an inverted head and shoulders pattern, if the neckline is at €100, the shoulders at €90, and the head at €75. The price target is closest to which of the following? A. €50. B. €110. C. €125. Solution: C Target = Neckline + (Neckline - Head): €100 + (€100 - €75) = €125 Q79-2 In a head and shoulders pattern, if the neckline is at $22, the shoulders at $26, and the head at $30. The price target is closest to which of the following: （2012年6月考题回顾） A. $14 B. $18 C. $38 Solution: A Head and shoulders pattern: Price target = neckline – (head – neckline) = 22 – (30 – 22) = 14 Q80-2 Bollinger Bands are constructed by plotting: A. a MACD line and a signal line. B. a moving-average line with an uptrend line above and downtrend line below. C. a moving-average line with upper and lower lines that are at a set number of standard deviations apart. Solution: C Bollinger Bands consist of a moving average and a higher line representing the moving average plus a set number of standard deviations from average price (for the same number of periods as 124 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 used to calculate the moving average) and a lower line that is a moving average minus the same number of standard deviations. Q81-2 A TRIN with a value of less than indicates: A. the market is in balance. B. there is more volume in rising shares. C. there is more volume in declining shares. Solution: B A value below is a bullish sign; it means more volume is in rising shares than in declining ones. The TRIN is calculated as: (Advancing issues/Declining issues)/ (Volume of advancing issues/Volume of declining issues). Q82-2 According to the . presidential cycle theory, the DJIA has the best performance during which year? A. The presidential election year itself. B. The first year following a presidential election. C. The third year following a presidential election. Solution: C A possible reason for the superior performance in the third year is that the . presidential election occurs, together with a number of other elections, in a four-year cycle, so the politicians desiring to be reelected inject money into the economy in the third year to improve their chances of winning the following year. Q83-2 All of the following are names of Elliott cycles except: A. presidential. B. supercycle. C. grand supercycle. Solution: A This is the term for a separate cycle theory. Q84-2 A technical analyst has detected a price chart pattern with three segments. The left segment shows a decline followed by a reversal to the starting price level. The middle segment shows a more pronounced decline than in the first segment and again a reversal to near the starting price level. The third segment is roughly a mirror image of the first segment. This chart pattern is most accurately described as: (mock84-32) A. a triple bottom. B. a head and shoulders. C. an inverse head and shoulders. Solution: C An inverse head and shoulders pattern consists of a left segment that shows a decline followed by a 125 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 reversal to the starting price level, a middle segment that shows a more pronounced decline than in the first segment and again a reversal to near the starting price level, and a third segment that is roughly a mirror image of the first segment. R53-2 技术分析概述  Technical analysis relies on Price and Volume data.  Technical analysis is the study of collective market sentiment, as expressed in buying and selling of assets.  The market price equates supply and demand at any instant. Price and volume reflect the collective behavior of buyers and sellers.  Market price reflects both rational and irrational investor behavior. This assumption implies that the efficient markets hypothesis does not hold. R54-2 技术分析三大假设  Supply and demand determine prices;  Changes in supply and demand cause changes in prices;  Prices can be projected with charts and other technical tools. R55-2 技术分析的作用  Behavior is reflected in trends and patterns that tend to repeat and can be indentified and used for forecasting prices. R56-2 技术分析的优劣势  Actual price and volume data are observable and objective. Data is not subject to assumptions or restatements. 优势  In illiquid markets price and volume data might not truly reflect supply and demand. 劣势  由于缺乏可靠的估值模型以决定内在价值，技术分析特别适用于商品、外汇等资产的分析。 R57-2 掌握理解各类technical analysis charts：  Line Charts: Show closing prices for each period as a continuous line.  Bar charts: Add the high and low prices for each trading period. Each period is displayed as a vertical line, with the closing price indicated as a point or dash on the right side of the line.  Candlestick Charts: Display a box bounded by the opening and closing price. Box clear表示股票涨了。Box filled表示股票跌了。  Distinction among line charts, bar charts, and candlestick charts：line chart只包含收盘价与连接收盘价的直线，bar chart包含收盘价、开盘价、最高价、最低价，candlestick chart不仅包括4个价格，本身的形状颜色还代表了一段时间的涨跌大局。  Charts of Price Data：方向相同时，每变化一个box size做一个记号，方向相反变化超过reversal point就换一列做相反记号，注意横轴不代表时间，反映价格变化了多少次，剔除了Noise。  Relative strength analysis: compare the performance of a stock with a benchmark, usually an index.  注意chart的时间区间，可以是日、周，也可以是月、年。  注意Volume与Trend的关系：放量预示趋势确认，缩量预示趋势逆转。 126 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R58-2 学会分析使用trend, support and resistance lines, and change in polarity  Uptrend: Prices are consistently reaching higher highs and retracing to higher lows. With connecting the lows of the price chart. The Longer price below the trendline, the more meaningful the forces of demand are greater than forces of supply.  Downtrend: Prices are consistently declining to lower lows and retracing to lower highs.  记忆诀窍: uptrend是低点越来越高，downtrend是高点越来越低。  Trendline: Can help to indentify whether a trend is continuing or reversing.  Change in polarity：突破resistance level后，resistance level极性变化为support level。也就是我们平时说的阻力位一旦突破后就会成为支撑位。 R59-2 Reversal patterns（反转图形，改变原趋势）  Head and shoulders pattern is the most widely recognized reversal pattern  Volume is an important indicator. A clear trend should exist before the formation of the pattern. Shoulders should be symmetrical.  For uptrend: head-and-shoulder, double top, triple top. For HAS, Left shoulder:上升斜率大，量大，形成倒V型；Head：上升到更高位，但量下降，又下降到肩的开始上升位（Neckline），且最低位突破了趋势线；Right shoulder: 与左肩对称，但是量更低。  难点：Head and shoulders pattern Price target ＝ neckline - (head-neckline).Reversal head and shoulders pattern price target = neckline+(neckline – head)  Triple tops and bottoms: three peaks or troughs at roughly the same price level. R60-2 Contunation patterns（盘整图形，突破后保持原趋势）  Ascending triangle（上面为水平线，下降得越来越小，最后突破向上）；Decending triangle（下面是水平线，上升得越来越小，最后突破向下）；symmetrical triangle（bullish和bearish寻找consensus，突破后方向与突破前一致）  Rectangle: 上下水平线，分别为支撑线和阻力线  Flags and Pennants are similar to rectangles and triangles in shape, but they are not horizontal.（旗形和楔形一般出现在短期，突破后趋势不变） R61-2 ★Price-based indicators  移动平均线：20, 60, 120 trading days  Golden cross: a short-term MA line crosses from underneath a long-term MA; Dead cross: a short-term MA line crosses from above a long-term MA.  Bollinger bands：移动平均线加减几个标准差，短期突破无意义；长期突破，在上面则为超买指标。 R62-2 Momentum oscillators:  to detect out of ordinary. 1) 可以用技术分析的方法，如趋势、支持和阻力线；2）分析与价格的Convergence and divergence。如果价格到高位，但是趋势振荡指标相反，early sign of weakness. 有三个应用：1）确定strength of trend; 2) 如果达到历史的高低点，表明要反转；3）for non-trending, 可用于短期交易决策。  Rate of change: M=(V-Vx)100, 如果与趋势同向且穿过零，则为买卖信号；  Relative Strength Index：RSI=＝100-100/(1+RS), RS=价格上升总和除以下降总和。一般为在30-70之间，过多则为overbought。过大，则波动率大。  Stochastic Oscillator, KD线：％K＝100(C-L14)/(H14-L14), %D为％K的最近三天移动 127 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 平均。When %D moves from below the %K line to above it, a bullish short-term trading signal.  MACD: MACD为12 and 26差异的指数移动平均，Signal line为MACD的移动平均（9 days）.应用：1）交叉说明趋势结束；2）做MACD的趋势线。 R63-2 Sentiment indicators  Put/Call ratio, contrarian  CBOE Volatility Index: 市场下降，波动率高。Use VIX with trend, pattern, or oscillator, contrarian  Margin debt: 如果处于低位，则Upturn is a sign of bullish.  Short interest ratio=Short interest/Average daily trading volume R64-2 Flow-of-funds indicators  Arms Index=平均下降量（下降总量除以下降家数）/平均上升量，>1, 则说明更多的下降量。如果持续下降，现有更大的下降，则bullish.  Margin debt：如果下降，则说明在卖股票，继续下跌。  Mutual fund cash position. Contrarian.  New equity issuance & Secondary offerings: uptrend may be to turn down R65-2 Cycle  Kondratieff cycle: long 54-year economic cycle; 18-year cycle：常用于房地产  Decennial pattern：0最好，5最差  Presidential cycle：第三年最好 R66-2 Elliot Wave Theory  Impulse wave & corrective wave: 5 moving up in a bull market and three moving down in a bear market  Fibonacci sequence: ratio of the size of subsequent waves was a Fibonacci ratio (, , , , , 2, , , , ), golden ratio 128 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 3-Economics P1-3 Demand and supply function Q1-3 A college student’s monthly demand for pizza is given by the equation: QDpizza=+ Where QDpizzais the number of pizzas ordered per month Ppizza is the price of a pizza I is her monthly food budget Pcola is the price of cola per bottle The student’s current monthly food budget is $500, the price of a pizza is $5, and the price of a bottle of cola is $ If the student’s monthly food budget were to increase to $700, the slope of her demand curve for pizza would be closest to: A. . B. . C. . Solution: B. Initial Price Quantity Relationship: QPDizza 11 0. 7 0Ppizza0. 0 09$50 0υ 1 .25 15υ.250 . 70PPizza Resulting Demand Curve: Pizza izza Price Quantity Relationship at New Income Level QPDizza 11 0. 7 0PPizza0. 0 09$70 0υ 1 .25 17υ.050 . 70PPizza Resulting Demand Curve: QP izza The slope of her demand curve for pizza will still be even with the higher income effect will result in a parallel shift of the initial demand curve to the right. 注：需求曲线是指需求反函数, demand curve is the graph of the inverse demand function. Q2-3 Which of the following least likely describes an unstable market equilibrium ? A. Excess supply will tend to drive prices down. B. The supply curve is less steeply sloped than the demand curve. C. Prices that differ from equilibrium values tend to move further away from equilibrium. Solution: A Unstable market equilibrium result when a downward sloping supply curve is less steeply sloped than the demand curve, so that excess supply tends to drive prices up and excess demand tends to drive prices down (further away from the equilibrium price) 这道题目首先可以排除C，因为C选项就是不稳定均衡的定义。但是A和B的表述都不充分，大家只需要掌握这个知识点就可以了，对于这道题目不需要纠结。 129 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A：如果A选项里的供给曲线斜率为正，而需求曲线斜率为负，此时如果有超额供给，价格会下降，即稳定均衡。不过如果供求曲线的斜率都为负，且需求曲线更陡，此时的过量供给会使得价格下降，但它是不稳定均衡。 B：如果B选项里的supply curve是向上倾斜的，虽然更平坦，仍然是稳定均衡，但是如果supply curve和demand curve是向下倾斜的，supply curve更加平坦，说明是不稳定的均衡。 Q3-3 Two-dimensional demand and supply curves are drawn under which of the following assumptions? (原版书R13-3) A. Own price is held constant. B. All variables but quantity are held constant. C. All variables but own price and quantity are held constant. Solution：C In order to draw demand and supply curves, own price and own quantity must be allowed to vary. However, all other variables are held constant to focus on the relation of own price with quantity. Q4-3 Movement along the demand curve for good X occurs due to a change in: (原版书R13-6) A. income. B. the price of good X. C. the price of a substitute for good X. Solution：B The demand curve shows quantity demanded as a function of own price only. The following information relates to Questions 5-3 and 6-3(原版书R13-8) A producer's supply function is given by the equation Q=-55+26Ps+ where Q is the quantity of steel supplied by the market, Ps is the per unit price of steel, and Pa is the per unit price of aluminum. Q5-3 If the unit price of aluminum is 10, the slope of the supply curve is closest to: A. . B. . C. . Solution：A The slope coefficient of Q. in the inverse supply function is . Start with the supply equation : Q=-55+26Ps+ Insert Pa=10; =-55+26Ps+(10) =-42+26 Ps Solve for Ps : Ps=+ (the inverse supply function) 130 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q6-3 Assume the supply side of the market consists of exactly five identical sellers. If the unit price of aluminum is 20, which equation is closest to the expression for the market inverse supply function? A. Ps ==+ B. Ps = + C. Qss = -145 + 130PS Solution：B. Start with the supply equation : Q=-55+26Ps+ To aggregate for five suppliers , multiply the individual producer’s supply function by 5: Q =5(-55+26Ps+) =-275+130 Ps+ Pa Now insert the unit price of aluminum at 20: Q=-275+130 Ps+(20) =-145+130Ps Invert the equation to get the market inverse supply function : Ps=+ Q7-3 Which of the following statements about market equilibrium is most accurate? (原版书R13-10) A. The difference between quantity demanded and quantity supplied is zero. B. The demand curve is negatively sloped and the supply curve is positively sloped. C. For any given pair of market demand and supply curves, only one equilibrium point can exist. Solution：A At market equilibrium the quantity demanded just equals quantity supplied, and thus, the difference between the two is zero. Q8-3 A wireless phone manufacturer introduced a next-generation phone that received a high level of positive publicity. Despite running several high-speed production assembly lines, the manufacturer is still falling short in meeting demand for the phone nine months after introduction. Which of the following statements is the most plausible explanation for the demand/supply imbalance? (原版书R13-15) A. The phone price is low relative to the equilibrium price. B. Competitors introduced next-generation phones at a similar price. C. Consumer incomes grew faster than the manufacturer anticipated. Solution：A The situation described is one of excess demand because, in order for markets to clear at the given level of quantity supplied, the company would need to raise prices. Q9-3 ★Assume the following: 131 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 An individual consumer’s demand for tea Qdt = 1,800 – 40Pt + + 150Pc Seller’s supply of tea Qst = –516 + 350Pt – 120W Legend and Initial Values Assumed Values Qdt Quantity of tea Pt Price of tea per 100 grams I Household income £2,400 W Hourly wage rate for labor Pc Price of coffee per 100 grams £ Equilibrium price of tea £ If the household income increases by % while Pc and W do not change, the new equilibrium quantity will be closest to(2014 Mock 98-41) A. 5,166. B. 5,136. C. 5,163. Solution：C Qdt = 1,800 – 40Pt + + 150Pc = 1,800 – 40 × + ( × 2400) + (150 × ) = 5,136 = Qst (equilibrium) Qst = –516 + 350Pt – 120W = 5,136 Solve for W = [5,136 + 516 – (350 × )]/(–120) = I increased by %; I = 2,400 × = 2,460. Set Qdt = Qst and solve for new Pt: Pt = [1,800 + ( × 2,460) + (150 × ) + 516 + (120 × )]/390 = Qd = 1,800 – (40 × ) + ( × 2,460) +(150 × ) = 5, 132 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 需求与供给基本概念 R1-3 Demand and supple function  Inverse demand function: PD= a -bQD ——需求曲线  Inverse supply function: PS =a+bQS ——供给曲线  In order to draw demand and supply curves, own price and own quantity must be allowed to vary. However, all other variables are held constant to focus on the relation of own price with quantity.  Law of Demand and supply  demand decreases as the price increases  supply increases as the price increases  Aggregating demand and supply curves:  Add the firms that comprise market supply together to get the market supply function.  Add the many individual demand curves to get the market demand function R2-3 Shift or move along  Price变化使得move along需求/供给曲线，其他因素导致Shift R3-3 Stable and unstable equilibria  Stable equilibrium:供给曲线从上向下穿过（从上压住）需求曲线  Unstable equilibrium:供给曲线从下向上穿过需求曲线 P2-3 Auction Q10-3 An auction in which the auctioner starts at a high price and then lowers the price in increments until there is a willing buyer is best called a: A. Dutch auction. B. Vickery auction. C. private-value auction. Solution: A. The basic Dutch auction is a descending-price auction. Q11-3 Which statement is most likely to be true in a single-price . Treasury bill auction? A. Only some non-competitive bids would be filled. B. Bidders at the highest winning yield may only get a portion of their order filled. C. All bidders at a yield higher than the winning bid would get their entire order filled. Solution: B. Non-competitive bids and bidders at lower yields will get their orders filled first. Securities may then not be available to fill demand entirely at the highest winning yield. Q12-3 The winner's curse in common value auctions is best described as the winning bidder paying: (原版书R13-14) A. more than the value of the asset. B. a price not equal to one's own bid. 133 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. more than intended prior to bidding. Solution：A The winning bidder in such auctions may be overly optimistic about the underlying value of the item won. 拍卖的基本概念 R4-3 Common value auction VS Private value auction a) common value auction:拍卖商品对每一个bidder都具有相同的价值 b) Private value auction：拍卖商品对每一个bidder都具有不同的潜在价值 R5-3 Common type of auctions a) ascending price auction (English auction):拍卖人先以一个保留价格起拍，出价最高的人获得这件商品  Winner’s curse: bid more than the ultimate value of the asset for common goods. b) sealed bid auction：每一个bidder将出价记录在一张纸上，并密封在信封中，which is unknown to other bidders  the optimal bid for the bidder with the highest reservation price  reservation price：密封拍卖中存在保留价格，若所有出价都低于这个保留价格，那么商品将不属于任何bidder c) second price sealed bid auction (Vickrey auction): Vickrey拍卖类似于密封拍卖，但却有一个关键性差异：商品由出价最高的投标者获得，但却只需按第二高的出价支付 d) descending price auction (Dutch auction)：拍卖人先以一个较高价格起拍，然后逐步降低价格，直到某个投标人愿意接受这个价格为止 R6-3 Noncompetitive bid  . Treasury securities, a single price auction is held but bidders may also submit Noncompetitive bid  bidders will accept the amount of Treasuries indicated at the price determined by the auction, rather than specifying a maximum price in their bids i. 例. Treasury securities, a single price auction is held but bidders may also submit Noncompetitive bid ii. bidders will accept the amount of Treasuries indicated at the price determined by the auction, rather than specifying a maximum price in their bids iii. US Treasury offers 90 billions to be auctioned with both competitive and non-competitive. 价格为的总量为97，满足Non-competitive 15billions, 满足 competitive 3 billions, 小于等于的全部满足，所有的成交价格都为（贴现率），即价格为 134 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 DiscountBid Price Competitive Cumulative Non-competitive Total Rateper $100BidsCompetitive Bids($ billions)Cumulative Bid(%)($ billions)Bids Bids ($ billions)($ billions)金程教育 0 专业·领先·增值 . P3-3 Consumer Surplus Q13-3 Venkat Reddy is very fond of mango fruits. If mangoes cost 10 rupees each, Reddy spends his budget on fruits that the values more highly than mangoes. However, at 4 rupees each Reddy buys 20 mangoes for devouring over a one-week period. The total consumer surplus in rupees for Venkat would be closest to: A. 13. B. 26. C. 60. Solution: C The consumer surplus is the value of the good minus the price paid for it (10-4) = 6, summed over the quantity bought. The total consumer surplus is the consumer surplus on each mango that Reddy buys and is added together. It is the area of the right triangle = (base x height) / 2, with base equal to 20 mangoes a week and the height equal to 6, the consumer surplus on each mango. Thus the total consumer surplus = (20 x 6) / 2 = 60 Q14-3 All else equal, if the elasticity of demand and the elasticity of supply both increase, which of the following is most likely? A. Consumer surplus will increase and producer surplus will increase. B. Consumer surplus will decrease and producer surplus will increase. C. Consumer surplus will decrease and producer surplus will decrease. Solution: C If both the elasticity of demand and elasticity of supply increase, both the demand curve and the supply curve will become more horizontal. The space between the curves to the left of the equilibrium quantity will become smaller and both consumer and producer surplus will decrease. Q15-3 Consumer surplus is best described as being: A. always less than or equal to zero. B. always greater than or equal to zero. C. at times positive and at other times negative 135 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B Consumer surplus is the value (or marginal benefit) of a good minus the price paid for it, summed over the quantity bought. As no consumer will (willingly) pay a price greater than the marginal value or benefit, consumer surplus is always positive. Abd of firce us used to coerce the consumer to buy a product, then the marginal benefit must be adjusted also so as to include the benefit of avoiding the punishment for not buying the product. Q16-3 Assume a market demand function is given by the equation Qd = 50 — where Qd is the quantity demanded and P is the price. If P equals 10, the value of the consumer surplus is closest to: (原版书R13-20) A. 67 B. 1205 C. 1667 Solution：B. We find consumer surplus as the area of the triangle formed by the y(price) axis, the inverse demand curve, and a line segment from the y axis to the inverse demand function at P = 10. Put the price into the demand equation : Qd=(10) Qd=(this is the base of the triangle) Invert the demand function by solving for P: = Qd-50 P= Qd+ Note the price intercept is . The height of the triangle is -10 = . The consumer surplus is the area of the triangle above the price of 10 and below the demand curve, with base equal to the quantity of : 1/2 Base X Height = (1/2) () ( - 10) = 1,205. Q17-3 The monthly demand curve for playing tennis at a particular club is given by the following equation: PTennis Match = 9 – × QTennis Match. The club currently charges members $ to play a match but is considering changing to a new flat-rate monthly membership fee for unlimited play. The most that the club will be able to charge for the flat-rate monthly membership is closest to:（mock89-40） A. $ B. $ C. $ Solution：C. CFA协会模考卷给出的解释有误： 136 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 10 P P=×Q R I 6 A CMC E 2 B MRC D 0 5 10 15 20 25 30 35 40 45 50 QUANTITY On rearrangement, the demand function is QTennis Match = 45 – × PTennis Match. The number of matches played per month at $ = 45 – × =25. The Y-intercept of the demand curve occurs when Q = 0: P= 9 The X-intercept of the demand curve occurs when P=0: Q = 45 The club will be able to charge the consumer surplus: the area under the demand curve above the current price per match to a total of 25 matches: × ($ – $) × 25 = $. This is illustrated in the diagram as Triangle A. 正确解释： 1） 这道题涉及到了two-part tariff的问题，但是本题问的是：如果收到一个会员费后，可以打无限次。 2） 正常情况下，对于垄断厂商来说，利润最大化MR=MC，但是此时资源配置不均衡，厂商完全能够出售更多数量的产品（打25次）。 3） 因此，垄断厂商能够收取更多的消费者剩余，即面积A，这就是题目中所说的“flat rate monthly membership fee”。尽管题目中是unlimited play，但事实上并非unlimited，最多只能打25次，每次收费4元，这部分费用为面积B，厂商收取的总费用是A+B的面积。 4） 按照CFA协会的解题方法，如果厂商只收取A面积的固定费用$，而不去收取每次$4的费用（总共$100费用），厂商就会损失，因此只收面积A是不合理的。所以厂商能够收取的最多费用是A+B的面积，也就是$. Q18-3 Which of the following best describes producer surplus? (原版书R13-21) A. Revenue minus variable costs. B. Revenue minus variable plus fixed costs. C. The area above the supply curve and beneath the demand curve and to the left of the equilibrium point. Solution：A Producer surplus is the difference between the total revenue that sellers receive from selling a given amount of a good and the total variable cost of producing that amount. Q19-3 Assume a market supply function is given by the equation Q = —7 + where Q is the quantity supplied and P is the price. If P equals 15, the value of the producer surplus is 137 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 closest to: (原版书R13-22) A. B. C. Solution：A With a linear supply curve, producer surplus is equal to the area of a triangle with base equal to the market clearing price minus the price intercept, height equal to the market clearing quantity, and bounded by the supply curve as the hypotenuse. Given a (market clearing) price of 15, quantity is 2: Q= -7 +(15) =2 Next find the inverse supply function : P=(1/)7+(1/)Q P=+ Note that the price intercept is and the quantity intercept is . Thus, producer surplus is 1/2 Base X Height = (1/2) (2) (15 - ) = . R7-3 Efficient allocation  The efficiencient quantity of a good is achieved: marginal benefits = marginal cost ( the intersect of demand and supply curve).  The allocative efficiency is attained when marginal benefits equates marginal cost.  At this equilibrium price and quantity, the sum of the consumer and producer surplus is at a maximum. R8-3 Surplus的理解  Consumer surplus: the difference between the total value to consumers of the units of a good that they buy and the total amount they must pay for those units  Producer surplus: the sum of difference between the price received for each unit of good produced and the opportunity cost of each unit for the total units produced. R9-3 Obstacles to the efficient allocation of productive resources: Price ceilings and price floors; Taxes, subsidies and quotas; Monopoly; External costs External benefits. R10-3 Price ceiling  the upper limit on the price which a seller can charge. When placed below the equilibrium price, it makes seller provide less products, and dead weight loss is produced.  In the long run, price ceilings lead to the following:(1) wait a long line to purchase（春运火车票）, (2) suppliers engage in discrimination, (3) take bribes to do so(rent-seeking), (4) suppliers reduce the quality of the goods. R11-3 Price floor  the minimum price that a buyer has to pay for a good. When placed above the equilibrium price, it produce dead weigh loss.  In the long run, price ceilings lead to the following: (1) overproduction(价格高，生产更多，卖不出去), (2) consumers will buy less if the price floor is above the equilibrium price. （工人的最低工资导致失业） 138 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P4-3 Tax Q20-3 The tax division between buyers and sellers with respect to products with perfectly elastic and perfectly inelastic demand, respectively, are: Perfectly elastic demand Perfectly inelastic demand A. Buyers pay the entire tax Buyers pay the entire tax B. Buyers pay the entire tax Sellers pay the entire tax C. Sellers pay the entire tax Buyers pay the entire tax Solution: C In the extreme cases of products with perfectly elastic and perfectly inelastic demand, the sellers and buyers, respectively, pay the entire tax. Q21-3 Compared to a producer, the consumer is most likely to pay the largest part of a tax increase if the elasticity of demand and elasticity of supply, respectively, are more: Elasticity of Demand Elasticity of Supply A. Elastic Elastic B. Elastic Inelastic C. Inelastic Elastic Solution: C The buyer pays the largest portion of a tax when demand is more inelastic and supply is more elastic. Q22-3 The demand for oil is more inelastic in the short-run than the supply of oil, but it is not perfectly inelastic. Based only on this factor, if the government imposes a $ per barrel tax on oil producers: A. The incidence of the tax will fall most heavily on oil producers, because the tax is imposed directly on them. B. The incidence of the tax will fall entirely on oil consumers, because producers will pass the tax through to consumers by increasing the price of oil by the amount of the tax. C. The incidence of the tax will be split between oil producers and oil consumers, with most of the tax being paid by oil consumers. Solution: C The more elastic, the more ability to respond to the change in price, the lower the tax incidence. Q23-3 For markets with perfectly elastic supply and perfectly inelastic supply, respectively, the introduction of a tax will most likely result in: Market with perfectly elastic supply Market with perfectly inelastic supply A. a price increase, and the seller bears the tax a price increase, and the buyer bears the tax B. a price increase, and supply remains the same. no change in price, and the seller bears the tax. C. a price increase, and the buyer bears the tax. no change in price, and the seller bears the tax. Solution: C 139 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Because in markets with perfectly elastic supply, price increases as a result of tax and the seller passes on the tax burden to buyers. In markets with perfectly inelastic supply, sellers maintain the same supply and price but absorb the tax burden themselves. Q24-3 In principle and in practice, rent ceilings are most likely to: A. be fair. B. be efficient. C. prevent the housing market from operating in the social interest. Solution: C In principle and in practice rent ceilings are inefficient and unfair. They prevent the housing market from operating in the social interest. Q25-3 A per-unit tax on items sold that is paid by the seller will most likely result in the: (原版书R13-16) A. supply curve shifting vertically upward. B. demand curve shifting vertically upward. C. demand curve shifting vertically downward. Solution：A The lowest acceptable price to the supplier at any given quantity must now increase because part of the price is paid as a per-unit tax. Thus, the supply curve shifts upward. Q26-3 If an excise tax is paid by the buyer instead of the seller, which of the following statements is most likely to be true? The price: (原版书R13-18) A. paid will be higher than if the seller had paid the tax. B. received will be lower than if the seller had paid the tax. C. received will be the same as if the seller had paid the tax. Solution：C The trade price should be the same whether the tax is imposed on the buyer or on the seller. R12-3 Tax的理解:  The actual tax incidence is independent of whether the government imposes the tax (statutory incidence) on consumers or suppliers.  If demand is less elastic than supply, consumers will bear a higher burden.(弹性弱的一方承担更多税收)  If supply is less elastic than demand, suppliers will bear a higher burden.  弹性越小，DWL越小 P5-3 Subsidies and quotas Q27-3 Which of the following provides the best description of the effect of subsidies on the prices of goods and the relationship between marginal cost and marginal benefit? 140 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Effect on prices Relationship between marginal cost and marginal benefit? A. Price falls Marginal benefit exceeds marginal cost B. Price increases Marginal cost exceeds marginal benefit C. Price falls Marginal cost exceeds marginal benefit Solution: C Upon introduction of a subsidy, the equilibrium level of supply increases and the price falls. In the new equilibrium, marginal cost (on the supply curve) exceeds marginal benefit (on the demand curve) and a deadweight loss arises due to overproduction. P SP SS -subsidy MB Quota O Deadweight loss ODeadweight loss ’ MC Quota O D D Q Subsidies Quotas Q 补贴，限额对供给，需求和市场均衡的影响： R13-3 Subsidies：供给曲线下降subsidy个单位→市场均衡从O移动到O’，均衡价格下降，均衡产量上升→形成一块deadweight loss（如图箭头指向的三角形） R14-3 Quotas：供给曲线，需求曲线和市场均衡都没有变化→quotas使市场处于非均衡状态，供给量小于需求量，形成供需缺口→形成一块deadweight loss（如图箭头指向的三角形） P6-3 Elasticity Q28-3 ★If the number of ice cream bars demanded increases from 19 to 21 when the price decreases from $ to $, the price elasticity of demand is: A. -5. B. . C. Solution: C. If the number of ice cream bars demanded changes from 19 to 21 when the price changes from $ to $, the percentage change in quantity is (21-19) / [(21 + 19)/ 2]=10%, and the percentage change in price is () / [(+) /2]= -100%. Thus, price elasticity = 10% /-100%= Q29-3 The market demand function for item X is a function of its price, household income, and the price of item Y.（2013 mock afternoon session） Own-price elasticity of demand for X Income elasticity of demand for X 141 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Cross-price elasticity of demand for X with respect to the price of Y Given the above elasticity coefficients for the two items, which of the following statements is most accurate? A. X and Y are substitutes. B. Demand for X is elastic. C. Item X is an inferior good. Solution: A. The cross-price elasticity is positive, indicating that as the price of Y increases, more of X is demanded, making X and Y substitutes. Q30-3 For most products, the long-run price elasticity of demand is: A. less than the short-run price elasticity of demand. B. greater than the short-run price elasticity of demand. C. more likely to increase than is the short-run price elasticity of demand. Solution: B Generally, when the price of a product increases, consumers reduce consumption by a larger amount in the long run than in the short run; this relationship between elasticity and time is referred to as the second law of demand. Q31-3 ★For a particular company's product, the percent change in quantity demanded is smaller than the percent change in price that caused the change in quantity demanded. If the company increased the price of that product, total revenue from sales of that product would most likely: A. increase more in the short run than in the long run. B. increase more in the long run than in the short run. C. decrease more in the short run than in the long run. Solution: A The price elasticity of demand for the product is inelastic (absolute value of elasticity coefficient is less than one). An increase in price will increase total revenue in the short run. The longer the time that has elapsed since a price change, the more elastic is demand. In the long run consumers will reduce their consumption by a larger amount than in the short run. Q32-3 For a particular product produced by a firm, the quantity at which demand is unit elastic is most likely the quantity that maximizes: A. total profit from the product but not total revenue from the product. B. total revenue from the product but not total profit from the product. C. both total profit from the product and total revenue from the product. Solution: B A firm maximizes its revenue at the price (or quantity) where demand is unit elastic. This price or 142 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 quantity is not the one that maximizes profit unless output can be increased at zero cost (no marginal costs). Q33-3 Susan Jahlberg, CFA recognizes that the expanding economy of China is increasing prosperity and the demand for many types of goods and services. To estimate the demand for a particular item, which of the following elasticities of demand would be the best choice for Jahlberg to calculate? A. The price elasticity. B. The income elasticity. C. The cross-elasticity. Solution: B. The income elasticity of demand measures the effect of income changes on demand and is the appropriate measure in this case. The price elasticity of demand measures the effect of price changes on demand. The cross-elasticity of demand measures the effect of price changes in substitutes and complementary products on demand. Q34-3 When the price of a cup of coffee is a constant Kenya Shillings (KES) 70 per cup, 10 cups of coffee are sold each hour at the Habari Café. However, when the price of tea falls from KES 70 per cup to KES 50 per cup, the quantity of coffee sold falls to 5 cups per hour. Assuming no other influences, the cross elasticity of demand for coffee with respect to the price of tea is closest to: A. . B. . C. . Solution: C. The formula for the cross elasticity of demand is as follows: Cross elasticity of demand = Percentage change in quantity demanded / Percentage change in price of a substitute or complement. Therefore the cross elasticity of demand for coffee with respect to the price of tea is: Percentage change in quantity demanded = (5 - 10) / (10 + 5)/2) ×100 = -5 / x 100 = %.Percentage change in price of a substitute = (50 - 70) / ((50 + 70) / 2) = -20 / 60 = %. Cross elasticity of demand = % / % = Q35-3 ★★The market demand function for four-year private universities is given by the equation (原版书R13-25) Qdpr = 84 – Ppr + + Where Qdpr is the number of applicants to private universities per year in thousands , Ppr is the average price of private universities (in thousands of USD), I is the household monthly income (in thousands of USD), and Ppu is the average price of public (government-supported ) . Assume that Ppr is equal to 38, I is equal to 100, and Ppu is equal to 18 . The cross-price elasticity of demand for private universities with respect to the price of public universities is closest to: A. . B. . 143 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. . Solution：A From the demand function: Solve for Qdpr: ΔQdpr/ΔPpu=(the coefficient in front of Ppu) Qdpr = Ppr++ Ppu =(38)+(100)+(18) = At Ppr = 38 ,and Ppu=18, the cross-price elasticity of demand d =(ΔQdpr/ΔPpu)( Ppu/ Qpr)=()(18 / )= Q36-3 If the cross-price elasticity between two goods is negative, the two goods are classified as: (原版书R13-26) A. normal. B. substitutes. C. complements. Solution：C With complements, consumption goes up or down together. With a negative cross-price elasticity, as the price of one good goes up, the demand for both falls. Q37-3 Demand for a good is most likely to be more elastic when: A. the good is a necessity. B. a lesser proportion of income is spent on the good. C. the adjustment to a price change takes a longer time. Solution：C The longer the time that has elapsed since a price change, the more elastic demand is. For example, if gas prices rise, consumers cannot quickly change their mode of transportation but will likely do so in the longer run. Q38-3 If a price cut of a product increases total revenue, demand is best described as: (2014 Mock 99-39) A. inelastic. B. unit elastic. C. elastic. Solution: C A product's demand is elastic if demand increases by a greater percentage than the percentage price cut when prices are cut. For example, if a 1% price cut increases the quantity sold by more than 1%, total revenue increases and demand is said to be elastic. 144 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Elasticity掌握概念及公式： R15-3 需求点弹性、交叉弹性和收入弹性的计算，分母用平均值。 prpercentchangeinquantitydemanded%ΔQiceelasticityofdemand=percentchange=inpricePcrosseedlasticityofdemand=percentchangeinquantitydemandpercentchangeinpriceofsubstituteorcomplement percentchangeinquantitydemandedincomeelasticityofdemand=percetchangeinincomeR16-3 Inelasticity demand & elasticity demand商品的定价策略，怎样才能使受益最大化 R17-3 Different kinds of goods:  Normal Goods: positive income elasticity, demand rises with income. (> 0)  Luxuries: high positive elasticity, demand rises strongly with income. (>1)  Necessity goods: normal but low elasticity  Inferior Goods: negative income elasticity, demand falls with income (<0) R18-3 商品的价格与它的互补品的需求量正向，商品的价格与它的替代品的需求量成反向 R19-3 Factors influencing the elasticity of demand:  Availability of substitutes↑, higher  Relative amount of spent on the good ↑,higher  Time period since price change ↑,higher R20-3 Factors influencing the elasticity of supply:  Availability of substituting inputs↑, higher.  Time period since price change, long-term>short-term>momentary（供电弹性大，水果小） R21-3 Price elasticity along a linear demand curve  Point in a higher price range has greater price elasticity of demand than point in the lower price range.  Revenue is maximized at the point that has unitary elasticity (elasticity=-1) P7-3 Utility theory of consumers Q39-3 ★Partial information on three baskets (1, 2, and 3) containing goods A and B is given in the table below. The marginal rate of substitution of B for A, (MRSBA), at basket 2 is also provided.（mock85-34） Basket Units of A Unit of B MRSBA 1 30 2 50 35 3 40 40 A consumer claims that he is indifferent between baskets 2 and 3 and his indifference curves are strictly convex. If he is also indifferent between baskets 1 and 3, the number of units of A in basket 1 is most likely. A. equal to 60. B. less than 60. C. greater than 60. 145 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Soluction: C As he is indifferent between all three baskets, all three must fall on the same indifference curve. The MRSBA at basket 2 is 4, meaning that the slope of the indifference curve at that point is -4, hence ΔA/ΔB = -4 = (A - 50) / (30 - 35): Solve for A = 70: greater than 60. 由于无差异曲线具有严格的凸性，所以 (50 X) 0。换句话说，对于B增3530 !，2 得出X>6 加5个单位，所放弃的A的数量越来越少。 A MRS>BAX 2 MRS=2 BA50 40 30 35 40 B Q40-3 Which of the following ranking systems best describes consumer preferences within a utility function?（原版书R14-2） A. Util. B. Ordinal. C. Cardinal. Solution: B. Utility functions only allow ordinal rankings of consumer preferences. Q41-3 If a consumer's marginal rate of substitution of good X for good Y (MRSxy) is equal to 2, then the:（原版书R14-4） A. consumer is willing to give up 2 units of X for 1 unit of Y B. slope of a line tangent to the indifference curve at that point is 2. C. slope of a line tangent to the indifference curve at that point is —2 Solution: C. The marginal rate of substitution is equal to the negative of the slope of the tangent to the indifference curve at that point, or -2. Q42-3 Which of the following statements best explains why indifference curves are generally convex as viewed from the origin? A. The assumption of non-satiation results in convex indifference curves. B. The marginal rate of substitution of one good for another remains constant along an 146 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 indifference curve. C. The marginal utility gained from one additional unit of a good versus another diminishes the more one has of the first good. Solution: C The slope of the indifference curve at any point gives the marginal rate of substitution of one good for another. The curve is convex because the marginal value of one good versus another decreases the more one has of the first good. Q43-3 Suppose the units goods of x is on the horizontal axis while the units goods of y is on the vertical axis. The marginal rate of substitution good x for good y (MRSxy) decreases from to ，which of the following changes the consumer’s budget constraint line? A. increase in price x. B. increase in price y. C. increase in income. Solution: A MRSxy= - Δy/Δx, the slope of budget line equals to the MRS, that is , the slope of budget line changes from to , more steeper, the reason may be the increase in price of x (intercept in the horizontal axis is I/Px), or decrease in the price of y. The sole change in the income will shift the budget line, thus the slope remaining the same. 消费者行为理论 R22-3 Utility theory（消费者偏好）  A utility function（ordinal utility）: U=U(Q,QB,...,QN)  Assumption: for bundle A, B and C, “>” stand for prefer  complete preference: U(A)>U(B), U(B)>U(A), U(A)=U(B) (indifference)  transitive preference: U(A)>U(B), U(B)>U(C)=>U(A)>U(C)  non-satiation: U(A+1)>U(A), more is better R23-3 Indifference curve 特征  较高无差异曲线的效用高于较低无差异曲线  同一消费者无差异曲线不相交  无差异曲线向右下倾斜  无差异曲线凸向原点，是凸图形(convex) R24-3 边际替代率(MRS)  MRSXY =-△Y/ △X(商品X对商品Y的替代）例如： MRSXY＝3，X对Y的替代率为3，即增加（＋1）X，放弃（-3）Y，效用水平不变。  If two consumers (A and B) have different MRS, they can both benefit from voluntary trade until MRASXY=MRBSXY R25-3 边际替代率递减规律：在维持效用水平不变的前提下，随着一种商品的消费数量连续增加，消费者为得到每一单位的这种商品所需要放弃的另一种商品的消费数量是递减的。（随着X越来越大，放弃的Y数量越来越小，斜率绝对值越来越小） R26-3 Budget constraint (预算约束线） 147 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Consumption option are determined by income & price；PXQX+PYQY<=Income R27-3 Consumer equilibrium (最优化选择)  Utility is maximized, subject to the budget constraint  Tangency between budget constraint & the highest attainable indifference curve  At Tangency, MRSXY（边际替代率，消费者意愿）= Price ratio（相对价格，市场意愿） Good Y I/PX为横坐标截距 I/PY为纵坐标截距 I/P Y Most prefePrred affordable combinationX/PY为预算线斜率 5 Good X6 MRSXY - I/P X∋Y∋ M UXPP XXYY P8-3 Substitution effect and income effect Q44-3 ★In the case of a normal good with a decrease in own price, which of the following statements is most likely true?（原版书R14-6） A. Both the substitution and income effects lead to an increase in the quantity purchased. B. The substitution effect leads to an increase in the quantity purchased, while the income effect has no impact. C. The substitution effect leads to an increase in the quantity purchased, while the income effect leads to a decrease. Solution: A In the case of normal goods, the income and substitution effects are reinforcing, leading to an increase in the amount purchased after a drop in price. Q45-3 Which of the following is least likely to be a characteristic of a Giffen good? (MOCK92-39) A. Its income effect is negative. B. Its demand curve slopes upward. C. Its substitution effect is negative. Solution: C C is correct. A Giffen good is an inferior good. All inferior goods have a negative income effect (less is purchased as income rises). While the substitution effect is always positive for all goods, for a Giffen good the income effect is so strong and so negative that it overpowers the substitution effect. The result is that as its price declines, less of it is purchased: This results in a positively sloped individual demand curve. Therefore, it is least likely that the substitution effect is negative. 148 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q46-3 The diagram illustrates a consumer’s allocation of her budget between items X and Y. With an initial budget (BC1) she consumes Qa units of item Y. When the price of Y drops, she consumes Qc units of item Y. Lines BC2 and BC3 are parallel to one another.(MOCK84-34) c a b BC2 BC1 BC3 Qa Qc Qb Quantity of Y The income effect arising from this change in the price of Y is best described as the distance between: A. Qb and Qa. B. Qc and Qb. C. Qc and Qa. Solution: B When the price of Y falls, the budget constraint shifts outward from BC1 to BC2, indicating an increase in the consumption of Y. Points a and b reflect the change in consumption of Y due solely to a decrease in price because BC3 reduces her income by a sufficient amount to return her to her original indifference curve. Qc – Qb is the income effect (which is negative here) because this is an inferior good. Q47-3 Which of the following is most accurate regarding only substitution effect?（2012年12月考题回顾） A. Substitution effect is positive for both normal goods and inferior goods B. Substitution effect is negative for both normal goods and inferior goods C. Substitution effect is negative for normal goods and positive for inferior goods Solution: A When the price of Good X decreases, there is a substitution effect that shifts consumption towards more of Good X. Substitution effect is positive for both normal goods and inferior goods. Income effect is the opposite. R28-3 Substitution effect：商品X价格减低时，商品X相对于其他商品相对价格减,Consumer equilibrium在无差异曲线上移动，带来对商品X需求量的增加 149 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 Quantity of X 金程教育 专业·领先·增值 R29-3 Income effect：商品X价格减低时，消费者实际购买力变化，real income提高， budget constraint 曲线移动带来对商品X需求量的变化。 R30-3 When decrease in the price of Good X:  The substitution effect is positive, and the income effect is also positive—consumption of Good X will increase.  The substitution effect is positive, and the income effect is negative but smaller than the substitution effect—consumption of Good X will increase.  The substitution effect is positive, and the income effect is negative and larger than the substitution effect—consumption of Good X will decrease, Giffen goods P9-3 Giffen and Veblen goods Q48-3 Which of the following statements best illustrates the difference between a Giffen good and a Veblen good? （原版书R14-8） A. The Giffen good alone is an inferior good. B. The substitution effect for each is in opposite directions. C. The Veblen good alone has a positively sloped demand curve. Solution: A Veblen goods are not inferior goods, whereas Giffen goods are. An increase in income for consumers of a Veblen good leads to an increase in the quantity purchased at each price. The opposite is true for a Giffen good. R31-3 Giffen goods(吉芬商品):  Income effect （inferior goods） > Substitution effect  demand curve has positive slope R32-3 Veblen goods(韦伯伦商品, Conspicuous goods): Price is used by the consumer to signal the status in the society  have a positively sloped demand curve (eg: Gucci bag)  But when price increases, the slope may be negative. R33-3 two important distinctions between Giffen goods and Veblen goods.  First, Giffen goods are inferior goods (negative income effect), while Veblen goods certainly are not.  Second, the existence of Giffen goods is theoretically supported by the rules of consumer choice, while the existence of Veblen goods is not. P10-3 Economic profit Q49-3 Chace’s House Industry has compiled the following information in order to determine its economic profit for the year: Total revenue $460,000 Value of buildings and machinery - At the beginning of the year $320,000 - At the end of the year $270,000 Cost of raw materials $80,000 150 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Wages paid during the year $ 30,000 Normal profit for the year $ 50,000 What is the economic rent of Choice Malts Breweries closest to? A. $110,000. B. $250,000. C. $230,000. Solution: B 机会成本包括: 显性成本和隐性成本, 确切的说, 固定资产的经济性贬值也是一种隐性成本, 也应扣除. Opportunity costs= 80,000 + 30,000 + 50,000 = 160,000 Economic depreciation= 320,000 - 270,000 = 50,000 Economic profit= Total revenue - Opportunity costs – Economic depreciation=460,000 - 160,000 - 50,000 =250,000 Q50-3 Four years ago, a company purchased a $500,000 machine with an estimated useful life of 10 years. For accounting purposes, the machine is being depreciated in the amount of $50,000 annually. The machine is used to manufacture a particular product and has no alternative use or scrap value. The annual revenue generated from operating the machine is $650,000 and the annual cost of the factors of production, other than depreciation, employed to generate that revenue is $600,000. Should the company continue to operate the machine? A. Yes. B. No, because operating costs are equal to operating revenues. C. No, because the opportunity cost of operating the machine is zero. Solution: A The company should continue to operate the machine. The opportunity cost of operating the machine is zero. The machine generates net economic profit of $50,000. Q51-3 Which of the following is least likely to be classified as an explicit opportunity cost? A. Employee payroll. B. Economic depreciation. C. Salary paid to the owner. Solution: B. Economic depreciation is classified as an implicit opportunity cost. The salary was paid to the owner not forgone and thus is an explicit cost. Q52-3 Normal profit is best described as: A. zero economic profit. B. total revenue minus all explicit costs. C. the sum of accounting profit plus economic profit. 151 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A. Normal profit is the level of accounting profit such that implicit opportunity costs are just covered; thus, it is equal to a level of accounting profit such that economic profit is zero. R34-3 Economic Profit的理解  Opportunity cost: Opportunity cost is the return that a firm’s resources could have earned elsewhere in its next most valuable use, which includes:  Explicit costs are measurable cash flows for operating expenses (wages, rent, material costs).  Implicit costs measure the opportunity cost of using a firm's assets (wages or rental, which are not claimed by the owner of the business). explicit costs Oppo ↑°rtunity cost→ i↑mplied rental rate i°mplied costs↓ n→↓ormal profitR35-3 The differences between economic profit and accounting profit：  Economic profit includes both explicit and implicit cost components of the firm, while accounting profit ignores implicit costs such as the opportunity cost of equity capital.  Accounting profits are generally higher than economic profits. R36-3 When the firm’s revenues are just equal to its costs (explicit and implicit, including the normal rate of return) economic profits will be zero  In highly competitive market situations, firms tend to earn the normal profit level over time because ease of market entry allows for other competing firms to compete away any economic profit over the long run. Economic profit that exists over the long run is usually found where competitive conditions persistently are less than perfect in the market.  In the short run, the normal profit for a firm may be considered fixed. In the long run, it will vary with the required rate of return on equity investments.  Accounting profit is often highly variable in both the long run and the short run.  Economic profit is highly variable in both the short run and long run.  Normal profit is minimum requirement for a firm to continue operating in the long run.  A firm unable to earn a normal profit (a firm with negative economic profit) will find it more difficult to raise equity capital, and the value of its equity in the market is likely to decline.  Earning a positive economic profit will increase the value of a firm’s equity, and negative economic profit will decrease the value of a firm’s equity P11-3 TR AR & MR Q53-3 An agricultural firm operating in a perfectly competitive market supplies wheat to manufacturers of consumer food products and animal feeds. If the firm were able to expand its production and unit sales by 10%, the most likely result would be: A. a 10% increase in total revenue. B. a 10% increase in average revenue. C. an increase in total revenue of less than 10%. 152 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A. In a perfectly competitive market, an increase in supply by a single firm will not affect price. An increase in units sold by the firm will be matched proportionately by an increase in revenue. Q54-3 The marginal revenue per unit sold for a firm doing business under conditions of perfect competition will most likely he: A. equal to average revenue. B. less than average revenue. C. greater than average revenue. Solution: A. Under perfect competition, a firm is a price taker at any quantity supplied to the market, and AR = MR = Price. Q55-3 With its existing production facilities, a monopolist firm can produce up to 100 units. It faces the following demand and cost schedules: Output (units) Price($/unit) Total cost($/unit) 0 3,000 600 20 2,800 10,600 40 2,600 32,600 60 2,400 66,600 80 2,200 112,600 100 2,000 170,600 The optimal output level for this producer (in units) is closest to: A. 20. B. 60. C. 100. Solution: B Output (units) Price($/unit) Total Revenues Total cost ($/unit) Profit 20 2,800 56,000 10,600 45,400 60 2,400 144,000 66,600 77,400 100 2,000 200,000 170,600 29,400 153 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 REVENUE: (OUTPUT-----REVENUE) R37-3 Total revenue= Price*output Marginal revenue = change in total revenue / change in output Average revenue = total revenue / output R38-3 PePrfect competition D = P = MR=AR（price taker）DWL=0Q, 市场实现最优配置 P12-3 Short-run & Long-run Decision Time Frames Q56-3 Regarding a company’s production function, both labor costs and capital costs are best described as: A. fixed in the long run. B. variable in the long run. C. variable in the short run. Solution: B In the short run, a company can vary the quantity of labor but the quantity of capital is fixed. In the long run, a firm can vary both the quantity of labor and the quantity of capital. Q57-3 Which of the following is generally not considered a long-run resource? A. Labor B. Buildings C. Technology Solution: A Economists generally treat raw materials and labors as variable costs. Plant size, capital equipment and technology are regarded as long-run resources because they cannot be adjusted in the short run. R39-3 Short-run & Long-run Decision Time Frames的理解  Short run: a time period for which quantities of some resources are fixed, which is a constraint on a firm’s ability to increase production. （labor and raw materials are variable while plant size, capital equipment, and technology are constant）  Long run: a time period for which a firm can adjust its input quantities, production methods, and plant size. (所有因素都可变) R40-3 Short-run & Long-run Decision Time Frames的理解  Labor and raw materials are variable in the short run.  Plant size, capital equipment, technology are constant in the short run. P13-3 Marginal Cost Q58-3 Consider the following data for a firm operating in perfect competition. 154 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Quantity Total Revenue Total Cost 21 $210 $138 22 $220 $145 23 $230 $154 24 $240 $165 The firm’s profit-maximizing output (in units) is most likely: A. 21. B. 23. C. in excess of 24. Solution: B Under perfect competition, economic profits are maximized where marginal revenue equals marginal cost; in this case where marginal cost crosses $10 per unit. Profits are maximized at 23 units of production. Q59-3 If adding one additional unit of labor results in a positive but declining marginal product of labor, then total product most likely is: A. constant. B. decreasing. C. increasing at a decreasing rate. Solution: C As long as marginal product is positive, total product is increasing. If the marginal product declines as additional units of labor are added, the rate of increase in total product is declining, ., increasing at a decreasing rate. Q60-3 If marginal cost per unit is greater than average total cost per unit, increasing output will most likely cause: A. marginal cost to decrease. B. average fixed cost to increase. C. average variable cost to increase. Solution:C . If marginal cost is greater than average total cost, then increasing output will cause marginal, average variable, and average total costs to increase. Average fixed cost will continue to decrease as output increases. Q61-3 ★★Which of the following best describes the elasticity of demand in a perfectly competitive market? A. The firm elasticity is zero and the market elasticity is infinite. B. The firm elasticity is infinite and the market elasticity is zero. C. The firm elasticity is infinite and the market elasticity is some finite number. 155 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C Infinite elasticity reflects perfect elasticity of demand. This characterizes the elasticity of demand for the products of a firm operating in a perfectly competitive market. If the firm increases prices, customers will go to another firm. However, the market demand is not perfectly elastic as it depends on substitutability with other products. Market elasticity will be greater than zero but less than infinite. Q62-3 Which of the following is the best reason for price discrimination? A. Differences in applicable tariffs. B. Differences in consumers' willingness to pay. C. Differences in production and/or transportation costs. Solution: B Price discrimination is charging different prices for a single good or service because of differences in buyers' willingness to pay and not because of differences in production costs. Q63-3 In the short run, an increase in output at low levels of production will most likely cause: A. an increase in the marginal cost due to the rising total fixed cost. B. an increase in the marginal cost due to the law of diminishing returns. C. a decrease in the marginal cost due to economies from greater specialization. Solution: C The marginal cost decreases at low levels of output due to economies from greater specialization. However, at higher levels of production, it eventually increases because of the law of diminishing returns. Q64-3 A profit maximum is least likely to occur when: (原版书R15-14) A. average total cost is minimized. B. marginal revenue equals marginal cost. C. the difference between total revenue and total cost is maximized. Solution: A. The quantity at which average total cost is minimized does not necessarily correspond to a profit maximum. Q65-3 Under conditions of perfect competition, in the long run firms will most likely earn: (原版书R15-17) A. normal profits. B. positive economic profits. C. negative economic profits. Solution: A. Competition should drive prices down to long-run marginal cost, resulting in only normal profits being earned. 156 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q66-3 The following equations have been developed for a company: Demand curve P = 150 – 5 × Q Total revenue curve 2 TR = 150 × Q – 5 × Q Marginal revenue curve MR = 150 – 10 × Q Total cost curve 32TC = Q – 10 × Q + 73 × Q + 120 Average cost curve 2AC = Q – 10 × Q + 73 + 120/Q Marginal cost curve MC = 23 × Q – 20 × Q + 73 P: price per unit Q: cost per unit The profit maximizing output for this firm (in units) is closest to: （mock84-39） A. 7. B. 8. C. 11. Solution: A. The profit-maximizing output will arise when MR = MC. MR = 150 – 10 × Q = MC = 3 × Q2 – 20 × Q + 73. On reduction, this becomes: 3 × Q2 – 10 × Q – 77 = 0. Only with Q = 7 will this equation be satisfied: 3 × 72 – 10 × 7 – 77 = 0 Q67-3 A local laundry and dry cleaner collects the following data on its workforce productivity. Workers always work in teams of two, and the laundry earns $ of revenue for each shirt laundered. Quantity of Labor (L) Total Product (TP) (Workers) (Shirts Laundered per Hour) 0 0 2 20 4 36 6 50 8 62 The marginal revenue product ($ per worker) for hiring the fifth and sixth workers is closest to: （mock83-34） A. 14. B. 21. C. 42. Solution: B. The marginal product (MP) is the amount of additional output resulting from using one more unit of input: ΔTP/ΔL, where ΔTP is the change in total product and ΔL is the change in total labor. 157 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The marginal revenue product (MRP) is the marginal product of an input times the price of the product: MP × Price = ΔTP/ΔL × Price. In this problem, the marginal product of hiring the 5th and 6th workers (ΔL = 2) is 14 shirts per hour/2 workers = 7 shirts per hour/worker. With each shirt resulting in $3 of revenue, the MRP is 7 shirts per hour/worker × $3/shirt = $21 per worker. 掌握边际利润递减规律、边际成本递增规律： R41-3 The law of diminishing return: at some point, as one more resource is added to the production process, holding the quantity of other inputs constant, the output continues to increase, but at a decreasing rate. R42-3 Marginal product of capital: increase in output from using one additional unit of capital, holding the quantity of labor constant. TP曲线最高点的横坐标与MP曲线和横轴的交点横坐标相同 TP曲线拐点与MP曲线最高点横坐标相同 MP曲线与AP相交于AP最高点 R43-3 TP:toal product，随投入增高，而增高，到达一定高度，减少。  MP: Marginal product, 先增加后减少  AP: Average product. Cost Cost TATC=AFC+AVC TCV $6 MC C ATC $3 AVC X TFC $1 X AFC 0 10 20 30  TC: total cost. TVC:total viarable cost . TFC:total Fixed cost. MC: marginal cost. ATC: average total cost. AVC: average viarable cost. AFC: average fixed cost .  MC intersects AVC and ATC at their minimum points.  Verticle distance between ATC and AVC is AFC. 158 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R44-3 Shutdown point & Breakeven point  Shutdown point:  If AR < AVC in the short run, the firm should shut down. This is its short-run shutdown point.  If AR ＞ AVC in the short run, the firm should continue to operate, even if it has losses.  In the long run the firm should shut down if AR < ATC. This is the long-run shutdown point.  Breakeven point  If AR = ATC, TR = TC (economic cost ), this is the firm's breakeven point.  If AR ≥ATC, firm stay in the market in both the short and long run  If AR ≥ AVC, but AR < ATC, the firm stay in market in the short run but will exit the market in the long run  If AR < AVC, the firm shut down in the short run and exit the market in the long run  对于短期，固定总成本不变，一根生产曲线，代表一种生产规模。 Economy of scale Diseconomy of scale CostLRATC Constant returns to scale Q* Q  In the long run, everything is viarable and the long run cost curves are known as planning curves. P14-3 Long-run industry supply Q68-3 A firm engages in the development and extraction of oil and gas, the supply of which is price inelastic. The most likely equilibrium response in the long run to an increase in the demand for petroleum is that oil prices: (原版书R15-18) A. increase, and extraction costs per barrel fall. B. increase, and extraction costs per barrel rise. C. remain constant, and extraction costs per barrel remain constant. Solution: B. The development and extraction of scarce oil and gas is an increasing-cost industry. A positive shift in demand will cause firms to increase supply, but at higher costs. The higher costs associated with increasing supply will cause prices to rise Q69-3 A firm develops and markets consumer electronic devices in a perfectly competitive, decreasing-cost industry. The firm's products have grown in popularity. The most likely equilibrium response in the long run to rising demand for such devices is for selling 159 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 prices to: (原版书R15-19) A. fall and per-unit production costs to decrease. B. rise and per-unit production costs to decrease. C. remain constant and per-unit production costs to remain constant. Solution: A. A positive shift in demand will cause firms to increase supply, but at decreasing costs. The decreasing cost per unit will be passed on to consumers and cause prices to fall in the long run. R45-3 Long-Run Industry Supply Curves  成本递增行业：行业产量↑成本↑，产品价格与供给量成同方向变动  成本递减行业：行业产量↑成本↓，产品价格与供给量成反方向变动  成本不变行业：行业产量↑成本保持不变，以不变的均衡价格提供产量 Price (b) Decreasing-cost industry (a) Increasing-cost industry (c)Constant-cost industry Quantity P15-3 Cost minimization and profit maximization Q70-3 A firm experiencing an increase in the marginal product of labor employed would most likely: (原版书R15-22) A. allow an increased number of workers to specialize and become more adept at their individual functions. B. find that an increase in workers cannot be efficiently matched by other inputs that are fixed such as property, plant, and equipment. C. find that the supply of skilled workers is limited, and additional workers lack essential skills and aptitudes possessed by the current workforce. Solution: A. Adding new workers in numbers sufficient for them to specialize in their roles and functions should increase marginal product of labor. Q71-3 For a manufacturing company to achieve the most efficient combination of labor and capital, and therefore minimize total costs for a desired level of output, it will most likely attempt to equalize the: (原版书R15-23) 160 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. average product of labor to the average product of capital. B. marginal product per unit of labor to the marginal product per unit of capital. C. marginal product obtained per dollar spent on labor to the marginal product per dollar spent on capital. Solution: C. Costs are minimized when substitution of labor for capital (or the reverse) does not result in any cost savings, which is the case when the marginal product per dollarspent is equalized across inputs. Q72-3 Pauker Company is producing at minimum short-run marginal cost. Pauker is most likely also producing: (MOCK88-39) A. maximum profits. B. at maximum marginal product. C. at minimum average variable cost. Solution: B The quantity of output at which short-run marginal cost of production is minimized is the same quantity at which the marginal product of inputs (., labor) is maximized. Profit is maximized by producing the output quantity at which marginal revenue equals marginal cost, which is not typically the same quantity at which marginal cost is minimized. The minimum average variable cost is at the output quantity at which it equals marginal cost, but this is also not typically the quantity with minimum marginal cost. Q73-3 ★A company uses three types of labor—unskilled, semiskilled, and skilled—in the production of electronic components. The company's production plan allows for the substitution of one type of labor for another. The marginal product and compensation in . dollars is as follows: Type of Labor Marginal Product per Day Compensation per Day (US$) Unskilled 200 units 105 Semiskilled 300 units 160 Skilled 500 units 270 Assuming that the compensation of the unskilled labor increases by 4%, what labor type should the company most likely hire when expanding output? (2014 Mock 99-34) A. Skilled B. Semiskilled C. Unskilled Solution: B The company should maximize output per monetary unit of input cost. So, it should look for the labor type that has the highest ratio of marginal product to compensation cost (MPinput/Pinput) . Type of Labor Marginal Product (MP) Compensatiom per MPinput/Pinput 161 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 per Day Day Unskilled 200 units 105 × = 200/ = Semiskilled 300 units 160 300/160 = Skilled 500 units 270 500/270 = The company minimizes costs and enhances profitability by adding semiskilled labor rather than the other two types because it has the highest ratio of MP to input price. R46-3 Profit-maximizing Utilization of an Input  For a firm with N productive inputs, cost minimization requires MPP 1 MPP2 L M P PNN Based on the condition for the profit-maximizing utilization of each factor, MRPf = Pf, for profit maximization, a firm must employ inputs in quantities MRP MP MR υMRP 1MRP2L MRPNP P P1 N P16-3 Perfect competition Q74-3 In perfectly competitive industries, what is the most likely long-run effect of a permanent decrease in demand? A. Price decreases. B. Firms incur economic losses. C. The number of firms decreases. Solution: C A permanent decrease in demand in a perfectly competitive industry will in the short-run cause the demand curve to shift to the left, causing prices to fall. However, in the long-run, firms will leave the industry due to economic losses. As firms leave the industry, supply decreases (., the supply curve shifts left-ward) thus increasing prices back to the equilibrium where economic profit is zero. Q75-3 In an industry comprised of three companies, which are small-scale manufacturers of an easily replicable product unprotected by brand recognition or patents, the most representative model of company behavior is:（原版书 Reading 16-18） A. oligopoly. B. perfect competition. C. monopolistic competition. Solution: B. 162 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The credible threat of entry holds down prices and multiple incumbents are offering undifferentiated products. Q76-3 The marginal revenue product of labor is most likely the additional: A. product generated by adding one more unit of labor. B. revenue generated by adding one more unit of labor. C. product generated by each laborer when technology improves. Solution: B . The marginal revenue product of labor is the additional revenue generated by adding one more unit of labor. Q77-3 The following equations have been developed for a company:(same as 64) Demand curve P = 150 – 5 × Q Total revenue curve TR = 150 × Q – 5 × Q2 Marginal revenue curve MR = 150 – 10 × Q Total cost curve TC = Q3 – 10 × Q2 + 73 × Q + 120 Average cost curve AC = Q2 – 10 × Q + 73 + 120/Q Marginal cost curve MC = 3 × Q2 – 20 × Q + 73 P: price per unit Q: cost per unit The profit maximizing output for this firm (in units) is closest to: （mock84-39） A. 7. B. 8. C. 11. Solution: A. The profit-maximizing output will arise when MR = MC. MR = 150 – 10 × Q = MC = 3 × Q2 – 20 × Q + 73. On reduction, this becomes: 3 × Q2 – 10 × Q – 77 = 0. Only with Q = 7 will this equation be satisfied: 3 × 72 – 10 × 7 – 77 = 0. Units Marginal revenue Marginal cost TR TC Net Profit 7 150 – 10 × 7 = 80 2805 484 321 3 × 7 – 20 × 7 + 73 = 80 8 150 – 10 × 8 = 70 2880 576 304 3 × 8 – 20 × 8 + 73 = 105 11 150 – 10 × 11 = 40 21045 1045 0 3 × 11 – 20 × 11 + 73 = 216 Q78-3 In which market structure(s) can a firm's supply function be described as its marginal cost curve above its average variable cost curve?（Notes P115） A. Oligopoly or monopoly. B. Perfect competition only. C. Perfect competition or monopolistic competition. 163 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B. The supply function is not well defined in markets other than those that can be characterized as perfect competition. 掌握几种市场（perfect competition, monopolistic competition, oligopoly and monopoly）的特点和达到均衡时的条件： R47-3 For perfect competition(also price taker market):  All the firms in the market produce identical products.  pure competition is price-taker, all others are price-searcher  There is a large number of independent firms.  Each seller is small relative to the size of the total market.  There is no barrier to entry or exit.  短期内：MR=MC，可能有economic profit或者economic loss；在有economic loss时，当AVC<P<ATC时，可以继续生产，P<AVC时，要关停.（shut down point）  Individual firm's demand schedule is perfectly elastic (horizontal).  长期内：无经济利润或损失（因为无进出壁垒）只有normal return，均衡条件是P=MR=MC=ATC。 R48-3 Permenant increase in demand:  External economies of scale: input prices fall because of the greater demand P1<P0  External economies of scale: input prices rise because of the greater demand P1>P0  短期供给曲线用SMC曲线上大于等于AVC曲线最低点的部分表示，即SMC上大于等于shutdown point的部分来表示 P17-3 monopoly Q79-3 Collusion is less likely in a market when: (原版书R16-11) A. the product is homogeneous. B. companies have similar market shares. C. the cost structures of companies are similar. Solution: B . When companies have similar market shares, competitive forces tend to outweigh the benefits of collusion. Q80-3 A government entity that regulates an authorized monopoly will most likely base regulated prices on: (原版书R16-14) A. marginal cost. B. long-run average cost. C. first-degree price discrimination. Solution: B. This allows the investors to receive a normal return for the risk they are taking in the market. 164 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q81-3 Upsilon Natural Gas, Inc. is a monopoly enjoying very high barriers to entry. Its marginal cost is $40 and its average cost is $70. A recent market study has determined the price elasticity of demand is . The company will most likely set its price at: (原版书R16-4) A. $ 40. B. $ 70. C. $120. Solution：C. Profits are maximized when MR = MC . For a monopoly, MR=P(1-1/Ep). Setting this equal to MC and solving for P: $40= P(1-1/)= P=$120 Q82-3 Compared with perfect competition, a natural monopoly will most likely be associated with a decrease in: A. Deadweight loss. B. Producer surplus. C. Consumer surplus. Solution: C The consumer surplus under a monopoly will be less than if the same market were perfectly competitive. And producer surplus can be increased by price discrimination. Q83-3 When rent-seeking equilibrium is reached, a monopoly's economic profit will most likely be: A. zero. B. positive. C. negative. Solution: A. With competitive rent seeking, a monopoly uses all its economic profit to maintain its monopoly. The firm's rent-seeking costs add to total fixed costs and to average total costs (ATC). The ATC curve shifts upward until, at the profit-maximizing price, the monopolistic firm breaks even. Q84-3 A monopoly's equilibrium level of output is least likely to occur where: A. demand is elastic. B. demand is inelastic. C. marginal revenue equals marginal cost. Solution: B A monopoly will never choose to operate where demand is inelastic because marginal revenue is negative in the inelastic portion of the demand curve. 165 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 PriceMCFATCP*ATC*GE金程教育 专业·领先·增值 R49-3 For monopoly: D Single seller, high barriers( legal barriers and natural barriers) MROQuantityQ*  Monopolists are price searchers (face downwards sloping demand curves) and have imperfect information about demand, so they must experiment with different prices (search) to find the profit maximizing price/quantity with always be in the elastic range of the demand curve for the firm's product.  短期和长期的均衡条件都是MR=MC（利润最大化的条件）,相比于完全竞争市场，垄断市场的产量较少，价格较高，并且有dead weight loss.  MR P υ(1 1 PΗ) Price discrimination reduces this inefficiency by increasing output toward the quantity where marginal benefit equals marginal cost, and the dead weight loss is smaller. An extreme case of price discrimination is perfect price discrimination. If it were possible for the monopolist to charge each consumer the maximum they are willing to pay for each unit, where would be no dead weight loss, since a monopolist would produce the same quantity as under perfect competition. With perfect price discrimination the consumer surplus would all be captured by the monopolist.  For price discrimination to work the seller must:  Downward sloping demand curve  At least two identifiable groups of customers with different price elasticities of demand for the product  Prevent the customers paying the lower price from reselling the product to the customers paying the higher price  Government regulation: ①Average cost pricing is the more common form of regulation at the point where ATC=D. This will  Increase output and decrease price.  Increase social welfare (allocative efficiency).  Ensure the monopolist a normal profit since price=ATC. ② Marginal cost pricing forces the monopolist to reduce price to the point where MC=D. this will: Increase output and reduce price. However, the price may be lower than ATC, resulting subsidy by government. 166 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 Short-run output decision for a firmLong-run output decision for a firmPPricerice金程教育 专业·领先·增值 P18-3 monopolistic competition Q85-3 Under monopolistic competition, a firm that introduces a new and differentiated product is least likely to: MCA. increase its price. MCB. make an economic profit. C. face a demand that is more elastic. Solution: C A firm in a monopolistic competition that introduces a new and differentiated product is able to better differentiate its products, and thus demand wouldP be less ela*stic as close substitutes would be less readily available. Thus the firm would be able to increase price and enjoy economATCic profit in the short run. ATC R50-3 monopolistic competition  The following market and product features define monopolistic competition:(1) There are a large number of independent sellers. (2) Each seller produces a differentiated product. (3) Firms coAmpete on proTduC*DATC*,P*ct quality, price and marketing. (4) Firms are free to enter and exit. (5) Firms in monopolistic competition face downward-sloping demand curves and the curves are highly elastic because competing products are perceived by consumers as close substitutes MRDMRQuantityQuantityQQ 短期内：MR=MC，可以economic profit或者economic loss； 长期内：无经济利润或损失（因为无进出壁垒），均衡条件是MC=MR & P=ATC，但不是在ATC的最低点 P19-3 Oligopoly market Q86-3 Over time, the market share of the dominant company in an oligopolistic market will most likely: (原版书R16-13) A. increase. B. decrease. C. remain the same. 167 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B The dominant company's market share tends to decrease as profits attract entry by other companies. Q87-3 Oligopolistic pricing strategy most likely results in a demand curve that is: (原版书R16-10) A. kinked. B. vertical. C. horizontal. Solution: A The oligopolist faces two different demand structures, one for price increases and another for price decreases. Competitors will lower prices to match a price reduction, but will not match a price increase. The result is a kinked demand curve. Q88-3 Aquarius, Inc. is the dominant company and the price leader in its market. One of the other companies in the market attempts to gain market share by undercutting the price set by Aquarius. The market share of Aquarius will most likely: (原版书R16-7) A. increase. B. decrease. C. stay the same Solution: A As prices decrease, smaller companies will leave the market rather than sell below cost. The market share of Aquarius, the price leader, will increase. Q89-3 ★SigmaSoft and ThetaTech are the dominant makers of computer system software. The market has two components: a large mass-market component in which demand is price sensitive, and a smaller performance-oriented component in which demand is much less price sensitive. SigmaSoft's product is considered to be technically superior. Each company can choose one of two strategies:  Open architecture (Open): Mass market focus allowing other software venders to develop products for its platform.  Proprietary (Prop): Allow only its own software applications to run on its platform. Depending upon the strategy each company selects, their profits would ThetaTech - Prop ThetaTech - Open SigmaSoft-Prop ( S 400, T 600) (S 650,T 700) SigmaSoft-Open (S 800, T 300) (S 600, T 400) The Nash equilibrium for these companies is: (原版书R16-8) A. proprietary for SigmaSoft and proprietary for ThetaTech. B. open architecture for SigmaSoft and proprietary for ThetaTech. C. proprietary for SigmaSoft and open architecture for ThetaTech. 168 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C In the Nash model, each company considers the other's reaction in selecting its strategy. In equilibrium, neither company has an incentive to change its strategy. ThetaTech is better off with open architecture regardless of what SigmaSoft decides. Given this choice, SigmaSoft is better off with a proprietary platform. Neither company will change its decision unilaterally. Q90-3 The natures of competitive environment to which the game of prisoners’ Dilemma applies and the solution offered by Nash equilibrium, respectively, are: nature of competitive environment solution from Nash equilibrium A. Oligopoly Both prisoners deny B. Oligopoly Both prisoners confess C. Monopolistic competition Both prisoners deny Solution: B The game of Prisoners’ Dilemma applies to oligopoly and the solution from Nash equilibrium is that both prisoners would confess to the crime. Q91-3 All else being equal, will the joint profit of an oligopolistic industry most likely be maximized if the: barriers to entry in the industry are demand for the industry's products is stable? low? A. No No B. No Yes C. Yes No Solution: B Joint profits in an oligopolistic industry are maximized when collusion is effective. The lower the number of firms in the industry (higher barriers to entry), the more effective collusion will be. Successful collusion is more likely when demand is stable because most firms will have similar expectations for the future of the industry. R51-3 For oligopoly:  Oligopoly is a form of market competition characterized by (1) small number of sellers (2) interdependence among competitors (3) large economies of scale (4) significant barriers to entry (5) either similar or differentiated products  Four traditional oligopoly models (1) The kinked demand curve model of oligopoly is based (2)Cournot duopoly model (3)Nash equilibrium model (4 Stackelberg dominant firm model R52-3 The kinked demand curve model of oligopoly  Assumption: each firm believes that if it raises its price, others will not follow, but if it cuts its price, other firms will cut theirs  Between range A and B, the optimum Q is constant, cann’t determine price 169 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Price MC 1 More elastic MC Kink PMC 2 K MR 1 A PBrLess elastic iceMR 2 Quantity Q Max profit K MC CFR53-3 Cournot model  only two firms competing (eg:a duopoly双寡头模型)  both have identical and constant marginal costs of production  each firm knows the quantity supplied by the other firm in the previous period and assumes that is what it will supply in the next period(两个厂商都准确地了解市场需求曲线)  construct a demand curve and marginal revenue curve for its own production (共同面MC临的市场需求曲线是线性的DF) 3 市场成本为零 R54-3 Dominant firm model  a single firm has a significantly large market share：greater scale & lower cost structure  market price is essentially determined by the dominant firm Market demand1 the other competitive firms take this market price as given.  The order of decision: 1 ο2 ο 3 ο4 4MR2DFQuantityQQCFDF R55-3 Game theory: Nash equilibrium: best payoff under which no best options for either. B honors B cheats A honors A 10% B 10% A -15% B 20% A cheats A 20% B -15% A 0 B 0 P20-3 Market Concentration（计算、根据已知值分析） Q92-3 An analyst gathered the following market share data for an industry comprised of six firms: Firm Market Share 170 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A 30% B 20% C 15% D 15% E 10% F 10% So, the industry’s four-firm concentration ratio and Herfindahl-Hirschman index are closest to: Four-firm concentration ratio HHI A. 50% 1750 B. 90% 1750 C. 80% 1950 Solution: C The four-firm concentration ratio=30%+20%+15%+15%=80% The Herfindahl-Hirschman index=302+202+152+152+102+102=1950 Q93-3 Which of the following four-firm concentration ratios most likely would indicate an oligopolistic market structure? A. 25% B. 55% C. 75% Solution: C A four-firm concentration ratio that exceeds 60% is regarded as indicative of an oligopoly. Q94-3 ★★★One disadvantage of the Herfindahl-Hirschmann Index is that the index: (原版书(R16-17) A. is difficult to compute. B. fails to reflect low barriers to entry. C. fails to reflect the effect of mergers in the industry. Solution: B The Herfindahl-klirschmann Index does not reflect low barriers to entry that may restrict the market power of companies currently in the market. Market Concentration计算： R56-3 The N-Firm Concentration Ratio is the percentage of the value of sales accounted for by the firms in an industry. R57-3 The Herfindahl-Hirschman Index (HHI) is the square of the percentage market share of each firm summed over the largest 50 firms (or summed over all the firms if there are  In a competitive market, HHI<1000  In a moderately competitive market, 1000<HHI<1800  In an uncompetitive market, HHI>1800 171 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 1000 1800 10000 Competitive Moderately Uncompetitive Monopoly market competitive market market market R58-3 Limitation of measures  First, limitation of the N-firm concentration ratio is that it may be relatively insensitive to mergers of two firms with large market shares. This problem is reduced by using Herfindahl-Hirschman Index (HHI).  Second, both of our simple concentration measures is that barriers to entry are not considered in either case. Even a firm with high market share may not have much pricing power if barriers to entry are low and there is potential competition R59-3 Economic rent & opportunity cost  The opportunity cost of an employee is what he could make in his next highest-paying alternative employment.  The different between a factor of production's earnings and opportunity cost is called economic rent.  Economic rent:对于fixed supply的经济租（例如：土地，黄金 & 石油），拿到的所有revenue都是经济租,故要素价格越高经济租越高 P21-3 GDP的基本概念 Q95-3 Which of the following is least likely to result in an increase in potential GDP? A. An advance in technology. B. An increase in the money wage rate. C. An increase in the quantity of capital. Solution: B Potential GDP will not change in response to an increase in the money wage rate. Q96-3 Assuming the economy is operating at full employment, what is the most likely long-run effect of an increase in government spending on the price level and real GDP? A. The price level and real GDP will both increase. B. The price level will increase, but there will be no change in real GDP. C. The price level will not change, but there will be an increase in real GDP. Solution: B . 172 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 If an economy is operating at full employment, the long-run effect of an increase in government spending is to increase the price level while real GDP will be unchanged at the full employment level. Q97-3 The component least likely to be included in a measurement of gross domestic product (GDP) is:(原版书R17-2) A. the value of owner occupied rent. B. the annual salary of a local police officer. C. environmental damage caused by production. Solution: C . By-products of production processes that have no explicit market value are not included in GDP. Q98-3 Suppose a painting is produced and sold in 2010 for £5,000. The expenses involved in producing the painting amounted to £2,000. According to the sum-of-value-added method of calculating GDP, the value added by the final step of creating the painting was: (原版书R17-5) A. £2,000. B. £3,000. C. £5,000. Solution: B . This is the value added by the artist: £5,000 — £2,000 = £3,000. Q99-3 From the beginning to the ending years of a decade, the annual value of final goods and services for country Xincreased from €100 billion to €300 billion. Over that time period, the GDP deflator increased from 111 to 200. Over the decade, real GDP for country X increased by approximately: (原版书R17-8) A. 50%. B. 67%. C. 200%. Solution: B . Real GDP in the first year was €100 billion/ = €90, and in the last year it was €300 billion/ = €150. Thus, (€150 — €90)/€90 = or 67%. Q100-3 The following data apply to a country in its domestic currency units:（2013 mock afternoon session） Consumer spending on goods 875,060 Government spending on goods 305,600 and services and services Business gross fixed investment 286,400 Government gross fixed 84,120 investment Change in inventories -68,500 Capital consumption allowance 8,540 173 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Transfer payments 9,300 Statistical discrepancy -2,850 Exports 219,800 Imports 250,980 Using the expenditures approach, the country’s gross domestic product (GDP) is closest to: A. 1,448,650 B. 1,451,500 C. 1,466,490 Solution: A . Using the expenditures approach: GDP = Consumer spending on goods and services + Business gross fixed investment + Change in inventories + Government spending on goods and services + Government gross fixed investment + Exports – Imports + Statistical discrepancy Consumer spending on goods and services 875,060 Business gross fixed investment 286,400 Change in inventories (68,500) Government spending on goods and services 305,600 Government gross fixed investment 84,120 Exports 219,800 Imports 250,980 Statistical discrepancy (2,850) =GDP 1,448,650 Q101-3 The numerator of the GDP price deflator reflects: (原版书R17-10) A. the value of base year output at current prices. B. the value of current year output at current prices. C. the value of current year output at base year prices. Solution: B . GD PVValue of current year output at current year prices deflator=apu100lue of current year outt at basd year prices υ Q102-3 Consider the following data for 2010 for a hypothetical country: (原版书R17-11) Account name Amount ($ trillions) Consumption Statistical discrepancy Capital consumption allowance Government spending Imports Gross private domestic investment Exports Based only on the data given, the gross domestic product and national income are respectively closest to: 174 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. and . B. and . C. and . Solution: B . GDP = Consumption + Gross private domestic investment + Government Spending + Exports — Imports = 15 + 4 + + — = . National income = GDP — CCA — Statistical discrepancy = — — = . Q103-3 The following data pertain to the total output in units and average selling prices in an economy that produces only two products, X and Y: （2013 mock morning session） Product X Product Y Year Output (units) Selling Price/unit Output (units) Selling Price/unit 2011 2,800 €9 2,000 €47 2012 3,000 €11 1,800 €52 If the implicit price deflator for GDP in 2011 was 100, for 2012 it is closest to: A. B. C. Solution: C . Nominal GDP Real GDP 2011 2,800 × 9 + 2,000 × 47 = 119,200 119,200 20G12 D3,0P00 × 1 1 +d 1,800e × 52f = 1l26a,600t A o3r,00 0 ×= 9 + 1, 80n0 × 47o = 11m1,600 B inal GDP/real GDP 1υ00value of current output at current prices100 υ value of current output at base year prices126,600 1 0υ011 3 .4111,600A Value of current output at current prices B Value of current output at base year prices Q104-3 The nominal and real GDP for a country are provided below :（MOCK92-41） 2010 2011 GDP at market prices ( € millions ) 3,679,098 3,818,145 Real GDP (2001 € millions ) 3,163,330 3,342,570 For 2011, the inflation rate ( % ) in the country is closest to : A. -1. 8 B. 3. 8 C. 5. 7 Solution: A . Inflation rate is calculated as the percentage change in the implicit GDP price deflator. 175 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Implicit GDP price deflator= RGDP at market pricesea100l GDP in base year prices υ 2010 2011 Implicit GDP price deflator υ 5 100υ114. 2 . Rate = () υ 0 1. 8% Q105-3 ★Assume that an economy is composed of two products, X and Y, with the following details: Quantity Quantity Product Product Produced Produced Unit Prices Unit Prices Product in 2012 in 2013 in 2012 in 2013 X Y unknown Assuming 2012 is the base year for measuring GDP and the GDP deflator for the economy in 2013 is , the unit price of Y in 2012 is closest to(2014 Mock 98-38) A. . B. . C. . Solution: A . Product Quantity Quantity Product Unit Produced Produced Unit Prices Product Prices in = (2) × (4) in 2012 in 2013 in 2012 2013 (1) (2) (3) (4) X 4, Y 2, NoRminal GDeP in 2013a equals the sum of the last column: 6, lGDP NominalGDP1 0υ0/GDP6 88 /υ .1 20132013deflator RexxyyalGDP P QυP Q υ ( 35υ)P 182 .5υ2012 P 18 2υ.52012yP R60-3 Nominal and Real GDP and GDP deflator 176 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Nnominal GDP= ƒPQti,ti,t i=1N = ƒ(price of good i in year t) υ(quantity of good i produced in year t)i=1Nreal GDP= ƒPQti,t-5i,ti=1 NN = ƒ(price of goƒPodQ i in year t 5) (qu antiυty of good i produced in year t)i,ti,ti=1GDP di=1eflator for year t =N 1υ00 ƒPQi,t-5i,t i=1nominal GDP in year t = 1υ00value of year t output at year t 5 pricesR61-3 GDP的计算  expenditure approach：GDP = C + I + G + (X - M)  income approach：GDP = national income + capital consumption allowance + statistical discrepancy P22-3 国民收入核算 Q106-3 In a simple economy with no foreign sector, the following equations apply Consumption function C = 2,500 + × (Y – T) Investment function I = 500 + × Y – 25 × r Government spending G = 1,000 Tax function T = –250 + × Y Y: Aggregate income r: Real interest rate If the real interest rate is 3% and government spending increases to 2,000, the increase in aggregate income will be closest to: (MOCK83-39) A. 1,000. B. 1,163. C. 7,143. Solution: C . With no foreign sector, the GDP identity is Y = C + I + G. With substitution from the equations above, Y = 2,500 + × (Y – T) + 500 + × Y – 25 × r + 1,000 = 2,500 + × (Y +250 – × Y) + 500 + × Y – 25 × r + 1,000. Y = 4,200 + × Y – 25 × r. Y = 30,000 – × r. At 3%, Y = 30,000 – × 3 = 29,464. Alternatively, Y – = 4,200 – 25 × r = 4,200 – 256 × r. 177 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 If government spending increased by 1,000 to 2,000, then Y = 5,200 + × Y – 25 × r. Y = 37,142 – × r, which at 3% would be Y = 37,142 – × 3 = 36,607. Representing an increase of 36,607 – 29,464 = 7,143. Alternatively, at 5,200, Y – = 5,200 – 25 × r or Y = 5,200 – 25 × r. Or more simply, ∆G ÷ (1 – c) = 1,000/(1 – ) = 7,143. Q107-3 In calculating personal income for a given year, which of the following would not be subtracted from national income? (原版书R17-12) A. Indirect business taxes. B. Undistributed corporate profits. C. Unincorporated business net income. Solution: C. Unincorporated business net income is also known as proprietor's income and is included in personal income. R62-3 National income, personal income, and personal disposable income  National income is the sum of the income received by all factors of production that go into the creation of final output.  national income = compensation of employees (wages and benefits) +corporate and government enterprise profits before taxes +interest income +unincorporated business net income (business owners' incomes) +rent +indirect business taxes - subsidies (taxes and subsidies that are included in final prices)  Personal income= national income - indirect business tax - corporate business tax - undistributed corporate profit  Personal disposable income= personal income - personal taxes P23-3 Saving and investment Q108-3 Because of a sharp decline in real estate values, the household sector has increased the fraction of disposable income that it saves. If output and investment spending remain unchanged, which of the following is most correct response(原版书R17-14) A. A decrease in the government deficit. B. A decrease in net exports and increased capital inflow. C. An increase in net exports and increased capital outflow. Solution: C The fundamental relationship among saving, investment, the fiscal balance, and the trade balance is S = I + (G — T) + (X —M). Given the levels of output and investment spending, an increase in saving (reduction in consumption) must be offset by either an increase in the fiscal deficit or an increase in net exports. Increasing the fiscal deficit is not one of the choices, so an 178 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 increase in net exports and corresponding increase in net capita] outflows (increased lending to foreigners and/or increased purchases of assets from foreigners) is the correct response. Q109-3 Equality between aggregate expenditure and aggregate output implies that the government's fiscal deficit must equal: (原版书R17-13) A. Private saving — Investment — Net exports. B. Private saving — Investment + Net exports. C. Investment — Private saving + Net exports. Solution: A. The fundamental relationship among saving, investment, the fiscal balance, and the trade balance is S = I + (G — T) + (X — M). This form of the relationship shows that private saving must fund investment expenditures, the government fiscal balance, and net exports (= net capital outflows). Rearranging gives G — T = (S — I) — (X — M). The government's fiscal deficit ( G — T) must be equal to the private sector's saving/investment balance (S — I) minus net exports. R63-3 储蓄,投资,财政平衡与贸易平衡之间的关系  总收入：C + I + G + (X - M) →① 总支出：C+S+T →②  ① = ② → S- I = (G - T) + (X - M)  (G - T)：财政平衡 (X - M)：贸易平衡  储蓄大于投资说明出现政府赤字或者贸易赤字 P24-3 IS & LM curve. Q110-3 An increase in the price level would shift the: ( A. IS curve. B. LM curve. C. aggregate demand curve. Solution: B . The LM curve represents combinations of income and the interest rate at which the demand for real money balances equals the supply. For a given nominal money supply, an increase in the price level implies a decrease in the real money supply. To decrease the demand for real money balances, either the interest must increase or income must decrease. Therefore, at each level of the interest rate, income (= expenditure) must decrease—a leftward shift of the LM curve. Q111-3 An increase in the nominal money supply would shift the: (原版书R17-17) A. IS curve and the LM curve. B. IS curve and the aggregate demand curve. C. LM curve and the aggregate demand curve. Solution: C . The LM curve represents combinations of income and the interest rate at which the demand for real money balances equals the supply. For a given price level, an increase in the nominal money 179 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 supply is also an increase in the real money supply. To increase the demand for real money balances, either the interest must decline or income must increase. Therefore, at each level of the interest rate, income (= expenditure) must increase—a rightward shift of the LM curve. Since the IS curve is downward sloping (higher income requires a lower interest rate), a rightward shift in the LM curve means that the IS and LM curves will intersect at a higher level of aggregate expenditure/income. This implies a higher level of aggregate expenditure at each price level—a rightward shift of the Aggregate Demand curve. Q112-3 An increase in government spending would shift the：(原版书R17-16) A. IS curve and the LM curve. B. IS curve and the aggregate demand curve. C. LM curve and the aggregate demand curve. Solution: B . The IS curve represents combinations of income and the real interest rate at which planned expenditure equals income. Equivalently, it represents combinations such that S(Y) = I( r) + (G– T) + (X – M) where S( Y) indicates that planned saving is a (increasing) function of income and l(r) indicates that planned investment is a (decreasing) function of the real interest rate. To maintain this relationship, an increase in government spending (G) requires an increase in saving at any given level of the interest rate (r). This implies an increase in income ( Y) at each interest rate level—a rightward shift of the IS curve. Unless the LM curve is vertical, the IS and LM curves will intersect at a higher level of aggregate expenditure/income. Since the LM curve embodies a constant price level, this implies an increase in aggregate expenditure at each price level—a rightward shift of the Aggregate Demand curve. Q113-3 Which curve represents combinations of income and the real interest rate at which planned expenditure equals income? (原版书R17-15) A. The IS curve. B. The LM curve. C. The aggregate demand curve. Solution:A The IS curve represents combinations of income and the real interest rate at which planned expenditure equals income. R64-3 IS curves 180 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 The IS CurveReal LM curve interest Real lower M/Prateinterest rate (r) LM CurveCLM curve higher M/PB金程教育 专业·领先·增值 AReal aggregate IncomeReal GDP (y)  If income and expenditure are to remain in equilibrium, there must be an inverse relationship between the real interest rate and income. In economics, this relationship is called the IS curve, because investment (I) and savings (S) are the primary variables that adjust to maintain the balance between expenditure and income. R65-3 LM curves  In equilibrium, there is a positive relationship between real income and the real interest rate for a given level of the real money supply P25-3 Aggregate Demand Q114-3 In regard to the aggregate demand curve and an increase in one of its associated factors, which of the following relationships is least accurate? (MOCK84-36) Increase in factor Shifts the AD curve Reason A Stock prices Rightward Lower investment B Consumer confidence Rightward Higher consumption C Exchange rate Leftward Lower exports and higher imports Exchange rate is foreign currency per unit of domestic currency Solution: A. If stock prices rise, the aggregate demand curve will shift to the right (increase in AD) because of higher consumption (wealth effect), not lower investments. Q115-3 The least likely cause of a decrease in aggregate demand is: (原版书R17-23) A. higher taxes. B. a weak domestic currency. C. a fall in capacity utilization. Solution: B . A weak domestic currency will result in an increase in aggregate demand at each price level—a rightward shift in the AD curve. A weaker currency will cause a country's exports to be cheaper in global markets. Conversely, imports will be more expensive for domestic buyers. Hence, the net exports component of aggregate demand will increase. Q116-3 As the price level declines along the aggregate demand curve, the interest rate is most 181 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 likely to: (原版书R17-19) A. decline. B. increase. C. remain unchanged. Solution:A . A decrease in the price level increases the real money supply and shifts the LM curve to the right. Since the IS curve is downward sloping, the IS and LM curves will intersect at a higher level of income and a lower interest rate. Q117-3 All else equal, aggregate demand is most likely to decrease in response to a decrease in: A. Interest rates. B. Federal tax revenues. C. Expected corporate profits. Solution: C Aggregate demand is expected to decrease if corporate profits decrease because firms will have less money to spend on investment in capital equipment. Q118-3 Other things equal, aggregate demand is most likely to decrease as aresult of a decrease in: (MOCK88-34) A. taxes. B. the money supply. C. the foreign exchange value of the domestic currency. Solution: B A decrease in the money supply will cause short-term interest rates to increase, decreasing investment and consumption spending and thereby decreasing AD. A decrease in taxes will increase disposable incomes, consumption spending, and AD. If the foreign exchange value of the domestic currency decreases, the country’s products become relatively less expensive to foreign buyers, while foreign goods become relatively more expensive to domestic buyers. As a result, net exports increase, which increases AD. Aggregate Demand R66-3 AD曲线说明Real GDP与物价水平之间呈反向关系  原因：更高的物价水平降低了实际财富，提高了实际利率并使国内生产的产品相比于国外产品更贵，所有这些因素使得国内产出下降 R67-3 Slope of AD  The slope of the AD curve depends on the relative sensitivities of investment, saving; and money demand to income and the interest rate. The AD curve will he flatter if  investment expenditure is highly sensitive to the interest rate;  saving is insensitive to income;  money demand is insensitive to interest rates; and 182 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  money demand is insensitive to income.  The first two conditions directly imply that income will have to move more to induce a large enough change in saving to match the change in investment spending.  All else equal, each of the last two conditions implies that a larger change in the interest rate is required to bring money demand in line with money supply. This, in turn, implies a larger change in investment spending and a correspondingly larger change in saving and incomes  从记忆的角度来说，AD曲线更加平坦，I对利率变化敏感，其他都不敏感 R68-3 Movement & shift  a change in the price level is represented as a movement along the AD curve  an increase in aggregate demand is shown by a shift to the right, indicating that the quantity of goods and services demanded is greater at any given price level. R69-3 The factors that affect aggregate demand:  Increase in consumers' wealth: households' wealth ↑→proportion of income saved↓& spending↑→C↑  Consumer expectations of future income: 消费者预期未来收入增加从而会增加当前消费  Business expectations: When businesses are more optimistic about future sales, they tend to increase their investment in plant, equipment, and inventory, which increases aggregate demand (I ↑).  High capacity utilization：资本效用提高从而PPE投资增加  Expansionary monetary policy：(a)rate of growth of the money supply↑→puts downward pressure on interest rates→PPE投资↑; (b) rate↓→credit↑→分期付款消费↑  Expansionary fiscal policy：taxes increases↓→disposable income and consumption， government spending↑→AD directly ↑(C increases for tax cut, G increases for spending increase)  Exchange rates：A decrease in the relative value of a country's currency will increase exports and decrease imports. Both of these effects tend to increase domestic aggregate demand (net X increases).  Global economic growth: GDP growth in foreign economies tends to increase the quantity of imports (domestic exports) foreigners demand. By increasing domestic export demand, this will increase aggregate demand (net X increases) P26-3 Aggregate Supply Curve Q119-3 Following a sharp increase in the price of energy, the overall price level is most likely to rise in the short run: (原版书R17-28) A. and remain elevated indefinitely unless the central bank tightens. B. but be unchanged in the long run unless the money supply is increased. C. and continue to rise until all prices have increased by the same proportion. Solution: B . An increase in energy prices will shift the short-run aggregate supply curve (SRAS) to the left, 183 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 reducing output and increasing prices. If there is no change in the aggregate demand curve, in particular if the central bank does not expand the money supply, slack in the economy will put downward pressure on input prices, shifting the SRAS back to its original position. In the long run, the price level will be unchanged. Q120-3 If wages were automatically adjusted for changes in the price level, the short-run aggregate supply curve would most likely be: (原版书R17-22) A. flatter. B. steeper. C. unchanged. Solution: B . The slope of the short-run aggregate supply curve reflects the extent to which wages and other input costs adjust to the overall price level. Automatic adjustment of wages would mitigate the impact of price changes on profitability. Hence, firms would not adjust output as much in response to changing output prices—the SRAS curve would be steeper. Q121-3 Which of the following best describes the aggregate supply curve in the short run (., 1 to 2 years)? The short-run aggregate supply curve is: (原版书R17-21) A. flat because output is more flexible than prices in the short run. B. vertical because wages and other input prices fully adjust to the price level. C. upward sloping because input prices do not fully adjust to the price level in the short run. Solution:C . Due to long-term contracts and other rigidities, wages and other input costs do not fully adjust to changes in the price level in the short run. Given input prices, firms respond to output price changes by expanding or contracting output to maximize profit. Hence, the SRAS is upward sloping. Q122-3 The most likely outcome when both aggregate supply and aggregate demand increase is: (原版书R17-26) A. a rise in inflation. B. higher employment. C. an increase in nominal GDP. Solution: B Higher aggregate demand (AD) and higher aggregate supply (AS) raise real GDP and lower unemployment, meaning employment levels increase. Aggregate Supply Curve R70-3 Three aggregate supply curves with different time frames  (1) the very short-run aggregate supply (VSRAS) curve  (2) the short-run aggregate supply (SRAS) curve 184 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  (3) the long-run aggregate supply (LRAS) curve R71-3 Factors can cause the SRAS curve to shift to the right:  (1) Labor productivity  (2)Input prices  (3)Expectations of future output prices  (4)Taxes and government subsidies  (5)Exchange rates R72-3 Factors that will shift the LRAS curve are  (1) Increase in the supply and quality of labor  (2) Increase in the supply of natural resources  (3) Increase in the stock of physical capital  (4) Technology R73-3 An investor expecting a decrease in aggregate demand that will result in a recessionary gap should: （AD decreases, P decrease（利率水平也下降）, Y小于充分就业的产出）  Increase investment in defensive companies and decrease investment in cyclical companies, because cyclical companies are likely to experience greater declines in earnings.  Increase investment in investment-grade and government fixed income securities (which will benefit as interest rates decline) and decrease investment in lower-quality fixed income securities.  Increase investment in long-maturity fixed income securities because their prices react more to falling interest rates than do shorter-maturity securities.  Decrease investment in commodities and companies that produce commodities, in anticipation of lower commodity demand and lower commodity prices. R74-3 An investor expecting an increase in aggregate demand that will result in an inflationary gap should:（AD升高，价格上升，Y大于充分就业的产出）  Increase investment in cyclical companies, which should see a large increase in earnings, and decrease investment in defensive companies.  Increase investments related to commodities, which should benefit from higher output in the economy.  Decrease exposure to fixed income securities in anticipation of higher interest rates, but increase exposure to lower-quality fixed income securities in anticipation of lower default risk in an expanding economy. R75-3 An investor anticipating stagflation should: (SRAS减少，价格上升，利率水平上升，产出下降)  Decrease investment in fixed income securities in anticipation of higher inflation and nominal interest rates.  Decrease investment in equities as revenue and profit margins will decrease.  Increase investment related to commodities in anticipation of higher commodity prices. R76-3 Stagflation  Stagflation：both high unemployment and increasing inflation  Stagflation is generally associated with a sharp decrease in aggregate supply.即supply 185 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 shock导致AS突然大幅下降从而使得GDP下降，物价上升，例如1973年的石油危机  An investor anticipating stagflation should:  Decrease investment in fixed income securities in anticipation of higher inflation and nominal interest rates.  Decrease investment in equities as revenue and profit margins will decrease.  Increase investment related to commodities in anticipation of higher commodity prices. P27-3 Production function Q123-3 An economic forecasting firm has estimated the following equation from historical data based on the neoclassical growth model: Potential output growth = + X Growth of labor + X Growth of capital The intercept () in this equation is best interpreted as: (原版书R17-33) A. the long-run sustainable growth rate. B. the growth rate of total factor productivity. C. above trend historical growth that is unlikely to be sustained. Solution: B The estimated equation is the standard Solow growth accounting equation. The intercept is the growth rate of total factor productivity. Q124-3 In the neoclassical or Solow growth model, an increase in total factor productivity reflects an increase in: (原版书R17-32) A. returns to scale. B. output for given inputs. C. the sustainable growth rate. Solution: B Total factor productivity (TFP) is a scale factor primarily reflecting technology. An increase in TFP means that output increases for any level of factor inputs. Q125-3 The sustainable growth rate is best estimated as: (原版书R17-31) A. the weighted average of capital and labor growth rates. B. growth in the labor force plus growth of labor productivity. C. growth in total factor productivity plus growth in the capital-to-labor ratio. Solution: B Output growth is equal to the growth rate of the labor force plus the growth rate of labor productivity, . output per worker. Unlike total factor productivity, output per worker is observable, so this is the most practical way to approach estimation of sustainable growth. Q126-3 ★Long-term sustainable growth of an economy is least likely to result from growth in:186 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 （Notes P148） A. the supply of labor. B. output per unit of labor. C. capital per unit of labor. Solution: C The sustainable rate of economic growth is a measurement of the rate of increase in the economy's productive capacity. An economy's sustainable rate of growth depends on the growth rate of the labor supply and the growth rate of labor productivity. Due to diminishing marginal productivity, an economy generally cannot achieve long-term sustainable growth through continually increasing the stock of capital relative to labor (., capital deepening). Production function R77-3 Five important sources of economic growth(1) Labor supply (2)Human capital(3)Physical capital stock (4)Technology (5)Natural resources R78-3 Production function  Y = A ×f (L, K)其中：A代表技术，L代表劳动力，K代表资本  Y/L=A ×f (K/L) →人均增长  growth in potential GDP = growth in technology + WL(growth in labor) + WC (growth in capital), WL and W C are labor's and capital's percentage share of national income.  WL＞WC 说明国民收入中labour的贡献更大  growth in per-capita potential GDP =growth in technology + WC (growth in the capital-to-labor ratio P28-3 Business cycle Q127-3 Based on typical labor utilization patterns across the business cycle, productivity (output per hours worked) is most likely to be highest(原版书R18-5) A. at the peak of a boom. B. into a maturing expansion. C. at the bottom of a recession. Solution: C At the end of a recession, firms will run "lean production" to generate maximum output with the fewest number of workers. Q128-3 In a recession, companies are most likely to adjust their stock of physical capital by: (原版书R18-6) A. selling it at fire sale prices. B. not maintaining equipment. C. quickly canceling construction activity. Solution: B Physical capital adjustments to downturns come through aging of equipment plus lack of 187 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 maintenance. Q129-3 Business cycle analysis most commonly describes economic activity that is conducted through: (原版书R18-1) A. state enterprises. B. agricultural co-ops. C. private corporations. Solution: C Business cycles relate to fluctuations in national economic activity generated mainly through business enterprises. Q130-3 If relative to prior values of their respective indicators the inventory—sales ratio has risen, unit labor cost is stable, and real personal income has decreased, it is most likely that a peak in the business cycle: (原版书R18-25) A. has occurred. B. is just about to occur. C. will occur sometime into the future. Solution: A Both inventory—sales and unit labor costs are lagging indicators that decline somewhat after a peak. Real personal income is a coincident indicator that by its decline shows a slowdown in business activity. Q131-3 Which part of business cycle can be signaled by the decrease of inventory to sales ratio and increase of equipment investment?（2012年12月考题回顾） A. mature B. The start of an economic recovery C. The end of an economic recovery Solution: B Because inventories accumulate as sales initially decline and then, once a business adjusts its ordering, become depleted as sales pick up, this ratio tends to lag the cycle. The increase of equipment investment indicate economic recovery. Q132-3 The inventory/sales ratio is most likely to be rising: (原版书R18-7) A. as a contraction unfolds. B. partially into a recovery. C. near the top of an economic cycle. Solution:C Near the top of a cycle, sales begin to slow before production is cut, leading to an increase in inventories relative to sales. 188 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q133-3 Which of the following is not a problem with NARU and NAIRU?（原版书P335） A. They only work in monetarist models. B. They may change over time given changes in technology and economic structure. C. They do not account for bottlenecks in segments of the labor market (., college graduates). Solution: A NARU and NAIRU are the unemployment rates at which the inflation rate will not use because of a shortage of labor. This concept does not tie to a particular school of macroeconomic models. Q134-3 What is the most important effect of labor productivity in a cost-push inflation scenario?（原版书R18-22） A. Rising productivity indicates a strong economy and a bias toward inflation. B. The productivity level determines the economy's status relative to its "natural rate of unemployment." C. As productivity growth proportionately exceeds wage increases, product price increases are less likely. Solution: C For productivity, or output per hour, the faster that it can grow, the further that wages can rise without putting pressure on business costs per unit of output. Business cycle R79-3 Business cycles have four phases: trough\expansion\ peak\contraction  Tow consecutive quarters of growth in real GDP as the beginning of an expansion and two declining as the beginning of a contraction  Only applies to the economies that cosist of business, not the state-control and argicultural society R80-3 Inventory-sales ratio  经济扩张接近波峰时，sales增加放缓，unsold存货累积，从而inventory-sales ratio高于正常水平  存货增加无论是计划还是非计划都计入GDP  如果只看到GDP增加而没看到inventory-sales ratio增加，会错误认为GDP依然强劲而不是开始衰退, lagging indicator R81-3 NAIRU (non-accelerating inflation rate of unemployment)  It is the rate of unemployment at which inflationary pressures are stable, below which inflation would accelerate  Analysis in this area recognizes that not all labor is alike  Structural factors related to training deficiencies, cultural patterns in all or some of the population, inefficiencies in the labor market, and the like can mean that the economy will effectively face labor shortages long before the unemployment rate reaches very low figures. 189 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P29-3 解释经济周期的理论 Q135-3 The Austrian economic school attributes the primary cause of the business cycle to: (原版书R18-8) A. misguided government intervention. B. the creative destruction of technological progress. C. sticky price and wage expectations that exaggerate trends. Solution: A Austrian economists see monetary policy mistakes as leading to booms and busts. Q136-3 Which of the following is most consistent with real business cycle (RBC) models? The arguments and recommendations of RBC models suggest that:（2013 mock morning session） A. monetary variables have a major impact on GDP growth B. persons are unemployed because their asking wages are too high C. governments should intervene when the economy is in contraction Solution: B As suggested particularly by the earliest RBC models, a person is unemployed because he or she is asking for wages that are too high, or in other words, this person’s utility function is maximized by having more leisure (., free time to visit museums, watch games on TV, and enjoy time with friends) and less consumption (which could be increased by giving up some leisure and finding a job). R82-3 Theories of the business cycle  Neoclassical theory:强调技术进步会同时影响AD与AS, economy has strong tendency toward 充分就业均衡，该学派的结论是经济周期是长期均衡的暂时偏离  Keynesian cycle theory：投资的变动是由fluctuation in business confidence (animal spirits)，这是AD变化的主要原因。凯恩斯认为需要政府干预，新古典和货币主义认为不需政府干预  In contrast to the New Classical school the Neo-Keynesian school assumes slow-to-adjust (sticky) prices and wages. The Neo-Keynesian models show that markets do not reach equilibrium immediately and seamlessly, but even small imperfections may cause markets to be in disequilibrium for a long time.所以Neo-凯恩斯认为价格变化比新古典主义认为的更慢  New Keynesian cycle theory：工资是根据past rational expectation确定，所以unexpected and currently expected fluctuation in AD将使得经济周期出现。  New classical cycle theor（yRBC）：rational expectation of price level是由potential GDP and expected AD决定。Only unexpected fluctuation in AD将使得经济周期出现。  奥地利学派:Believe cycles are caused by government intervention in the economy  Monetarist cycle theory: fluctuations in both investment and consumption expenditure, driven by fluctuations in the growth rate of the quantity of money, are the main source of fluctuations in AD，将使得经济周期出现。 190 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P30-3 unempolyment Q137-3 The discouraged worker category is defined to include people who: A. are overqualified for their job. B. could look for a job but choose not to. C. currently look for work without finding it Solution: B Discouraged workers are defined as persons who have stopped looking for work and are outside the labor force. Q138-3 12. The factor for which it is most difficult to estimate its effect on the unemployment rate is: A. technological progress. B. the use of temporary workers. C. the nature of underemployment. Solution: A The impact of new technologies can be experienced over a period as long as decades, while unemployment is measured over a much shorter time frame. Q139-3 The following information has been gathered for a hypothetical economy:（mock 85） Total Population 1,100 Working Age Population 975 Labor Force 750 Underemployed 120 Unemployed 95 Discouraged workers 80 Frictionally Unemployed 25 Voluntarily Unemployed 40 The unemployment rate is closest to: A. %. B. %. C. %. Solution: B Unemployment rate = Unemployed / Labor force×100 = 95/750×100 = %. R83-3 Definiton  Employed: number of people with a job. This figure normally does not include people working in the informal sector (., unlicensed cab drivers, illegal workers, etc.).  Labor force: number of people who either have a job or are actively looking for a 191 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 job. This number excludes retirees, children, stay-at-home parents, fulltime students, and other categories of people who are neither employed nor actively seeking employment.  Unemployed: people who are actively seeking employment but are currently without a job. Some special subcategories include:  Long-term unemployed: people who have been out of work for a long time (more than 3-4 months in many countries) but are still looking for a job.  Frictionally unemployed: people who are not working at the time of filling out the statistical survey because they just left one job and are about to start another job. That is, the frictionally unemployed have a job waiting for them and are not 100 percent unemployed—it is just that they have not started the new job yet.  Unemployment rate: ratio of unemployed to labor force. unemployment ratenumber of unemployedforce 100 υlabor  Activity (or participation) ratio: ratio of labor force to total population of working age (., those between 16 and 64 years of age). labor force participation rate=Wlabor forceork100ing age population υ Underemployed: person who has a job but has the qualifications to work a significantly higher-paying job. For example, a lawyer who is out of work and takes a job in a bookstore could call herself underemployed. This lawyer would count as employed for the computation of the unemployment rate (she does have a job, even if it may not be her highest paying job). Although the unemployment rate statistic is criticized for not taking the issue of underemployment into account, it may be difficult to classify whether a person is truly underemployed—for example, the lawyer may find legal work too stressful and prefers working at the bookstore. However, data for part-time working is sometimes a good proxy.  Discouraged worker: person who has stopped looking for a job. Perhaps because of a weak economy, the discouraged worker has given up seeking employment. Discouraged workers are statistically outside the labor force (similar to children and retirees), which means they are not counted in theofficial unemployment rate. During bad recessions, the unemployment rate may actually decrease because many discouraged workers stop seeking work, such as stay-at-home mothers who ideally would prefer to work. It is important to observe the participation rate together with the unemployment rate to understand if unemployment is decreasing because of an improved economy or because of an increase in discouraged workers. Discouraged workers and underemployed people may be considered examples of "hidden unemployment."  Voluntarily unemployed: person voluntarily outside the labor force, such as a jobless worker refusing an available vacancy for which the wage is lower than their threshold or those who retired early. 192 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P31-3 inflation Q140-3 Which of the following can lead to demand-pull inflation? A. An increase in exports. B. A decrease in government expenditures. C. An increase in the prices of raw materials. Solution: A An increase in exports reflects an increase in aggregate demand that causes inflation. Q141-3 ★★An analyst gathered the following year-end price level data for an economy: Year End Price Level 2000 2004 2005 The economy's annual inflation rate for 2005 and the compounded annual inflation rate for the 2000-2005 period are closest to: 2005 Inflation 2000-2005 Inflation A % % B % % C % % Solution: A Inflation for 2005 = ( — 1 = — 1 = % or ( — )/ = %. The compound annual inflation for 2000-2005 is found using a financial calculator. Inputs are PV = , FV= , N = 5, PMT = 0, and compute I/ Y = %. Q142-3 ★The least likely consequence of a period of hyperinflation is the: (原版书R18-16) A. reduced velocity of money. B. increased supply of money. C. possibility of social unrest. Solution: A In hyperinflation, consumers accelerate their spending to beat price increases and money circulates more rapidly. Q143-3 The term that describes when inflation declines but nonetheless remains at a positive level is: (原版书R18-14) A. deflation. B. stagflation. C. disinflation. 193 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C Disinflation is known as a reduction of inflation from a higher to lower, but still above zero, level. Q144-3 The category of persons who would most likely be harmed by an increase in the rate of inflation is: (原版书R18-13) A. homeowners with fixed 30-year mortgages. B. retirees relying on a fixed annuity payment. C. workers employed under contracts with escalator clauses. Solution: B With inflation, a fixed amount of money buys fewer goods and services, thus reducing purchasing power. Q145-3 An economic peak is most closely associated with: (原版书R18-4) A. accelerating inflation. B. stable unemployment. C. declining capital spending. Solution: A Inflation is rising at peaks. Q146-3 Demand-pull inflation is least likely a result of the increase of A. Export B. money wage rate C. quantity of money Solution: B Demand pull inflation result from an increase in the money supply, increased government spending, or any other cause that increases aggregate demand. The following information Exhibit 1 relates to two folloing questions Date November 2010 December 2010 Goods Quantity Price Quantity Price Sugar 70kg € 120kg € Cotton 60kg € 50kg € Q147-3 For the December consumption basket in Exhibit 1, the value of the Paasche index is closest to: (原版书R18-18) A. 116. B. 148. C. 160. Solution: A 194 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The Paasche index uses the current product mix of consumption combined with the variation of prices. So for December, its value is: (120 X 1 + 50 X )/ (120 X + 50 x ) =- (160/138) X 100= Q148-3 The price index that best resolves the substitution bias is the:（MOCK92-42） A. Fisher index. B. Paasche index . C. Laspeyres index. Solution: A A is correct. Both the Laspeyres index and the Paasche index ignore the substitution effect whereby people may substitute higher-priced goods or services with cheaper ones. This situation causes the Laspeyres index (which uses the historical composition of a basket of goods ) to be upward biased relative to the true inflation rate , while the Paasche index ( which uses the current composition of the basket with cheaper options replacing more expensive ones ) is downward biased relative to the true inflation rate . The Fisher index is a geometric mean of the Laspeyres and Paasche indices, and it will, therefore , display less of a substitution bias than the other two . Q149-3 ★Assuming the base period for 2010 consumption is November and the initial price index is set at 100, then the inflation rate after calculating the December price index as a Laspeyres index is closest to: (原版书R18-17) A. %. B. %. C. %. Solution: A The Laspeyres index is calculated with these inputs: I.-  November consumption bundle: 70 X + 60 X = 99  December consumption bundle: 70 X 1 + 60 X = 118 IN.  December price index: (118/99) X 100 =  Inflation rate: ( — 1 = = % Q150-3 A new technology that reduces employee illness will most likely decrease: (2014 Mock 99-40) A. demand-pull inflation. B. cost-push inflation. C. cost-pull inflation. Solution: B By reducing employee illness, the new technology will increase the output per hour per worker, which will decrease the unit labor cost. As the unit labor cost decreases, cost-push inflation decreases. The technology does not affect demand and accordingly should not affect demand-pull inflation. 195 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Inflation R84-3 Inflation rate  Inflation rate = [(Current CPI - year-ago CPI) / year - ago CPI] * 100  CPI = (cost of basket at current prices / cost of basket at base period prices) * 100  Core inflation:价格指数计算中剔除了食品与能源，因此更好的反映价格变化趋势 R85-3 Laspeyres index  uses a constant basket of goods and services ,most countries calculate consumer price inflation this way  Three factors cause a Laspeyres index of consumer prices to be biased upward as a measure of the cost of living: new goods, quality changes, commodity substitution R86-3 Paasche index  A Paasche index uses the current consumption weights, prices from the base period, and prices in the current period. R87-3 Fisher index.  A Fisher index the geometric mean of a Laspeyres index and a Paasche index  IndexFisher=(IP*I1/2L)  can solve the subsititution bias. R88-3 Hedonic pricing  can be used to adjust a price index for product quality. R89-3 Inflation  Demand-pull inflation: (1) increase in the quantity of money, (2) Increase in government purchases. (3)Increase in exports.  Cost-push inflation: (1)increase in money wage rates. (2) increase in the money prices of raw materials  non-accelerating inflation rate of unemployment (NAIRU), also called the natural rate of unemployment P32-3 Indicators Q151-3 Which of the following statements is the best description of the characteristics of economic indicators? (原版书R18-23) A. Leading indicators are important because they track the entire economy. B. Lagging indicators in measuring past conditions do not require revisions. C. A combination of leading and coincident indicators can offer effective forecasts. Solution: C Although no single indicator is definitive, a mix of them—which can be affected by various economic determinants—can offer the strongest signal of performance. Q152-3 The characteristic of national consumer price indexes which is most typically shared across major economies worldwide is: A. the geographic areas covered in their surveys. B. the weights they place on covered goods and services. 196 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. their use in the determination of macroeconomic policy Solution: C Central banks typically use consumer price indexes to monitor inflation and evaluate their monetary policies. Q153-3 When the spread between 10-year . Treasury yields and the federal funds rate narrows and at the same time the prime rate stays unchanged, this mix of indicators most likely forecasts future economic: (原版书R18-24) A. growth. B. decline. C. stability. Solution: B The narrowing spread of this leading indicator foretells a drop in short-term rates and a fall in economic activity. The prime rate is a lagging indicator and typically moves after the economy turns. Q154-3 Of the following statements regarding the Producer Price Index (PPI), which is the least likely? The PPI: (原版书R18-20) A. can influence the future CPI. B. category weights can vary more widely than analogous CPI terms. C. is used more frequently than CPI as a benchmark for adjusting labor contract payments. Solution: C The CPI is typically used for this purpose, while the PPI is more closely connected to business contracts. Q155-3 The unemployment rate is considered a lagging indicator because: A. new job types must be defined to count their workers. B. multi-worker households change jobs at a slower pace. C. businesses are slow to hire and fire due to related costs. Solution: C This effect makes unemployment rise more slowly as recessions start and fall more slowly as recoveries begin. Q156-3 Which of the following would be most useful as a leading indicator to signal the start of an economic recovery? （Mock 89-43） A. An increase in aggregate real personal incomes (less transfer payments). B. A decrease in average weekly initial claims for unemployment insurance. C. The narrowing of the spread between the 10-year Treasury yield and the federal funds rate. Solution: B 197 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Average weekly initial claims for unemployment insurance are a leading indicator of economic activity and a decline is an indicator of rehiring at the start of a recovery. R90-3 先行，同步与滞后经济指标 Leading indicators Reason Average weekly hours, Because businesses will cut overtime before laying off workers manufacturing in a downturn and increase it before rehiring in a cyclical upturn, these measures move up and down before the gene l economy. Average weekly initial claims This measure offers a very sensitive test of initial layoffs and for unemployment insurance rehiring Manufacturers' new orders Because businesses cannot wait too long to meet demands for for consumer goods and consumer goods or materials without ordering, these gauges materials tend to lead at upturns and downturns. Indirectly, they capture changes in business sentiment as well, which also often leads the cycle. Vendor performance, slower By measuring the speed at which businesses can complete and deliveries diffusion index deliver an order, this gauge offers a clear signal of unfolding demands on businesses. Manufacturers' new orders In addition to offering a first signal of movement, up or down, in for non-defense capital goods an important economic sector, movement in this area also indirectly captures business expectations. Building permits for new Because most localities require permits before new building can private housing units begin, this gauge foretells new construction activity. S&P 500 Stock Index Because stock prices anticipate economic turning points, both up and down, their movements offer a useful early signal on economic cycles. Money supply, real M2 Because money supply growth measures the tightness or looseness of monetary policy, increases in money beyond inflation indicate easy monetary conditions and a positive economic response, whereas declines in real M2 indicate monetary restraint and a negative economic response. Interest rate spread Because long-term yields express market expectations about the between 10-year treasury direction of short-term interest rates, and rates ultimately follow yields and overnight the economic cycle up and down, a wider spread, by borrowing rates (federal anticipating short rate increases, also anticipates an economic funds rate) upswing. Conversely, a narrower spread, by anticipating short rate decreases, also anticipates an economic downturn. Index of Consumer Because the consumer is about two-thirds of the . economy Expectations, University of and will spend more or less freely according to his or her Michigan expectations, this gauge offers early insight into future consumer spending and consequently directions in the whole economy. 198 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Coincident indicators Reason Employees on Once recession or recovery is clear, businesses adjust their non-agricultural payrolls fulltime payrolls. Aggregate real personal By measuring the income flow from non-corporate profits and income wages, this measure captures the current state of the economy. (less transfer payments) Industrial Production Index Measures industrial output, thus capturing the behavior of the most volatile part of the economy. The service sector tends to be more stable. Manufacturing and trade sales In the same way as aggregate personal income and the industrial production index, this aggregate offers a measure of the current state of business activity. Lagging indicators Reason Average Duration of Because businesses wait until downturns look genuine to lay off, Unemployment and wait until recoveries look secure to rehire, this measure is important because it lags the cycle on both the way down and the way up. Inventory—sales ratio Because inventories accumulate as sales initially decline and then, once a business adjusts its ordering, become depleted as sales pick up, this ratio tends to lag the cycle. Change in unit labor costs Because businesses are slow to fire workers, these costs tend to 经济衰退初期，单位产品的rise into the early stages of recession as the existing workforce is 劳动成本上升 used less intensely. 经济复苏后期，单位产品的Late in the recovery when the labor market gets tight, upward 劳动成本上升 pressure on wages can also raise such costs. In both cases, there is a clear lag at cyclical turns. Average bank prime lending Because this is a bank administered rate, it tends to lag other rate rates that move either before cyclical turns or with them. Commercial and industrial Because these loans frequently support inventory building, they loans outstanding lag the cycle for much the same reason that the inventory—sales ratio does. Ratio of consumer installment Because consumers only borrow heavily when confident, this debt to income measure lags the cyclical upturn, but debt also overstays cyclical downturns because households have trouble adjusting to income losses, causing it to lag in the downturn. Change in consumer price Inflation generally adjusts to the cycle late, especially the more index for services stable services area Diffusion Index  diffusion index reflects the proportion of the index's components that are moving in a pattern consistent with the overall index.  a measure of the breadth of the change in a composite index. 199 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  In general, a diffusion index does not reflect outliers in any component (like a straight arithmetic mean would do) but instead tries to capture the overall change common to all components. P33-3 Money supply and money demand Q157-3 The proposition that the real interest rate is relatively stable is most closely associated with: (原版书R19-7) A. the Fisher effect. B. money neutrality. C. the quantity theory of money. Solution: A The Fisher effect is based on the idea that the real interest rate is relatively stable. Changes in the nominal interest rate result from changes in expected inflation. Q158-3 Which is the most accurate statement regarding the demand for money? A. Precautionary money demand is directly related to GDP. B. Transactions money demand is inversely related to returns on bonds. C. Speculative demand is inversely related to the perceived risk of other assets. Solution: A Precautionary money demand is directly related to GDP. Precautionary money balances are held to provide a buffer against unforeseen events that might require money. Precautionary balances tend to rise with the volume and value of transactions in the economy, and therefore rise with GDP. Q159-3 A development country that maintains a fixed value for its currency relative to the . dollar is experiencing a decline in its economic activity, and its inflation rate falls below the Ievel in the United States. As a result of the developing country‘s actions to maintain the fixed exchange rate target, its :（MOCK92-43） A. money supply will contract. B. short-term interest rates will fall. C. foreign exchange reserves will decrease. Solution: B B is correct. With a decline in economic activity and domestic inflation, the currency of the developing country would start to rise against the dollar. To protect the exchange rate target, the developing country‘s monetary authority Will purchase foreign exchange reserves and Sell its own currency. This action will increase the domestic money supply and decrease short-term interest rates. 200 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R91-3 Money has three basic functions:  Medium of exchange -facilitates transactions (liquidity). (2)Unit of account- used to quote prices. (2) Store of value- transfer purchasing power to future R92-3 Money Creation:  （r: the required reserve ratio） Potent1ial deposit expansion multiplier=r Fed definition: based on spendiabiliyt. M1 includes all currency not held at banks, travelers’ checks, and checking account deposits of individuals and firms (but not government checking accounts); M2 includes all the components of M1, plus time deposits, savings deposits, and money market mutual and fund balances. R93-3 货币数量论  Money supply × Velocity= GDP = Price × Real output Monetarists believed that money supply should be increased only at the growth rate of real output to stabilize price level. R94-3 货币需求：  Transaction demand：与real GDP 正相关  Precautionary demand与real GDP 正相关  Speculative demand It is inversely related to returns available in the market（(risk higher, higher cash 即与风险正相关) R95-3 Fisher effect  RNom R Real+ E I> ≅R96-3 Cost of inflation  Perfectly anticipated: The prices of all goods and wages could be indexed to this inflation rate. Increased demand  price increases more; decreased demand  price increases less.  One effect of high inflation: the cost of holding money rather than interest-bearing securities is higher  decrease the quantity of money that people willingly hold and impose some costs of more frequent movement of money from interest-bearing securities to cash  Unanticipated inflation:  Inflation > expected, borrowers gain  Inflation < expected, lenders gain  volatile inflation rates, lenders require higher interest rates  information about supply and demand from changes in prices becomes less reliable.  destabilizing effects: unexpected inflation can increase the magnitude or frequency of business cycles, impose real costs on an economy. R97-3 Inflation targeting  most common is 2%, with a permitted deviation of ± 1 %  Why not targeting 0%? Because variations would allow for negative inflation, which is considered disruptive to the smooth functioning of an economy.  Central banks are not necessarily targeting current inflation, which is the result of prior 201 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 policy and events, but inflation in the range of two years in the future. R98-3 Interest rate targeting  In the past, some have used interest rate targeting, increasing the money supply when specific interest rates rose above the target band and decreasing the money supply when rates fell below the target band. R99-3 Exchange rate targeting  Many developing economies choose to operate monetary policy by targeting their currency's exchange rate.  Such targeting involves setting a fixed level or band of values for the exchange rate against a major currency, with the central bank supporting the target by buying and selling the national currency in foreign exchange markets.  By tying a domestic currency to that of an economy with a good track record on inflation, the domestic economy would effectively "import" the inflation of the foreign economy.  Result: Interest rates and conditions in the domestic economy must adapt to accommodate the target and domestic interest rates and money supply can become more volatile.  Limitations: a country may run out of foreign reserves with which to purchase its currency when the exchange value of its currency is still below the target exchange rate  Net effect:  the targeting country will have the same inflation rate as the targeted currency  the targeting country will need to follow monetary policy and accept interest rates that are consistent with this goal, regardless of domestic economic circumstances. P34-3 Central bank Q160-3 Which role is a central bank least likely to assume? (原版书R19-11) A. Lender of last resort. B. Sole supervisor of banks. C. Supplier of the currency. Solution: B The supervision of banks is not a role that all central banks assume. When it is a central bank's role, responsibility may be shared with one or more entities. Q161-3 In theory, setting the policy rate equal to the neutral interest rate should promote: (原版书R19-18) A. stable inflation. B. balanced budgets. C. greater employment. Solution: A The neutral rate of interest is that rate of interest that neither stimulates nor slows down the 202 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 underlying economy. The neutral rate should be consistent with stable long-run inflation. Q162-3 Which action is a central bank least likely to take if it wants to encourage businesses and households to borrow for investment and consumption purposes? (原版书R19-14) A. Sell long-dated government securities. B. Purchase long-dated government treasuries. C. Purchase mortgage bonds or other securities. Solution: A Such action would tend to constrict the money supply and increase interest rates, all else equal. Q163-3 Which of the following is a limitation on the ability of central banks to stimulate growth in periods of deflation? (原版书R19-21) A. Ricardian equivalence. B. The interaction of monetary and fiscal policy. C. The fact that interest rates have a minimum value (0%). Solution: C Deflation poses a challenge to conventional monetary policy because once the central bank has cut nominal interest rates to zero to stimulate the economy, they cannot cut them further. Q164-3 A central bank that decides the desired levels of interest rates and inflation and the horizon over which the inflation objective is to be achieved is most accurately described as being: (原版书R19-15) A. target independent and operationally independent. B. target independent but not operationally independent. C. operationally independent but not target independent. Solution: A The central bank described is target independent because it set its own targets (., the target inflation rate) and operationally independent because it decides how to achieve its targets (., the time horizon). 中央银行的作用，政策目标，与政策工具 R100-3 Role of central bank:  Sole supplier of currency (发行货币)  Banker to the government and other banks （最终贷款）  Lender of last resort  Supervise banks (监管)  Holder of gold and foreign exchange reserves  Conductor of monetary policy R101-3 Central banks manage money supply in order to  Maintain price stability 203 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Promote full employment  Maximum sustainable long-term growth of the economy  Moderate long-term interest rate R102-3 Three Policy Tools of the central bank  required reserve ratio: most powerful tool  open market operations: most frequently used tool  discount rate ：央行处于被动地位 R103-3 Central bank should be:  Independent:  operational independence: allowed to independently determine the policy rate  target independence: central bank definec how inflation is computed, sets the target infaltion level, and determines the time horizon to achieve  ECB has both, while most central banks have only operational independence.  Credible: too much debt leads to incredible; self-fulling prophecies  Transparent P35-3 Monetary policy Q165-3 A country that maintains a target exchange rate is most likely to have which outcome when its inflation rate rises above the level of the inflation rate in the target country? (原版书R19-16) A. An increase in short-term interest rates. B. An increase in the domestic money supply. C. An increase in its foreign currency reserves. Solution: A Interest rates are expected to rise to protect the exchange rate target. Q166-3 The least likely limitation to the effectiveness of monetary policy is that central banks cannot: (原版书R19-22) A. accurately determine the neutral rate of interest. B. regulate the willingness of financial institutions to lend. C. control amounts that economic agents deposit into banks. Solution: A The inability to determine exactly the neutral rate of interest does not necessarily limit the power of monetary policy. Q167-3 The current situation is as follows: Real trend rate=2% Current inflation rate=3% Long-run Expected inflation =2% If the policy rate is 5%, which type of monetary policy is it?（2012年12月考题回顾） A. Expansionary 204 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. Contractionary C. Neutral Solution: B Neutral rate = real trend rate + long-run expected inflation (target inflation rate)= 2% + 2% = 4% The central bank’s monetary policy is being contractionary when its policy rate is above 4%. Q168-3 The primary monetary policy goal of most major central banks is best characterized as: A. containing inflation. B. stimulating economic growth. C. maintaining low interest rates. Solution: A Most major central banks’ primary monetary policy goal is to contain inflation. Q169-3 According to the traditional theory，which is more difficult to control between inflation and deflation?（2012年12月考题回顾） A. inflation B. deflation C. the same Solution: B If the deflation is mindset and interest rate decrease to zero, the money expansion will not take effect because the increase can’t decrease further. Q170-3 As a monetary policy tool, quantitative easing (QE) will most likely help revive an ailing economy in which of the following environments?（2013 mock afternoon session） A. Liquidity trap B. Deflationary trap C. Declining bank reserves and economic activity Solution: C Quantitative easing (QE) is an “unconventional” approach to monetary policy and is operationally similar to open market purchase operations but conducted on a much larger scale. The additional reserves created by central banks in a policy of quantitative easing can be used to buy any asset. The idea was that this additional reserve would kick-start lending, causing broad money growth to expand, which would eventually lead to an increase in real economic activity. 货币政策传导机制 R104-3 Money Supply在长期和短期对经济的影响：  In the short run, decrease (increase) in the equilibrium interest rate from increase (decrease) in the money supply will increase (decrease) aggregate demand, which will increase (decrease) real GDP and the price level. 205 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R105-3 In the long run, money supply growth has no effect on real GDP and, as the quantity theory of money suggests, increases in the money supply, when the economy is operating at potential (full-employment) GDP, will lead to a proportional increase in prices R106-3 Monetary policy’s transmission mechanism:  了解FFR的变化如何影响整个经济：Rate↓ → Domestic currency depreciate↓ → Net exports(NX)↑ → More investment↑ → Purchase of goods (consume)↑ → Aggregate demand↑ → Price, real GDP↑ R107-3 The transmission mechanism for a decrease in interbank lending rates affects four things simultaneously:  Market rates decrease due to banks adjusting their lending rates for the short and long term.  Asset prices increase because lower discount rates are used for computing present values.  Firms and individuals raise their expectations for economic growth and profitability. They may also expect the central bank to follow up with further interest rate decreases.  The domestic currency depreciates due to an outflow of foreign money as real interest rates decline R108-3 Neutral rate of interest：the rate that neither spurs on nor slows down the underlying economy  Neutral rate=Trend growth + Inflation target  Policy rate> Neutral rate: contractionary  Policy rate< Neutral rate: expansionary R109-3 Limitation of money policy  如果公众相信央行通过降低MS以试图降低通胀是成功的，就会预期未来通胀率将会下降，那么长期利率将会下降；  但是，尽管央行想通过提高短期利率来降低经济活力，如果公众认为会造成经济衰退，公众都会去购买长期国债，将使得长期债券的价格上升，长期利率下降，货币政策失效；  流动性陷阱：如果央行试图通过增加货币供给降低利率来治理通货紧缩，但是，公众会完全吸收新增的货币供给，对利率水平根本没有影响。特别是，在通货紧缩的前提下，利率水平已经达到零。  结论是，对于央行的扩张政策，公众和金融机构完全吸收其流动性，则货币政策失效。 P36-3 Fiscal policy Q171-3 Which statement regarding fiscal policy is most accurate? (原版书R19-26) A. To raise business capital spending, personal income taxes should be reduced. B. Cyclically adjusted budget deficits are appropriate indicators of fiscal policy. C. An increase in the budget surplus is associated with expansionary fiscal policy. Solution: B 206 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Cyclically adjusted budget deficits are appropriate indicators of fiscal policy. These are defined as the deficit that would exist if the economy was at full employment (or full potential output). Q172-3 The least likely explanation for why fiscal policy cannot stabilize aggregate demand completely is that: (原版书R19-27) A. private sector behavior changes over time. B. policy changes are implemented very quickly. C. fiscal policy focuses more on inflation than on unemployment. Solution: B Fiscal policy is subject to recognition, action, and impact lags. Q173-3 Both indirect tax and direct tax are revenue tools of govement, which of them could be implementated quickly so that government revenues can be increased without significant additional costs?（2012年6月考题回顾） A. indirect tax B. direct tax C. both Solution: A Quick implementation of indirect taxes also means that government revenues can be increased without significant additional costs. Direct taxes and transfer payments take time to implement, delaying the impact of fiscal policy. 财政政策工具 R110-3 Fiscal Policy Tools: Spending Tools, Revenue Tools & Desirable attributes of tax policy R111-3 Spending Tools:  Transfer payments: redistribute wealth, taxing some and making payments to others, transfer payments are not included in GDP computations.  Current spending:government purchases of goods and services on an ongoing and routine basis.  Capital spending: government spending on infrastructure such as roads, schools, bridges, and hospitals R112-3 Revenue Tools  Direct taxes are levied on income or wealth. These include income taxes, taxes on income for national insurance, wealth taxes, estate taxes, corporate taxes, capital gains taxes, and Social Security taxes  Indirect taxes are levied on goods and services. These include sales taxes, value-added taxes (VATs), and excise taxes.  间接税的执行速度较快 R113-3 Advantages of fiscal policy tools  Social policies such as discouraging tobacco use can be implemented very quickly via indirect taxes 207 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Quick implementation of indirect taxes also means that government revenues can be increased without significant additional costs R114-3 Disadvantages of fiscal policy tools  Direct taxes and transfer payments take time to implement, delaying the impact of fiscal policy  Capital spending also takes a long time to implement. The economy may have recovered by the time its impact is felt. P37-3 Effect of fiscal policy Q174-3 ★★In an economy, consumption is 70% of pre-tax income and the average tax rate is 25% of total income. If planned government expenditures are expected to increase by $ billion, the increase in total incomes and spending, in billions, is closest to: A. $. B. $. C. $. Solution: C Explain the implementation of fiscal policy and the difficulties of implementation. The fiscal multiplier is 1/[1-c(1-T)] where c marginal propensity to consume = consumption ÷ disposable income T the tax rate Assuming pre-tax income of $100 Disposable income $100×()=$75 Marginal propensity to consume $70÷$75= The fiscal multiplier 1÷[×()]= With government expenditure of $ Billion, total incomes and spending will rise by $ Billion×=$ Billion N otes∋C: MPC is ba s0ed disposaYble in,com∋e. I ∋NX 0∋ 简 便方∋Y法： C ∋I G∋ N X ∋0 .7 Y∋G ∋ ∋ Y∋ G ∋ 10 Y∋ G, G∋$ 1∋.25 b illion3 Y∋$ 4. 2 billion 财政政策实施 R115-3 Fiscal multiplier: ,MPC: 边际消费倾向 Fiscal multiplier = 1 MP1C(1-t)R116-3 The balance budget multiplier, KB YT∋ 11 b∋ b(1t) 208 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R117-3 Debt ratio: Aggregate debt to GDP  If the real interest rate on the government's debt is higher than the real growth rate of the economy, then the debt ratio will increase over time  debt ratio衡量的是政府的赤字规模 R118-3 Discretionary fiscal policy：refers to government spending and taxing decisions designed to stabilize the economy.  Crowding-out effect: Deficit→increase real interest→decrease Private investment.  Limitation: (1) Recognition lag (The forecast may be wrong), (2) Action lag, (3) Impact lag R119-3 Interaction of monetary and fiscal policies Monetary Fiscal Interest rate output Private Public policy policy spending spending Tight Tight higher lower lower lower Easy Easy lower higher higher highe r Tight Easy higher higher lower higher Easy Tight lower varies higher lower P38-3 GDP和GNP Q175-3 The income from a financial investment in Country P by a citizen of Country Q is most likely included in:（Notes R20-1） A. Country P's GDP but not its GNP. B. Country Q's GNP and GDP. C. Country P's GOP and GNP Solution: A The income from a financial investment in Country P of a citizen of Country Q is included in Country P's GDP but not its GNP. It is included in Country Q's GNP but not its GDP. GDP和GNP R120-3 GDP measures the market value of all final goods and services produced by factors of production located within a country/economy during a given period of time, generally a year or a quarter.  GNP measures the market value of all final goods and services produced by factors of production supplied by residents of a country, regardless of whether such production takes place within the country or outside of the country.  Difference  GDP includes, and GNP excludes, the production of goods and services or income to capital owned by foreigners within that country.  GNP includes, and GDP excludes, the production of goods and services or income 209 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 to capital owned by its citizens outside of the country.  GDP is more closely related to economic activity within a country and so to its employment and growth. P39-3 比较优势 Q176-3 In the Ricardian trade model, a country captures more of the gains from trade if: (原版书R20-8) A. it produces all products while its trade partner specializes in one good. B. the terms of trade are closer to its autarkic prices than to its partner's autarkic prices. C. the terms of trade are closer to its partner's autarkic prices than to its autarkic prices. Solution: C A country gains if trade increases the price of its exports relative to its imports as compared to its autarkic prices, . the final terms of trade are more favorable than its autarkic prices. If the relative price of exports and imports remains the same after trade opens, then the country will consume the same basket of goods before and after trade opens, and it gains nothing from the ability to trade. In that case, its trade partner will capture all of the gains. Of course, the opposite is true if the roles are reversed. More generally, a country captures more of the gains from trade the more the final terms of trade differ from its autarkic prices. Q177-3 According to the Heckscher-Ohlin model, when trade opens: (原版书R19-10) A. the scarce factor gains relative to the abundant factor in each country. B. the abundant factor gains relative to the scarce factor in each country. C. income is redistributed between countries but not within each country. Solution: B As a country opens up to trade, it has a favorable impact on the abundant factor, and a negative impact on the scarce factor. This is because trade causes the output mix to change and therefore changes the relative demand for the factors of production. Increased output of the export product increases demand for the factor that is used intensively in its production, while reduced output of the import product decreases demand for the factor used intensively in its production. Because the export (import) product uses the abundant (scarce) factor intensively, the abundant factor gains relative to the scarce factor in each country. Q178-3 Which of the following statements best describes the costs of international trade? (原版书R19-2) A. Countries without an absolute advantage in producing a good cannot benefit significantly from international trade. B. Resources may need to he allocated into or out of an industry and less-efficient companies may be forced to exit an industry, which in turn may lead to higher unemployment. C. Loss of manufacturing jobs in developed countries as a result of import competition means that developed countries benefit far less than developing countries from trade 210 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B Resources may need to be reallocated into or out of an industry, depending on whether that industry is an exporting sector or an import-competing sector of that economy. As a result of this adjustment process, less-efficient companies may be forced to exit the industry, which in turn may lead to higher unemployment and the need for retraining in order for displaced workers to find jobs in expanding industries. Q179-3 Suppose Mexico exports vegetables to Brazil and imports flashlights used for mining from Brazil. The output per worker per day in each country is as follows: (原版书R19-5) Flashlights Vegetables Mexico 20 60 Brazil 40 80 Which country has a comparative advantage in the production of vegetables and what is the most relevant opportunity cost? A. Brazil: 2 vegetables per flashlight. B. Mexico: vegetables per flashlight. C. Mexico: 1/3 flashlight per vegetable. Solution: C While Brazil has an absolute advantage in the production of both flashlights and vegetables, Mexico has a comparative advantage in the production of vegetables. The opportunity cost of vegetables in Mexico is 1/3 per flashlight, while the opportunity cost of vegetables in Brazil is 1/2 per flashlight. Q180-3 In the Ricardian trade model, comparative advantage is determined by: (原版书R20-7) A. technology. B. the capital-to-labor ratio. C. the level of labor productivity. Solution: A In the Ricardian model, comparative advantage is determined by technology differences between countries. Technology determines output per worker in each industry in each country. Differences in technology between countries cause output per worker in each industry to differ between countries. These ratios determine the pattern of comparative advantage. Q181-3 Consider two countries, A and B. Country A is a closed country with a relative abundance of labor and holds a comparative advantage in the production of textiles. Country B has a relative abundance of capital. When the textile trade is opened between the two countries, Country A will most likely experience a favorable impact on: （MOCK84-42） A. labor. B. capital. C. both capital and labor. 211 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A As a country opens up to trade, the benefit accrues to the abundant factor, which is labor in Country A. 比较优势 R121-3 Absolute advantage & Comparative advantage  Absolute advantage refers to the lower absolute cost to produce a product.  Comparative advantage refers to the lower opportunity cost to produce a product  The law of comparative advantage holds that trading partners can be made better off if they specialize in the production of goods for which they are the low-opportunity cost producer and trade for those goods for which they are the high-opportunity cost producer. R122-3 产生比较优势的原因  Ricardian model: comparative advantage and pattern of trade are determined by differences in technology between countries.（技术差异）  Heckscher-Ohlin model: comparative advantage and pattern of trade are determined by differences in factor (factor & labor) endowments between countries. （生产要素禀赋区别）  A country has a comparative advantage in goods whose production is intensive in the factor with which it is relatively abundantly endowed, and would tend to specialize in and export that good.  Capital is relatively more (less) abundant in a country if the ratio of its endowment of capital to labor is greater (less) than that of its trading partner.  A country having relatively abundant labor would export relatively labor-intensive goods and import relatively capital-intensive goods.  It allows the possibility of income redistribution through trade：1）The price of the relatively less scare (more available) factor of production in each country will increase. 2）The good that a country imports will fall in price P40-3 Trade barrier Q182-3 Assuming its trading partner does not retaliate, which of the following conditions must hold in order for a large country to increase its national welfare by imposing a tariff? （MOCK83-42） A. It must have a comparative advantage in the production of the imported good. B. The deadweight loss must be smaller than the benefit of its improving terms of trade. C. It must auction the import licenses for a fee to offset the decline in the consumer surplus. Solution: B The large country is able to cause the foreign exporter to reduce price in order to retain market share. In the large country, domestic producers gain from higher volume and the government gains from collecting the tariff. The sum of these two gains must exceed the deadweight loss to domestic consumers to achieve a national welfare gain. The change in terms of trade causes income redistribution from the foreign exporter to the domestic producer 212 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q183-3 Four countries operate within a customs union. One country proposes moving to a common market structure. What additional level of economic integration between the countries would most likely arise if this change took place? They would:（MOCK84-43） A. establish common trade barriers against non-members. B. begin to allow free movement of the factors of production. C. establish common economic institutions and coordination of economic policies Solution:B A common market structure incorporates all aspects of the customs union and extends it by allowing free movement of factors of production among members. Q184-3 A large country can: (原版书R19-13) A. benefit by imposing a tariff. B. benefit with an export subsidy. C. not benefit from any trade restriction. Solution:A. By definition, a large country is big enough to affect the world price of its imports and exports. A large country can benefit by imposing a tariff if its terms of trade improve by enough to outweigh the welfare loss arising from inefficient allocation of resources. Q185-3 Which of the following trade restrictions is likely to result in the greatest welfare loss for the importing country? (原版书R19-12) A. A tariff. B. An import quota. C. A voluntary export restraint. Solution:A. With a voluntary export restraint, the price increase induced by restricting the quantity of imports (= quota rent for equivalent quota = tariff revenue for equivalent tariff) accrues to foreign exporters and/or the foreign government. 贸易壁垒 R123-3 Trade restrictions  prevent free flow of goods and services among countries  reasons of trade barriers:Protecting infant industry, National security, Protecting domestic jobs, Protecting domestic industries R124-3 关税使得政府收入增加。如果政府卖出进口配额，则政府收入增加；如果进口配额被进口国厂商直接获取，政府收入不会增加。  关税和进口配额对福利的影响是一样的：  对于小国来说，福利会减少。  而对于大国来说，福利可能会增加，因为大国能影响世界价格，迫使出口国 213 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 （小国）降价。世界价格下降带来的影响是收入从出口国到进口国的再分配。但是这基于两个假设条件：贸易对手不报复；产生的DWL小于改善terms of trade带来的好处  出口补贴会减少福利，但大国的福利减少更多，因为  In small country case, price rises in domestic market by the amount of subsidy.  In large country case, world price declines as the large country increases exports.  In both small and large country case, the net welfare will decrease, but with a larger decline in large country case. Because in large country case, the decline in world price implies that a part of subsidy is transferred to the foreign country (Importer), unlike the small country case.  自动出口限制：对于政府是没有影响的。 Tariff Import Quota Export Subsidy VER ImpaImporting ct on Importingcoun countryExporting Importing ty country country Producer surplus Increases Increases Increases Increases Consumer surpluDecreases Decreases Decreases Decreases s Mixed (depends on whether the quota rents Government are captured byFalls the No c(governmenhange (rent t revenueIncreases importing country through to foreigners) spending rises) sale of licenses or by the exporters) Decreases in Small country Decreases in small country Decreases Na (a larger decline tional welfare Could increase Could increase in large in largeDecreases in large country country) country R125-3 Types of trade restrictions: tariffs, quotas, export subsidy voluntary export restraint,minimum domestic content  Domestic (importing) country, import quotas, tariffs, and VERs的效应:  Reduce imports.  Increase price.  Decrease consumer surplus.  Increase domestic quantity supplied.  Increase producer surplus. R126-3 Capital restriction  Place control on foreigners’ ability to own domestic assets and/or control on domestic residents’ ability to own foreign assets  Capital restriction: limit openness of financial market  Trade restriction: limit openness of goods market P41-3 BOP Q186-3 A country with a persistent trade surplus is being pressured to let its currency appreciate. Which of the following best describes the adjustment that must occur if currency 214 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 appreciation is to be effective in reducing the trade surplus? （原版书R21-21） A. Domestic investment must decline relative to saving. B. Foreigners must increase investment relative to saving. C. Global capital flows must shift toward the domestic market. Solution:C The trade surplus cannot decline unless the capital account deficit also declines. Regardless of the mix of assets bought and sold, foreigners must buy more assets from (or sell fewer assets to) domestic issuers/investors. Q187-3 A country having a current account deficit most likely will still be able to consume more output than it produces by: （MOCK83-43） A. increasing its net foreign liabilities. B. restricting foreign direct investment. C. adjusting interest rates to stimulate higher domestic savings. Solution:A A current account deficit must be offset by a capital account surplus. Only by borrowing money from foreigners can a country have a current account deficit and consume more output than it produces. An increase in net foreign liabilities is the result of borrowing from foreigners. Q188-3 A country with a trade deficit will most likely: （原版书R21-19） A. have an offsetting capital account surplus. B. save enough to fund its investment spending. C. buy assets from foreigners to fund the imbalance. Solution:A A trade deficit must be exactly matched by an offsetting capital account surplus to fund the deficit. A capital account surplus reflects borrowing from foreigners (an increase in domestic liabilities) and/or selling assets to foreigners (a decrease in domestic assets). A capital account surplus is often referred to as a "capital inflow" because the net effect is foreign investment in the domestic economy. Q189-3 During the most recent quarter, a steel company in South Korea had the following transactions: (原版书R19-18)  Bought iron ore from Australia for AUD50 million.  Sold finished steel to the United States for USD65  Borrowed AUD50 million from a bank in Sydney.  Received a USD10 million dividend from . subsidiary.  Paid KRW550 million to a Korean shipping company. Which of the following would be reflected in South Korea's current account balance for the quarter? A. The loan. B. The shipping. 215 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. The dividend. Solution:C The current account includes income received on foreign investments. The Korean company effectively "exported" the use of its capital during the quarter to its . subsidiary, and the dividend represents payment for those services. Q190-3 The sale of mineral rights would be captured in which of the following balance of payments components? (原版书R19-16) A. Capital account. B. Current account. C. Financial account. Solution:A The capital account measures capital transfers and sale and purchase of non-produced, non-financial assets such as mineral rights and intangible assets Q191-3 A current account deficit is most likely to decrease as a result of an increase in:（Notes P218） A. domestic savings. B. private investment. C. the fiscal budget deficit. Solution:A Other things equal, an increase in domestic savings would tend to decrease the current account deficit, while an increase in private investment or an increase in the fiscal budget deficit would tend to increase the current account deficit. Q192-3 A country implements policies that are expected to increase taxes by €100 million, increase government spending by €50 million, and reduce investments and private sector savings by €25 million each. As a result, the country’s current account balance will most likely:（2013 mock afternoon session） A. increase by €50 million. B. decrease by €50 million. C. increase by €100 million. Solution:A CA = Sp – I + (T – G – R) CA = Current account balance Sp = Private sector savings I = Investments T = Taxes G = Government spending R = Transfers 216 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 ΔCA = –25 – (–25) + (100 – 50 – 0) = 50. Q193-3 Which of the following organizations is the most focused on promoting economic growth and reducing poverty by offering both monetary and technical assistance? (MOCK88-43) A. World Bank. B. World Trade Organization. C. International Monetary Fund. Solution:A Promoting economic growth and reducing world poverty are among the primary goals of the World Bank. The IMF primarily promotes the growth of international trade, supports exchange rate stability, and provides a forum for cooperation on monetary problems internationally. The WTO has a primary focus on reaching trade agreements and settling trade disputes. Q194-3 ★During the last month, a food company located in the United States had the following transactions: Amount Transaction (US$ millions) Bought raw material from Indonesia Sold food products to France Received royalty fees from its branch in the United Kingdom Donated to a charitable institution in Africa Borrowed from a bank in Singapore Paid legal fees to its German legal consultant company Received interest coupon from its investment in Eurobonds issued in Luxembourg These transactions will most likely increase the . current account by: (2014 Mock 99-36) A. $ million. B. $ million. C. $ million. Solution: C Note that the borrowing from a bank in Singapore is not a current account transaction. Current Account Transaction (US$ millions) Bought raw material from Indonesia – Sold food products to France 65 Received royalty fees from its branch in the United Kingdom Donated to charitable institution in Africa – Borrowed from a bank in Singapore Omit Paid legal fees to its German legal consultant company – 217 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Received interest coupon from its investment in Eurobonds issued in ourg Total 15 国际收支平衡表 R127-3 Balance of Payments Components  The BOP equation is: current account + capital account + financial account = 0  The current account measures the exchange of merchandise goods, services, investment income, and unilateral transfers (gifts to and from other nations). The current account balance equals the sum of exports minus imports, net interest income, and net transfer. 在BOP（国际收支平衡表）中，interest income 属于current account  The capital account consists capital transfer（债务豁免，移民） and net sales of non-produced\non-financial assets（版权，自然资源的买卖）.  The financial account measure net capital flows based on sales and purchases of domestic and foreign financial assets. (financial assets aboard 在国外金融资产and foreign-owned financial assets国外拥有的在国内的金融资产) R128-3 X-M≡private saving + government saving - investment  Low private saving and/or high investment -> current account deficit ->net capital imports（美国国内消耗多就要从国外进口，从国外吸收资本）  Government deficit-> current account deficit  Current account deficit(长期)->rise the risk premium in the deficit country P42-3 汇率 Q195-3 Over the past month, the Swiss Franc (CHF) has depreciated 12% against pound sterling (GBP). How much has the pound sterling appreciated against the Swiss Franc? （原版书R21-7） A. 12%. B. Less than 12%. C. More than 12%. Solution:C The appreciation of sterling against the Swiss franc is simply the inverse of the 12% depreciation of the Swiss franc against Sterling: [1/ (1 - )] - 1 = (1/) - 1 =- , or % Q196-3 A BRL/MXN spot rate is listed by a dealer at . The 6-month forward rate is . The 6-month forward points are closest to: （原版书R21-11） A. —. B. +. C. +. 218 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution:B The number of forward points equals the forward rate minus the spot rate, or — = , multiplied by 10,000: 10,000 X = points. By convention, forward points are scaled so that ±1 forward point corresponds to a change of ±1 in the last decimal place of the spot exchange rate. Q197-3 A three-month forward exchange rate in CAD/USD is listed by a dealer at . The dealer also quotes 3-month forward points as a percentage at %. The CAD/USD spot rate is closest to: （原版书R21-12） A. . B. . C. . Solution:A Given the forward rate and forward points as a percentage, the unknown in the calculation is the spot rate. The calculation is as follows: Spot rate X (1 + Forward points as a percentage) = Forward rate Spot rate X (1 + ) = Spot = = Q198-3 ★★★The JPY/AUD spot exchange rate is , the JPY interest rate is %, and the AUD interest rate is %. If the interest rates are quoted on the basis of a 360-day year, the 90-day forward points in JPY/AUD would be closest to: （原版书R21-15） A. —. B. —. C. . Solution:B The forward exchange rate is given by 90♣1 • ♣ •.00151 •♦÷÷F Si Ω JPYJPYAUDJP82360YAUD♦ .42÷♥ 82 . 4 2≠.9881 5υ 1 iAUD Ω♥ ≠≠The forward points are 100 X (F— S) =100 X ( — ) =100 X () =—. Note that because the spot exchange rate is quoted with two decimal places, the forward points are scaled by 100. Q199-3 A large industrialized country has recently devalued its currency in an attempt to correct a persistent trade deficit. Which of the following domestic industries is most likely to benefit from the devaluation? （原版书R21-20） A. Luxury cars. B. Branded prescription drugs. 219 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. Restaurants and live entertainment venues. Solution:A A devaluation of the domestic currency means domestic producers are cutting the price faced by their foreign customers. The impact on their unit sales and their revenue depends on the elasticity of demand. Expensive luxury goods exhibit high price elasticity. Hence, luxury car producers are likely to experience a sharp increase in sales and revenue due to the devaluation. Q200-3 Which of the following counterparties is most likely to be considered a sell-side foreign-exchange market participant? （原版书R21-4） A. A large corporation that borrows in foreign currencies. B. A sovereign wealth fund that influences cross-border capital flows. C. A multinational bank that trades foreign exchange with its diverse client base. Solution:C The sell side generally consists of large banks that sell foreign exchange and related instruments to buy-side clients. These banks act as market makers, quoting exchange rates at which they will buy (the bid price) or sell (the offer price) the base currency. Q201-3 An exchange rate between two currencies has increased to . If the base currency has appreciated by 8% against the price currency, the initial exchange rate between the two currencies was closest to: （原版书R21-8） A. . B. . C. . Solution:B The percentage appreciation of the base currency can be calculated by dividing the appreciated exchange rate by the initial exchange rate. In this case, the unknown is the initial exchange rate. The initial exchange is the value of X that satisfies the formula: = Solving for X leads to = . Q202-3 A dealer provides the following quotes: （原版书R21-10） Ratio Spot rate CNY/HKD CNY/ZAR CNY/SEK Another dealer is quoting the ZAR/SEK cross-rate at . The arbitrage profit that can be earned is closest to: A. ZAR 3671 per million SEK traded. B. SEK 4200 per million ZAR traded. C. ZAR 4200 per million SEK traded. 220 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution:C The ZAR/SEK cross-rate from the original dealer is ( =-- , which is lower than the quote from the second dealer. To earn an arbitrage profit, a currency trader would buy SEK (sell ZAR) from the original dealer and sell SEK (buy ZAR) to the second dealer. On 1 million SEK the profit would be SEK 1,000,000 x ( — ) = ZAR 4200 Q203-3 ★A forward premium indicates: （原版书R21-14） A. an expected increase in demand for the base currency. B. the interest rate is higher in the base currency than in the price currency. C. the interest rate is higher in the price currency than in the base currency. Solution:C To eliminate arbitrage opportunities, the spot exchange rate (S), the forward exchange rate (F), the interest rate in the base currency (ib), and the interest rate in the price currency (if,) must satisfy: F 1 ip♣ •S1 ♦b♥ ÷≠According to this formula, the base currency will trade at forward premium (F > S) if, and only if, the interest rate in the price currency is higher than the interest rate in the base currency (ip > ib). Q204-3 ★★In early 2011, the British pound (GBP) to New Zealand dollar (NZD) spot exchange rate was . The UBOR interest rates, quoted on a 360-day year basis, were % for the British pound and % for the New Zealand dollar. The 180-day forward points (scaled up by four decimal places) inNZD/GBP would be closest to:（mock89-44） A. -343. B. -173. C. 175 Solution:C 1） 首先要正确理解外汇的标价方法。British pound (GBP) to New Zealand dollar (NZD) spot exchange rate was 表示一个英镑相当于个NZD，即 NZD/GBP，相当于1GBP= 2） 其次，正确的计算过程如下： 221 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 F1rNZDS1rGBP金程r教育 专业·领先·增值 .6025%%% %3603） 关于远期与即期外汇常考两种形式，也是考纲的要求。  如果求forward in points，计算方法是(Forward -Spot) × 10,000 = 175  如果求forward in percentage，计算方法是(Forward -Spot)/Spot = % 4） 注：原版书中出现的报价方法  JPY/GBP表示一个英镑换取多少日元 书中还出现了GBPJPY，GBP:JPY，GBP-JPY，这三种报价方式与JPY/GBP相同，都表示一个英镑换取多少日元  For example, USD/EUR代表的含义是：  USD is price currency，EUR is base currency；  units of USD that one unit of EUR will buy（可以写成1EUR=去理解）；  units of USD per one unit of EUR;  The USD exchange rate against EUR is （考试中常出现的说法）;  EUR to USD spot exchange rate is （考试中常出现的说法）. 所以the British pound (GBP) to New Zealand dollar (NZD) spot exchange rate was 的意思是 NZD / GBP Q205-3 The current spot rate for the USD/EUR is . The forward rate for the EUR/Australian dollar (AUD) is , which represents a 400 point forward premium to the spot rate (scaled up by four decimal places). The USD/AUD spot rate is closest to: （mock84-44） A. . B. . C. . Solution:B Step 1 Find the spot rate for the EUR/AUD Spot = Forward rate – Points Spot=− 400/10,000= Step 2: Calculate cross-rate U AUSDDUEUSDR*AEUUDRUSD=*= Q206-3 The Canadian dollar (CAD) exchange rate with the Japanese yen (JPY) changes from JPY/CAD 75 to JPY/CAD 78. The CAD has:（Notes P237） 222 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. depreciated by %, and the JPY has appreciated by %. B. appreciated by , and the JPY has depreciated by %. C. appreciated by %, and the JPY has depreciated by %. Solution:C The CAD has appreciated because it is worth a larger number of JPY. The percent appreciation is (78 - 75) / 75 = %. To calculate the percentage depreciation of the JPY against the CAD, convert the exchange rates to direct quotations for Japan: 1 / 75 = CAD/JPY and 1 / 78 = CAD/JPY. Percentage depreciation = ( - ) / = % Q207-3 The spot CHF/GBP exchange rate is . In the 180-day forward market, the CHF is at a forward premium of points to the GBP. The 180-day forward CHFIGBP exchange rate is closest to: A. B. C. Solution:B “the CHF is at a forward premium of points to the GBP” indicate that CHF is base currency and GBP is price currency. Because the spot CHF/GBP exchange rate is , the GBP/CHF is 1/ (= ). The 180-day forward exchange rate is + = GBP/CHF . The forward CHF/GBP is 1/ (=) Q208-3 The EUR/USD spot exchange rate is , and 1-year interest rates are 3% in EUR and 2% in USD. The forward USD/EUR exchange rate is closest to:（Notes P242） A. B. C. Solution:A * / = ; 1 / = Q209-3 An investor examines the following rate quotes for the Brazilian real and the Australian dollar:（2013 mock morning session） Spot rate BRL/AUD BRL 1-year interest rate % Forward rate BRL/AUD AUD 1-year interest rate % If the investor shorts BRL500,000 he will achieve a risk-free arbitrage profit (in BRL) closest to: A. -6,327 B. 1,344 C. 6,405 Solution:B 223 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 If the right side of the following equation is greater than the left, an arbitrage opportunity exists. (1 id)Sf/d(1if)/(Ff/d)The arbitrage profit is the right side of the equation minus the left side. Right Side: Step 1 BRL500,000 × (1/ = AUD236,653 Step 2 AUD236,653 × () = AUD243,989 Step 3 AUD243,989 × = BRL521,844 Arbitrage profit = BRL521,844 (right side above) – BRL520,500 (left side above) = 1,344. 汇率 R129-3 名义与实际汇率  FX real(d/f) = FX nominal (d/f) CPIf/CPId R130-3 FX Appreciation and Depreciation to USD appreciated therefore CHF depreciated R131-3 Spot rates & Forward rates  Spot rates：exchange rates for immediate delivery of the currency  Forward rates ：exchange rates for currency transactions that will occur in the future.（例如，现在约定一个月后以多少人民币买1美元） R132-3 The spread on a forward foreign currency quotation  Consider a 6-month (180 days) forward exchange rate quote from a . currency dealer of GBP:USD = / . Percentage spread = ( – ) / = %  Spreads increase with greater exchange rate volatility, the term of the forward contract, and decrease when trading volume is higher.  Forward currency spreads are typically greater than spot currency spreads R133-3 Forward discount or premium forward prmium♣♦= F♣-S •36 0♣ ••or discount ♦♥S υ÷≠t ♦♥ ÷≠÷≠ P43-3 FX regime Q210-3 In practice, both a fixed parity regime and a target zone regime allow the exchange rate to float within a band around the parity level. The most likely rationale for the band is that the band allows the monetary authority to: （原版书R21-17） A. be less active in the currency market. B. earn a spread on its currency transactions. C. exercise more discretion in monetary policy. Solution:C Fixed exchange rates impose severe limitations on the exercise of independent monetary policy. With a rigidly fixed exchange rate, domestic interest rates, monetary aggregates (., 224 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 money supply), and credit conditions are dictated by the requirement to buy/sell the currency at the rigid parity. Even a narrow band around the parity level allows the monetary authority to exercise some discretionary control over these conditions. In general, the wider the band, the more independent control the monetary authority can exercise. Q211-3 In the classification of currency regimes, a currency board system (CBS) most likely differs from a fixed-rate parity system in that: （mock83-44） A. a CBS has a discretionary target level of foreign exchange reserves. B. a CBS can peg to a basket of currencies but a fixed-rate system cannot. C. the monetary authority within a CBS does not act as a traditional lender of last resort. Solution:C In a CBS, the monetary authority has an obligation to maintain 100% foreign currency reserves against the monetary base. It thus cannot lend to troubled financial institutions. As long as the country under a fixed-parity regime maintains its exchange peg, the central bank can serve as a lender of last resort. Q212-3 ★The monetary authority of The Stoddard Islands will exchange its currency for . dollars at a one-for-one ratio. As a result, the exchange rate of the Stoddard Islands currency with the . dollar is , and many businesses in the Islands will accept . dollars in transactions. This exchange rate regime is best described as:（Notes P238） A. a fixed peg. B. dollarization. C. a currency board. Solution:C This exchange rate regime is a currency board arrangement. The country has not formally dollarized because it continues to issue a domestic currency. A conventional fixed peg allows for a small degree of fluctuation around the target exchange rate. R134-3 Exchange rate regimes  Countries That Do Not Have Their Own Currency  A country can use the currency of another country (formal dollarization) not create money/currency.  A country can be a member of a monetary union in which several countries use a common currency (eg:Euro)  Countries That Have Their Own Currency  A currency board arrangement is an explicit commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate（ notable example of such an arrangement is Hong Kong）  conventional fixed peg arrangement a country pegs its currency within margins of ±1 percent versus another currency or a basket that includes the currencies of 225 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 its major trading or financial partners  Target zone : the permitted fluctuations in currency value relative to another currency or basket of currencies are wider (., +/-2 %)  Crawling peg: the exchange rate is adjusted periodically, typically to adjust for higher inflation  passive crawling peg : a series of exchange rate adjustments over time is announced and implemented  active crawling peg: can influence inflation expectations, adding some predictability to domestic inflation  Managed floating exchange rates: the monetary authority attempts to influence the exchange rate in response to specific indicators such as the balance of payments, inflation rates, or employment without any specific target exchange rate or predetermined exchange rate path  Independently floating: the exchange rate is market-determined, and foreign exchange market intervention is used only to slow the rate of change and reduce short-term fluctuations, not to keep exchange rates at a certain target level P44-3 Elasticity approach Q213-3 A large industrialized country has recently devalued its currency in an attempt to correct a persistent trade deficit. Which of the following domestic industries is most likely to benefit from the devaluation? (原版书R21-20) A. Luxury cars. B. Branded prescription drugs. C. Restaurants and live entertainment venues. Solution: A Considering that this is a large industrialized country, the devaluation of its currency will increase its exports of luxury cars. Q214-3 A country that wishes to narrow its trade deficit devalues its currency. If domestic demand for imports is perfectly price-inelastic, whether devaluing the currency will result in a narrower trade deficit is least likely to depend on: A. the size of the currency devaluation. B. the country's ratio of imports to exports. C. price elasticity of demand for the country's exports. Solution: A With perfectly inelastic demand for imports, currency devaluation of any size will increase total expenditures on imports (same quantity at higher prices in the home currency). The trade deficit will narrow only if the increase in export revenues is larger than the increase in import spending. To satisfy the Marshall-Lerner condition when import demand elasticity is zero, export demand elasticity must be larger than the ratio of imports to exports in the country's international trade. 226 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R135-3 弹性论 ImportsexportsM impoΖX Ζ rts exportsimports exports Η:elasticities M a s positive numbers of demand for imports ΗX:elasticities a s positive numbers of demand for emports Given Marshall-Lerner condition : ΖX X Η M ΖM1 Η0 ! When import expenditures=export revenues 即 X=ΖM ΖMarshall-Lerner condition 简写为 Η1 XM Η!  In general, elasticity of demand is greater for goods with close substitutes, goods that represent a high proportion of consumer spending, and luxury goods in general. Goods that are necessities, have few or no good substitutes, or represent a small proportion of overall expenditures tend to have less elastic demand.  Thus, currency depreciation will have a greater effect on the balance of trade when import or export goods are primarily luxury goods, goods with close substitutes, and goods that represent a large proportion of overall spending. R136-3 The J-Curve贬值效应的时滞  import and export contracts delivery and payment in the future , import and export quantities may be relatively insensitive to currency depreciation in the short run means currency depreciation may worsen a trade deficit in the short run  出口供给（主要原因）和进口需求作出相应调整后，贸易余额开始改善  调整过程用曲线描述呈J形  Marshall-Lerner condition 成立情况下，贬值对贸易余额的时滞效应——J-Curve Effect  Shortcoming :ignores capital flows Balance of trade 0 Trade restrictions Before cBuefore rrency decpurrerecniactye s Time R137-3 Absorption approach  BT = Y – E, 其中Y = domestic production of goods and services or national incom, E = domestic absorption of goods and services, which is total expenditure，BT = balance of trade  国民收入>总吸收：国际收支顺差，货币升值; 国民收入<总吸收：国际收支逆差， 227 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 货币贬值 228 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 4-Financial Statement Analysis P1-4 Accruals and other adjustments in preparing financial statements Q1-4 ★Assume . GAAP applies unless otherwise noted. Walker Company received a letter on November 31, 2001 indicating that Johnson, Inc. would purchase a specialty machine priced at $4,000,000. On February 13, 2002, a binding contract was executed for the machine’s construction. Materials costing $2,000,000 were ordered in December 2001, arrived with an invoice in August 2002, and were used in the manufacturing process in the first quarter of 2003. After a labor dispute, Walker finally completed manufacture and delivered the machine in December 2004. Johnson received the first invoice in 2005 and paid the $4,000,000 purchase price in 2005. Walker Company uses the accrual method of accounting. Walker should record the materials used to construct the machine as expenses in the year: A. 2005. B. 2004. C. 2003. Solution: B Under the accrual concept, income is recognized when the earning activities are substantially completed, risk of ownership has transferred from buyer to seller, and payment is realizable and collectible. Under the matching principle, expenses incurred that directly relate to the sold item are expensed in the same period as the revenue is recognized. Q2-4 Assume . GAAP applies unless otherwise noted. Bishop Ltd. received an advanced payment of $10,000 on December 1, for rent on a property for December and January. On receipt they correctly recorded it as cash and unearned revenue. If at December 31, their year-end, they failed to make an adjusting entry related to this payment, ignoring taxes, what would the effect on the financial statements for the year be? A. Assets are overstated by $5,000 and Liabilities are overstated by $5,000. B. Liabilities are overstated by $5,000 and Net income is overstated by $5,000. C. Liabilities are overstated by $5,000 and Owners’ equity is understated by $5,000. Solution: C The Company should have made an adjusting entry to reduce the unearned revenue account (a liability) by $5,000 and increase Revenue (and hence net income and retained earnings) by $5,000. As the company failed to make the adjusting entry the liabilities are overstated and owners’ equity is understated. Q3-4 A decrease in assets would least likely be consistent with a(n): (NotesB3-28 4) A. increase in expenses. B. decrease in revenues. C. increase in contributed capital. Solution：C. 229 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The expanded accounting equation shows that assets = liabilities + contributed capital + beginning retained earnings + revenue — expenses — dividends. A decrease in assets is consistent with an increase in expenses or a decrease in revenues but not with an increase in contributed capital. Q4-4 If a firm raises $10 million by issuing new common stock, which of its financial statements will reflect the transaction? (NotesB3-28 6) A. Income statement and statement of owners' equity. B. Balance sheet, income statement, and cash flow statement. C. Balance sheet, cash flow statement, and statement of owners' equity. Solution：C. The $10 million raised appears on the cash flow statement as a cash inflow from financing and on the statement of owners' equity as an increase in contributed capital. Both assets (cash) and equity (common stock) increase on the balance sheet. The income statement is unaffected by stock issuance. Q5-4 An auditor needs to review all of a company's transactions that took place between August 15 and August 17 of the current year. To find this information, she would most likely consult the company's: (NotesB3-28 7) A. general ledger. B. general journal. C. financial statements. Solution：B. The general journal lists all of the company's transactions by date. The general ledger lists them by account. Q6-4 ★ Which of the following statements about cash received prior to the recognition of revenue in the financial statements is most accurate? The cash is recorded as（:原版书Reading23） A. deferred revenue, an asset. B. accrued revenue, a liability. C. deferred revenue, a liability. Solution：C. Cash received prior to revenue recognition increases cash and deferred or unearned revenue. This is a liability until the company provides the promised goods or services. Q7-4 ★ An electrician repaired the light fixtures in a retail shop on October 24 and sent the bill to the shop on November 3. If both the electrician and the shop prepare financial statements under the accrual method on October 31, how will they each record this transaction?(Notes B3-28 5) 230 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Electrician Retail shop A. Accrued revenue Accrued expense B. Accrued revenue Prepaid expense C. Unearned revenue Accrued expense Solution: A The service is performed before cash is paid. This transaction represents accrued revenue to the electrician and an accrued expense to the retail shop. Since the invoice has not been sent as of the statement date, it is not shown in accounts receivable or accounts payable. Q8-4 ★When, at the end of an accounting period, a revenue has been recognized in the financial statements but no billing has occurred and no cash has been received, the accrual is to: （原版书Reading23） A. unbilled (accrued) revenue, an asset. B. deferred revenue, an asset. C. unbilled (accrued) revenue, a liability. Solution：A. When cash is to be received after revenue has been recognized but no billing has actually occurred, an unbilled (accrued) revenue is recorded. Such accruals would usually occur when an accounting period ends prior to a company billing its customer. This type of accrual can be contrasted with a simple credit sale, which is reflected as an increase in revenue and an increase in accounts receivable. No accrual is necessary. Q9-4 ★When, at the end of an accounting period, cash has been paid with respect to an expense incurred but not yet recognized in the financial statements, the business should then record: （原版书Reading23） A. an accrued expense, an asset. B. a prepaid expense, an asset. C. an accrued expense, a liability. Solution：B. Payment of expenses in advance is called a prepaid expense, which is classified as an asset. Q10-4 How should the proceeds received from the advance sale of tickets to a sporting event be treated by the seller, assuming the tickets are nonrefundable?(NotesB3-105 5) A. Unearned revenue is recognized to the extent that costs have been incurred. B. Revenue is recognized to the extent that costs have been incurred. C. Revenue is deferred until the sporting event is held. Solution：C. The ticket revenue should not be recognized until it is earned. Even though the tickets are 231 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 nonrefundable, the seller is still obligated to hold the event. Q11-4 ★ When, at the end of an accounting period, cash has not been paid with respect to an expense that has been incurred, the business should then record: （原版书Reading23） A. an accrued expense, an asset. B. a prepaid expense, an asset. C. an accrued expense, a liability. Solution：C. When an expense is incurred and no cash has been paid, expenses are increased and a liability ("accrued expense") is established for the same amount. 掌握以下几种权责发生制（Accrual Basis）： 权责发生制是以权利和责任的发生来决定收入和费用归属期的一项原则。 R1-4 收入应与为取得该收入所发生的费用、成本相匹配，以正确计算在该会计期间所获得的净损益。 R2-4 ★除了基本概念以外还需要掌握几个名词  unearned revenue 或deffered revenue (liability): The firm receives cash before it provides a good or service to customers，等到货物delivery之后，B/S表中liability会减少一部分，cash增加一部分  unbilled revenue 或 accrued revenue (asset): If the revenue is earned, and it is just that the billing dept has not raised the bill, then you should take up the revenue under accrued receivables and for most purposes, they should be the same as accounts receivables.（未开票前，称为unbilled；开票后，从unbilled 转为A/R）  prepaid expenses(asset): The firm pays cash ahead of time for unanticipated expense.  accrued expenses(liability): An expense that is incurred, but not yet paid for, during a given accounting period. P2-4 Audits of Financial Statements的理解 Q12-4 ★Assume . GAAP applies unless otherwise noted. Which of the following statements best describes the level of accuracy provided by a standard audit report? A. There is reasonable assurance that the financial statements contain no errors. B. There is full assurance that the financial statements are free of material errors. C. There is reasonable assurance that the financial statements are fairly presented. Solution: C Audits provide reasonable assurance that the financial statements are fairly presented, meaning that there is a high degree of probability that they are free of material error, fraud or illegal acts. Q13-4 What type of audit opinion is preferred when analyzing financial statements? A. Qualified. B. Adverse. C. Unqualified. 232 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C An unqualified opinion is a “clean” opinion and indicates that the financial statements present the company’s performance and financial position fairly. Q14-4 If an auditor finds that a company's financial statements have made a specific exception to applicable accounting principles, she is most likely to issue a: (NotesB3-17 4) A. dissenting opinion. B. cautionary note. C. qualified opinion. Solution：C. An auditor will issue a qualified opinion if the financial statements make any exceptions to applicable accounting standards and will explain the effect of these exceptions in the auditor's report. R3-4 Audits of Financial Statements掌握概念及理解：  概念：Audit is an independent review of an entity’s financial statement.  理解：Audits provide reasonable assurance that the financial statements are fairly presented, meaning that there is a high degree of probability that they are free of material error, fraud or illegal acts.  Audit report有三种类型分别是qualified opinion, unqualified opinion, adverse opinion.  ★An unqualified audit opinion conveys that the financial statement report a “true and fair view” or are “fairly presented” in accordance with applicable accounting standards.  ★The auditors must also express an opinion on the company’s internal control systems according to Sarbanes-Oxley Act. P3-4 Other Information Sources of Financial Statements的理解 Q15-4 Assume . GAAP applies unless otherwise noted. When an issue is going to be put to a vote, by shareholders, at an annual general meeting the company prepares a (n): A. annual report. B. proxy statement. C. management statement of responsibility. Solution: B Proxy statements are prepared and distributed to shareholders on matters that are to be put to a vote at shareholder meetings. Q16-4 ★Information about management and director compensation would least likely be found in the:（原版书Reading22） A. auditor's report. B. proxy statement. 233 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. notes to the financial statements. Solution：A. Information about management and director compensation is not found in the auditor's report. Disclosure of management compensation is required in the proxy statement, and some aspects of management compensation are disclosed in the notes to the financial statements. Q17-4 Information about accounting estimates, assumptions, and methods chosen for reporting is most likely found in: (NotesB3-17 3) A. the auditor's opinion. B. financial statement notes. C. Management's Discussion and Analysis. Solution：B. Information about accounting methods and estimates is contained in the footnotes to the financial statements. Q18-4 ★Assume . GAAP applies unless otherwise noted. An analyst would find information about significant uncertainties affecting a company's liquidity, capital resources and results of operations in the: A. Notes to the financial statements. B. Balance sheet and income statement. C. Management discussion and analysis. Solution: C Management must highlight any favorable and unfavorable trends and identify significant events and uncertainties that affect the company’s liquidity, capital resources and results of operations in the MD&A. Q19-4 ★Information about material events and uncertainties would best be found in A. footnotes. B. the proxy statement. C. management’s discussion and analysis Solution: C. This is a component of management’s discussion and analysis. . Q20-4 ★Which of the following is least likely to appear in a company's proxy statement?(MOCK-57) A. Compensation arrangements for management and directors B. Significant events and contingencies that may affect future operations C. Potential conflicts of interest between management, directors, and shareholders 234 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B Significant events, conditions, trends, and contingencies that may affect future operations are contained in Management's Discussion and Analysis/ compensation agreements for directors and management and their potential conflicts of interest are required in the proxy statement. Q21-4 ★ Information about a company's objectives, strategies, and significant risks would most likely be found in the: （原版书Reading22） A. auditor's report. B. management commentary. C. notes to the financial statements. Solution：B. These are components of management commentary. Other Information Sources of Financial Statements掌握概念： R4-4 ★Financial footnotes  includes information about account methods and assumptions; related-party transactions; commitments and contingencies  footnotes是被审计过的 R5-4 Supplementary schedule: provides explanatory information, such as operating income or sales by region or business segment; R6-4 ★MD&A (Management Discussion & Analysis):  Management must highlight any favorable or unfavorable trends, and  Identify significant events and uncertainties that affect the company’s liquidity, capital resources, and results of operations;  Such as, to provides information about the effects of inflation, changing prices R7-4 ★Proxy statement: provides useful information regarding  Management and director compensation;  Company stock performance;  Any potential conflicts of interest between management, shareholders and board;  Relevant current information on their websites and press release and as part of conference calls. R8-4 Annual filing (10-K) & quarterly report (10-Q): generally present the 4 key financial statements and footnotes but are not audited. R9-4 8-K: reported to SEC, which includes material corporate events on a more current basis, such as M&A P4-4 关于Financial Statement指标、准备和呈报的一些要求 Q22-4 ★Which of the following statements is most accurate with respect to financial reporting requirements? （2012mock85） A. Regulatory authorities are typically private sector, self-regulated organizations. B. Standard-setting bodies have authority because they are recognized by regulatory agencies. 235 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. The requirement to prepare financial reports in accordance with specified accounting standards is the responsibility of standard-setting bodies. Solution：B Without the recognition of the standards by the regulatory authorities, such as the . Securities and Exchange Commission, the private sector standard-setting bodies, such as . FASB, would have no authority. Q23-4 Which of the following inventory valuation methods is required by the accounting standard-setting bodies? (NotesB3-104 7) A. Lower of cost or net realizable value. B. Weighted average cost. C. First-in, first-out. Solution：A Inventories are required to be valued at the lower of cost or net realizable value (or "market" under . GAAP). FIFO and average cost are two of the inventory cost flow assumptions among which a firm has a choice. Q24-4 Which of the following is least likely to be a general feature underlying the preparation of financial statements within the IFRS Conceptual Framework? （2012-mock83） A. Matching B. Materiality C. Accrual basis Solution：A The IFRS Conceptual Framework specifies a number of general features underlying the preparation of financial statements, including materiality and accrual basis. Matching is not one of those general features; it is a general principle of expense recognition. Q25-4 Under the IASB Conceptual Framework, one of the qualitative characteristics of useful financial information is that different knowledgeable users would agree that the information is a faithful representation of the economic events that it is intended to represent. This characteristic is best described as: A. verifiability. B. comparability. C. understandability. Solution：A Under the International Accounting Standards Board’s Conceptual Framework, verifiability is the qualitative characteristic that means that different knowledgeable and independent users would agree that the information presented faithfully represents the economic events that it is 236 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 intended to represent. Q26-4 Which of the following statements best describes the role of the International Organization of Securities Commissions (IOSCO)? The IOSCO: （2012mock84-59） A. is responsible for regulating financial markets of member nations. B. is the oversight body to which the International Accounting Standards Board (IASB) reports. C. assists in attaining the goal of cross-border cooperation in combating violations of securities laws. Solution：C The IOSCO is not a regulator of financial markets. To ensure consistent application of international financial standards, it is important to have uniform regulation and enforcement across national boundaries. IOSCO assists in attaining this goal of uniform regulation as well as cross-border cooperation in combating violations of securities and derivatives laws. Q27-4 . generally accepted accounting principles are currently developed by which entity?（原版书Reading24） A. The Securities and Exchange Commission. B. The Financial Accounting Standards Board. C. The Public Company Accounting Oversight Board. Solution：B. The FASB is responsible for the Accounting Standards CodificationTM, the single source of nongovernmental authoritative . generally accepted accounting principles. Q28-4 Which of the following organizations is least likely involved with enforcing compliance with financial reporting standards? (NotesB3-44 2) A. Financial Services Authority (FSA). B. Securities and Exchange Commission (SEC). C. International Accounting Standards Board (IASB). Solution：C. The IASB is a standard-setting body. The SEC (in the United States) and the FSA (in the United Kingdom) are regulatory authorities. Q29-4 Dawn Czerniak is writing an article about international financial reporting standards. In her article she states, "Despite strong support from business groups for a universally accepted set of financial reporting standards, disagreements among the standard-setting bodies and regulatory authorities of various countries remain a barrier to developing one." Czerniak's statement is: (NotesB3-44 3) A. correct. B. incorrect, because business groups have not supported a uniform set of financial reporting standards. C. incorrect, because disagreements among national standard-setting bodies and regulatory 237 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 agencies have not been a barrier to developing a universal set of standards. Solution：B. Political pressure from business groups and other interest groups who are affected by financial reporting standards has been a barrier to developing a universally accepted set of financial reporting standards. Disagreements among national standard-setting bodies and regulatory agencies have also been a barrier. Q30-4 According to the IASB Conceptual Framework, the fundamental qualitative characteristics that make financial statements useful are: (NotesB3-44 4) A. verifiability and timeliness. B. relevance and faithful representation. C. understandability and relevance. Solution：B. The fundamental qualitative characteristics are relevance and faithful representation. Verifiability, timeliness, and understandability are enhancing qualitative characteristics. Q31-4 International Accounting Standard (IAS) No. 1 least likely requires which of the following? (NotesB3-44 6 A. Neither assets and liabilities, nor income and expenses, may be offset unless required or permitted by a financial reporting standard. B. Audited financial statements and disclosures, along with updated information about the firm and its management, must be filed at least quarterly. C. Fair presentation of financial statements means faithfully representing the firm's events and transactions according to the financial reporting standards. Solution：B. According to IAS No. 1, financial statements must be presented at least annually. Fair presentation is one of the IAS No. 1 principles for preparing financial statements. The ban against offsetting is one of the IAS No. 1 principles for presenting financial statements. Q32-4 Which of the following statements about the FASB conceptual framework, as compared to the IASB conceptional framework, is most accurate? (NotesB3-45 7) A. The FASB framework allows for upward revaluations of tangible, long-lived assets. B. The FASB framework and IASB framework are now fully converged. C. The FASB framework lists revenue, expenses, gains, losses, and comprehensive income related to financial performance. Solution：C. The FASB framework lists revenues, expenses, gains, losses, and comprehensive income. The IASB framework only lists income and expenses. 238 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q33-4 ★Which is least likely one of the conclusions about the impact of a change in financial reporting standards that might appear in management's discussion and analysis? (NotesB3-45 8) A. Management has chosen not to implement the new standard. B. Management is currently evaluating the impact of the new standard. C. The new standard will not have a material impact on the company's financial statements. Solution：A. Management can discuss the impact of adopting the new standard, conclude that it does not apply or will have no material impact, or state that they are still evaluating the potential impact. Q34-4 ★A core objective of the International Organization of Securities Commissions is to: （原版书Reading24） A. eliminate systematic risk. B. protect users of financial statements. C. ensure that markets are fair, efficient, and transparent. Solution：C. A core objective of IOSCO is to ensure that markets are fair, efficient, and transparent. The other core objectives are to reduce, not eliminate, systematic risk and to protect investors, not all users of financial statements. Q35-4 According to the Conceptual Framework for Financial Reporting (2010), which of the following is not an enhancing qualitative characteristic of information in financial statements?(原版书Reading24) A. Accuracy. B. Timeliness. C. Comparability. Solution：A. Accuracy is not an enhancing qualitative characteristic. Faithful representation, not accuracy, is a fundamental qualitative characteristic. Q36-4 Which of the following is not a constraint on the financial statements according to the Conceptual Framework (2010)? （原版书Reading24） A. Understandability. B. Benefit. versus cost. C. Balancing of qualitative characteristics. Solution：A. Understandability is an enhancing qualitative characteristic of financial information—not a 239 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 constraint. Q37-4 Valuing assets at the amount of cash or equivalents paid or the fair value of the consideration given to acquire them at the time of acquisition most closely describes which measurement of financial statement elements? （原版书Reading24） A. Current cost. B. Historical cost. C. Realizable value. Solution：B. Historical cost is the consideration paid to acquire an asset. Q38-4 The valuation technique under which assets are recorded at the amount that would be received in an orderly disposal is: （原版书Reading24） A. current cost. B. present value. C. realizable value. Solution：C. The amount that would be received in an orderly disposal is realizable value. Q39-4 Which of the following is not a characteristic of a coherent financial reporting framework? A. Timeliness. B. Consistency. C. Transparency. Solution：A. Timeliness is not a characteristic of a coherent financial reporting framework. Consistency, transparency, and comprehensiveness are characteristics of a coherent financial reporting framework. Financial Statement 指标: R10-4 美国准则与国际准则  Standard-setting bodies: make the rules, such as FASB——. GAAP; IASB——IFRS  Regulatory authorities: enforce the rules, such as SEC——美国；FSA——英国 R11-4 ★Qualitative characteristics of financial statement under IASB, relevance和reliability faithful presentation（two fundamental characteristics）  Relevance: Financial statements are relevant if the information in them can influence user’s economic decisions. To be relevant, information should have predictive value, confirmatory value, or both.  Faithful representation. Information that is faithfully representative is complete, neutral (absence of bias), and free of error. 240 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R12-4 ★Four characteristics enhance relevance and faithful presentation  Understandability：Users should be able to readily understand the information .  Timeliness. Information is available to decision makers before the information is stale.  Verification：Independent observers, using the same methods, obtain similar results.  Comparability R13-4 Constraints on financial statement  Relevant vs. Timely：There is a tradeoff between relevant and timely.  Cost vs. benefits：The benefit users gain from the information should be greater than the cost of presenting it.  Non-quantifiable：Non-quantifiable information (reputation, brand loyalty, capacity for innovation, etc.) cannot be captured directly in financial statements. R14-4 ★Coherent of financial reporting framework (underlying logic)  Transparency：Full disclosure and fair presentation create transparent.  Comprehensiveness：An effective financial reporting framework is based on principles that are universal enough to provide guidance for recording both existing and newly developed transactions.  Consistency：Similar transactions should be accounted for in a similar manner regardless of industry company size, geography, or other characteristics. R15-4 Standard-setting approach  Principles-based: require the prepares of financial reports and auditors to exercise considerable judgment in financial reporting — IFRS  Rules-based: establishes specific rules for each element or transaction — . GAAP  . GAAP将慢慢转变为Objectives Oriented（结合以上两者） P5-4 Financial Statement Elements的理解 Q40-4 Assume . GAAP applies unless otherwise noted. Which of the following is least likely to be classified as a financial statement element? A. Revenue B. Liability C. Net income Solution: C Net income is not an element of the financial statements, but the net result of revenues less expenses. The elements are: assets, liabilities, owners’ equity, revenue and expenses. Q41-4 ★Which of the following principle requires faithful representation of the effects of transactions in accordance with the standards without material errors? A. Fair presentation B. Materiality C. Consistency 241 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B Materiality means that the financial statements should be free of misstatements or omissions that could influence the decisions of users of financial statements. Q42-4 ★Which of the following is not a requirement to recognize revenues under US GAAP? A. Price is determinable B. Goods have been delivered to clients C. Cost can be estimated reliably Solution: C Cost can be estimated reliably is the principal made by IFRS. And four criteria to determine whether revenue should be recognized in GAAP is :  There is evidence of an arrangement between the buyer and seller.  The product has been delivered or the service has been rendered.  The price is determined or determinable.  The seller is reasonably sure of collecting money. 原版书P146： 1) IFRS对sale of goods进行收入确认的方法：  the entity has transferred to the buyer the significant risks and rewards of ownership of the goods;  the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;  the amount of revenue can be measured reliably;  it is probable that the economic benefits associated with the transaction will flow to the entity; and  the costs incurred or to be incurred in respect of the transaction can be measured reliably. 2) IFRS对rendering of service进行收入确认的方法：  the amount of revenue can be measured reliably  it is probable that the economic benefits associated with the transaction will flow to the entity  the stage of completion of the transaction at the balance sheet date can be measured reliably  the costs incurred for the transaction and the costs to complete the transaction can be measured reliably 3) US GAAP specify that revenue should be recognized when it is "realized or realizable and earned”  There is evidence of an arrangement between buyer and seller.  The product has been delivered, or the service has been rendered  The price is determined, or determinable  The seller is reasonably sure of collecting money. 242 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q43-4 For a nonfinancial firm, are depreciation expense and interest expense included or excluded from operating expenses in the income statement? (NotesB3-79 1) Depreciation expense Interest expense A. Included Included B. Included Excluded C. Excluded Included Solution: B Depreciation is included in the computation of operating expenses. Interest expense is a financing cost. Thus, it is excluded from operating expenses. Q44-4 ★ An example of an expense classification by function is:（原版书Reading25） A. tax expense. B. interest expense. C. cost of goods sold. Solution：C. Cost of goods sold is a classification by function. The other two expenses represent classifications by nature. Q45-4 ★Are income taxes and cost of goods sold examples of expenses classified by nature or classified by function in the income statement? (NotesB3-80 2) Income taxes Cost of goods sold A. Nature Function B. Function Nature C. Function Function Solution: A Income taxes are expenses grouped together by their nature. Cost of goods sold includes a number of expenses related to the same function, the production of inventory. Q46-4 Which of the following would least likely increase pretax income? (NotesB3-80 6) A. Decreasing the bad debt expense estimate. B. Increasing the useful life of an intangible asset. C. Decreasing the residual value of a depreciable tangible asset. Solution: C Decreasing the residual (salvage) value of a depreciable long-lived asset will result in higher depreciation expense and, thus, lower pretax income. Q47-4 CC Corporation reported the following inventory transactions (in chronological order) for the year: (NotesB3-81 9) Purchase Sales 40 units at $30 13 units at $35 243 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 20 units at $40 35 units at $45 90 units at $50 60 units at $60 Assuming inventory at the beginning of the year was zero, calculate the year-end inventory using FIFO and LIFO. FIFO LIFO A. $5,220 $1,040 B. $2,100 $1,280 C. $2,100 $1,040 Solution: B 108 units were sold (13 + 35 + 60) and 150 units were available for sale (beginning inventory of 0 plus purchases of 40 + 20 + 90), so there are 150 — 108 = 42 units in ending inventory. Under FIFO, units from the last batch purchased would remain in inventory: 42 x $50 = $2,100. Under LIFO, the first 42 units purchased would be in inventory: (40 x $30) + (2 x $40) = $1,280. Q48-4 Changing an accounting estimate: (NotesB3-81 12) A. is reported prospectively. B. requires restatement of all prior-period statements presented in the current financial statements. C. is reported by adjusting the beginning balance of retained earnings for the cumulative effect of the change. Solution: A A change in an accounting estimate is reported restatement of prior period statements is necessary. Q49-4 Which of the following transactions would most likely be reported below income from continuing operations, net of tax? (NotesB3-82 13) A. Gain or loss from the sale of equipment used in a firm's manufacturing operation. B. A change from the accelerated method of depreciation to the straight-line method. C. The operating income of a physically and operationally distinct division that is currently for sale, but not yet sold. Solution: C A physically and operationally distinct division that is currently for sale is treated as a discontinued operation. The income from the division is reported net of tax below income from continuing operations. Changing a depreciation method is a change of accounting principle, which is applied retrospectively and will change operating income. Q50-4 ★★Which of the following statements about nonrecurring items is least accurate? (NotesB3-82 14) A. Gains from extraordinary items are reported net of taxes at the bottom of the income statement before net income. 244 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. Unusual or infrequent items are reported before taxes above net income from continuing operations. C. A change in accounting principle is reported in the income statement net of taxes after extraordinary items and before net income. Solution: C A change in accounting principle requires retrospective application; that is, all prior period financial statements currently presented are restated to reflect the change. Q51-4 ★Under US GAAP, a company which is planning to change one of its accounting policies has to adjust the financial statements most likely in a manner: A. Retrospective B. Prospective C. Cumulative Solution: A Change accounting policies need to Retrospect. (To LIFO, no need to adjust retrospectively) Financial Statement Elements掌握. GAAP和IFRS的区别： R16-4 US GAPP: Assets，Liabilities，Equity or Net Assets，Investments by owners，Distributions to owners，Comprehensive income，Revenues，Expenses，Gains，Losses R17-4 IFRS: Assets、Liabilities、Equity or Net Assets、Revenues，Expenses P6-4 Steps in the Financial Statement Analysis Framework Q52-4 Assume . GAAP applies unless otherwise noted. Making any necessary adjustments to the financial statements to facilitate comparison with respect to accounting choices is done in which step of the financial statement analysis framework? A. Process data B. Collect data C. Develop and communicate conclusions Solution: A Making any adjustments is part of the processing data step. Commonly used data bases (part of the collection phase) do not make adjustments for differences in accounting choices. Q53-4 ★Ratios are an input into which step in the financial analysis framework?（原版书Reading22） A. Process data. B. Collect input data. C. Analyze/interpret the processed data. Solution: C. 245 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Ratios are an output of the process data step but are an input into the analyze/interpret data step. R18-4 Steps in the Financial Statement Analysis Framework — 6个步骤  State the objective and context  Gather data：所有财务报表信息的搜集  Process the data：将财务报表搜集的信息做处理，如计算ratio  Analyze and interpret the data：将分析出来的各种ratio进行分析  Report the conclusions or recommendations  Update the analysis P7-4 Accounting System Q54-4 Assume . GAAP applies unless otherwise noted. An entry made to record an accrual, such as bad debt expense, that is not yet reflected in the accounting system is best described as a (n): A. Ledger entry. B. Adjusting entry. C. Trial balance entry. Solution: B Adjusting entries are a type of journal entries typically made at the end of the accounting period to record items such as accruals that are not yet reflected in the accounting system. Q55-4 ★The collection of all business transactions sorted by account in an accounting system is referred to as:（原版书Reading23） A. a trial balance. B. a general ledger. C. a general journal. Solution：B. The general ledger is the collection of all business transactions sorted by account in an accounting system. The general journal is the collection of all business activities sorted by date. R19-4 ★报表制作几个步骤  General Journal: list of entries sorted by date (order)  General ledger: sorted by account  Initial trial balance/Adjusted trial balance: balance, Trial balances are typically prepared at the end of an accounting period as a first step in producing financial statement.  Financial statements P8-4 Revenue Recognition Q56-4 Under IFRS, income includes increases in economic benefits from. 246 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. increases in owners' equity related to owners' contributions. B. increases in liabilities not related to owners' contributions. C. enhancements of assets not related to owners' contributions. Solution: C. Under IFRS, income includes increases in economic benefits from increases in assets, enhancement of assets, and decreases in liabilities. Q57-4 A retailer provides credit cards only to its most valued customers who pass a rigorous credit check. A credit card customer ordered an item from the retailer in May. The item was shipped and delivered in July. The item appeared on the customer’s July credit card statement and was paid in full by the due date in August. The most appropriate month in which the retailer should recognize the revenue is: (Mock84-47) A. May. B. July. C. August. Solution: B. The appropriate time to recognize revenue would be in the month of July; the risks and rewards have been transferred to the buyer (shipped and delivered), the revenue can be reliably measured, and it is probable that the economic benefits will flow to the seller (the rigorous credit check was completed). Neither the actual payment date nor the credit card statement date is relevant here. Q58-4 ★If the outcome of a long-term contract can be measured reliably, the preferred accounting method under both IFRS and . GAAP is: A. the installment method. B. the completed contract method. C. the percentage-of-completion method. Solution: C The preferred method is the percentage-of-campletion method. The completed contract method should be used only when the outcome cannot be measured reliably. Q59-4 ★★A company uses the percentage-of-completion method to recognize revenue from its long-term construction contracts and estimates percent completion based on expenditures incurred as a percentage of total estimated expenditures. A three-year contract for €10 million was undertaken with a 30% gross profit anticipated. The project is now at the end of its second year, and the following end-of-year information is available: Year 1 Year 2 Costs incurred during year €3,117,500 €2,582,500 Estimated total costs €7,250,000 €7,600,000 247 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The gross profit (in €) recognized in year 2 is closest to: A. 617,500. B. 880,000. C. 960,000. Solution: A Percentage of Completed Costs Incurred /Total Costs Anticipated × 100% Gross Profit %Complete × Future Anticipated Profit – Profit Already Recognized Year 1 Year2 Percent Completed 3,117,500 / 7,250,000 = % 5,700,000 / 7,600,000 = % Gross Profit % × (10,000,000–7,250,000) % × (10,000,000 –7,600,000) = 1,182,500 – 1,182,500 = 617,500 Q60-4 ★During 2010, Company A sold a piece of land with a cost of $6 million to Company B for $10 million. Company B made a $2 million down payment with the remaining balance to be paid over the next 5 years. It has been determined that there is significant doubt about the ability and commitment of the buyer to complete all payments. Company A would most likely report a profit in 2010 of: A. $4 million using the accrual method. B. $ million using the installment method. C. $2 million using the cost recovery method. Solution: B Under the installment method, the portion of the total profit that is recognized in each period is determined by the percentage of the total sales price for which the seller has received cash. For Company A 2/10 x 4 = $ million. Note, cost recovery method could be used in this case, but the reported profit would be $0. Q61-4 ★The following information is from a company’s investment portfolio: Investment Classification Held-to-maturity Market value, 31 Dec 2009 $ 17,000 Cost/Amortized cost 31 Dec 2009 22,000 Market value, 31 Dec 2010 10,000 Cost/Amortized cost 31 Dec 2010 20,000 If the investment is reclassified as Available-for-sale as of 31 December 2010, the balance sheet carrying value of the company’s investment portfolio would most likely: A. remain the same. B. decrease by $10,000. C. decrease by $12,000. Solution: B Held-for-trading and available-for-sale securities are carried at market value, whereas held-to-maturity securities are carried at amortized cost. If the investment is reclassified as available-248 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 for-sale in 2010, the carrying amount should be adjusted to its market value, which is $10,000. Compared with the amortized cost of $20,000, it’s a decrease of $10,000. Q62-4 Assume . GAAP applies unless otherwise between accrued revenue and expenses and cash flows result in the creation of assets and liabilities. Would each of the following revenue events result in the creation of an asset or a liability when the event originally occurs? Revenue is recognized before the cash is Cash is received before the revenue is received. recognized. A. Asset Asset B. Asset Liability C. Liability Asset Solution: B Revenue recognition before the cash is received will result in the creation of an accounts receivable, an asset, whereas when the cash is received before the revenue is recognized a liability, unearned revenue, is created. Q63-4 ★A real estate firm sold an industrial building to an automobile manufacturer. The price of the building was 12 million dollars with a cost of 8 million dollars. The purchaser made a down payment of 1 million dollars without any further payment. Recently, as the economy contracted, the purchaser met some financial difficulties. The firm can no longer assure the reception and timing of the remaining amount. If the company decided to use installment method, at the end of the first year, the profit recognized is closest to: A. 0. B. 333,333. C. 500,000. Solution: B Under installment method, the profit recognized equal to 1,000,000(12-8) / 12=333,333 Q64-4 Assume . GAAP applies unless otherwise the beginning of 2008, Florida Road Construction entered into a contract to build a road for the government Construction will take four years. The following information as of 31 December 2008 is available for the contract: Total revenue according to contract $10,000,000 Total expected cost $8,000,000 Cost incurred during 2008 $1,200,000 Under the completed contract method, how much revenue will be reported in 2008? A. None. B. $300,000. C. $1,500,000. 249 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A Under the completed contract method, no revenue would be reported until the project is completed. B is incorrect. This is the profit under the percentage-of-completion method. C is incorrect. This is the revenue under the percentage-of-completion method. Q65-4 Under IFRS, if the cost of a long-term contract cannot be estimated reliably, which of the following methods is preferred to recognize revenue? A. Recognize revenue up to the extent of cost incurred. B. Recognize revenue after the completeness of the contract. C. Recognize revenue as proportionate to cost incurred. Solution: A The completed-contract method is used when the outcome of a project cannot be reliably measured or the project is short-term. Q66-4 According to International Financial Reporting Standards, which of the following conditions should be satisfied in order to report revenue on the income statement? （2012-mock83） A. Payment has been received. B. Costs can be reliably measured. C. Goods have been delivered to the customer. Solution：B The IFRS conditions that should be met include that the costs incurred can be reliably measured, and it is likely that the economic benefits will flow to the entity, not the actual receipt of any payment, and that the significant risks and rewards of ownership have been transferred, which is normally when the goods have been delivered, but not always. Q67-4 A company entered into a three-year construction project with a total contract price of $ million and an expected total cost of $ million. The following table provides cash flow information relating to the contract: （2012-mock83） All figures in millions Year 1 Year 2 Year 3 Costs incurred and paid $ $ $ Amounts billed and payments received $ $ $ If the company uses the percentage-of-completion method, the amount of revenue recognized (in millions) in Year 2 is closest to: A. $. B. $. C. $. Solution：C 250 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The revenue reported is equal to the percentage of the contract that is completed in that period, where percentage completion is based on costs. In Year 2: ( ÷ ) × = . Q68-4 ★★Which of the following would most likely result in a current liability? （NotesB3-105 4） A. Possible warranty claims. B. Future operating lease payments. C. Estimated income taxes for the current year. Solution: C Estimated income taxes for the current year are likely reported as a current liability. To recognize the warranty expense, it must be probable, not just possible. Future operating lease payments are not reported on the balance sheet. Q69-4 ★If the outcome of a long-term contract can be measured reliably, the preferred accounting method under both IFRS and . GAAP is: （原版书Reading25） A. the cost recovery method. B. the completed contract method. C. the percentage-of-completion method. Solution：C. The preferred method is the percentage-of-completion method. The completed contract method should be used under . GAAP only when the outcome cannot be measured reliably. A method similar to, but not referred to as, the cost recovery method is used under IFRS when the outcome cannot be measured reliably. Q70-4 ★During 2009, Argo Company sold 10 acres of prime commercial zoned land to a builder for $5,000,000. The builder gave Argo a $1,000,000 down payment and will pay the remaining balance of $4,000,000 to Argo in 2010. Argo purchased the land in 2002 for $2,000,000. Using the installment method, how much profit will Argo report for 2009? （原版书Reading25） A. $600,000. B. $1,000,000. C. $3,000,000. Solution：A. The installment method apportions the cash receipt between cost recovered and profit using the ratio of profit to sales value (., $3,000,000 = $5,000,000 = 60 percent). Argo will, therefore, recognize $600,000 in profit for 2009 ($1,000,000 cash received X 60 percent). Q71-4 ★Apex Consignment sells items over the internet for individuals on a consignment basis. Apex receives the items from the owner, lists them for sale on the internet, and receives a 25 percent commission for any items sold. Apex collects the full amount 251 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 from the buyer and pays the net amount after commission to the owner. Unsold items are returned to the owner after 90 days. During 2009, Apex had the following information:  Total sales price of items sold during 2009 on consignment was €2,000,000.  Total commissions retained by Apex during 2009 for these items was €500,000. How much revenue should Apex report on its 2009 income statement?（原版书Reading25） A. €500,000. B. €2,000,000. C. €1,500,000. Solution：A. Apex is not the owner of the goods and should only report its net commission as revenue. Q72-4 ★★An e-commerce company Sells hotel room nights on its Website Under agreement from a large number of major hotel chains. The hotel chains grant the company flexibility for the rooms they supply to the Company's website and for the prices charged. These major chains bear the responsibility for providing all services once a customer books a room from the website. During 2011, the company received $5 million in payments from the sale of hotel rooms. The cost of these rooms was $ million, which does not include $250,000 in direct selling costs. Under U. S. GAAP, the company’s cost of Sales is closest to:（MOCK92-58） A. $250, 000. B. $4,500, 000. C. $4,750, 000. Solution：A. To report cost of sales under gross reporting (and include the cost of rooms), the company must meet four criteria: Criteria Met / Not Met The company must: Be the primary obligor under the contract. Not Met Bear the inventory risk and credit risk. Met Be able to choose its supplier. Met Also have reasonable latitude to establish pricing Met The first criterion is not met. The major hotel chains have the obligation of fulfilling the room contract once it is entered into. Because not all of these conditions are met, the company must use net reporting, where revenue is $ 500,000 and cost of sales is $250, 000. Revenue Recognition掌握概念及理解： R20-4 Revenue Recognition criteria  completion of the earnings process & assurance of payment. For example, Receiving cash before revenue recognition--unearned revenue  Expenses are recognized when incurred. 252 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Under IFRS: risk and reward is transferred, no continuing control or management over the goods sold, revenue can be readily measured, probable inflow of economic benefits, cost can be realiably measured (for service, the stage of completion can be measured)  Under GAAP: evidence of arrangement between the buyer and seller, product being delivered or service has been rendered, price is determined or determinable, reasonably sure of collecting money. R21-4 ★Revenue Recognition理解：  Under . GAAP 1) 对于long-term contract，可以选用POC和CC——此处定为考点，请重点掌握. Percentage of completion: 在工程的收入与支出确定时使用。通过已产生支出与总支出的比例来确定收入总额。Completed-contract:当工程的结果不确定时使用。收入，支出和利润均在工程完工后确认。 2) 对于分期付款合约，如果收款非常确定，那么可以按照普通的收入确定法来确定收入；如果收款不确定那么用installment sales；如果收款高度不确定那么用cost recovery 3) 熟记：POC和CC的区别: 重要指标，A是POC比较大；L是POC比较小；NI的波动是CC比较大；但是total CF一样大  Under IFRS 1) 对于long term contract，只有POC 2) 那么如果遇到长期合同，与美国准则下CC不同，在国际准则下选用收入的确认不超过成本，最后才确认毛利 3) 其它与美国准则一样 R22-4 ★installment method和cost recovery method如何区分（under US. GAAP） Under US. GAAP, Installment method and Cost recovery method are used  Installment method: when collectibility cann’t be reasonably estimated, profit is recognized as cash is collected.  Cost recovery method: when is highly uncertain, profit is recognized only when cash collected exceeds cost incurred.  假如：ABC firm considered the initial investment by the buyer was not substantial enough to warrant full recognition of the gain.  If the recovery of cost is assured if default.也就是说就算是default，公司也能确认cost是可以recovery的。所以题目中有这样的描述就是installment sales；  如果没有这样的描述，那么就是cost recovery。Cost recovery较谨慎。  例：Assume . GAAP (generally accepted accounting principles) applies unless otherwise noted. On June 15, 2007, a short term agreement was entered into sell the property and automatic equipment of ABC firm for USD 100,000. As the result of this sale, the subsidiary will no longer offer sales of title insurance or real estate closing servicing. ABC firm considered the initial investment by the buyer was not substantial enough to warrant full recognition of the gain. However, the recovery of the cost of the property is reasonably assured if the buyer defaults. Which of the revenue recognition method will be the most appropriate? 答：用installment sales method R23-4 ★Installment 在IFRS下如何进行利润确认  the discounted present value: is recognized at the time of sale 253 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  the difference between the installment payments and the discounted present value: is recognized as interest over time  If the outcome of the project cannot be reliably estimated:revenue recognition is similar to the cost recovery method. P9-4 Accounting Equation Q73-4 Assume . GAAP applies unless otherwise noted. An analyst gathered the following information from a company’s accounting records: Assets, December 31, 2007 $5,250,000 Liabilities, December 31, 2007 $2,200,000 Contributed capital, December 31, 2007 $1,400,000 Retained earnings, January 1, 2007 $800,000 Dividends declared during 2007 $200,000 The analyst’s estimate of net income for 2007 would be closest to: A. $650,000. B. $850,000. C. $1,050,000. Solution: C Owner’s equity = $5,250,000 - $2,200,000 = $3,050,000. Owners equity = contributed capital + ending retained earnings. Ending retained earnings = 3,050,000 - 1,400,000 = 1,650,000. Ending retained earnings = beginning retained earnings + net income - dividends. 1,650,000 = 800,000 + NI - 200,000; so Net income = $1,050,000. Q74-4 ★Assume . GAAP applies unless otherwise noted. HVG, LLC paid $12,000 of cash to a real estate company upon signing a lease on 31 December 2005. The payment represents a $4,000 security deposit and $4,000 of rent for each of January 2006 and February 2006. Assuming that the correct accounting is to reflect both January and February rent as prepaid, the most likely effect on HVG’s accounting equation in December 2005 is A. No net change in assets. B. A decrease in assets of $8,000. C. A decrease in assets of $12,000. Solution: A The payment of January rent represents prepaid rent (an asset), which will be adjusted at the end of January to record rent expense. Cash (an asset) decreases by $12,000. Deposits (an asset) increase by $4,000. Prepaid rent (an asset) increases by $8,000. There is no net change in assets. Q75-4 ★At the beginning of the year, a company had total shareholders' equity consisting of ￥50,000 in retained earnings, contributed capital at the start was ￥200,000. 254 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 During the year, the following events occurred: ￥ income reported . 42,000 paid 7,000 loss on available-for-sale investments 3,000 currency translation gain on foreign subsidiaries 8,000 of company stock, to be held as Treasury stock 6,000 The total shareholders' equity at the end of the year is closest to:(MOCK79-47) A. ￥268,000 B. ￥284,000 C. ￥287,000 Solution:C List and explain the components of owners' equity. Shareholders' Equity (￥) Start-of-year share capital 200,000 Less treasury stock (6,000) Beginning retained earnings 50,000 Plus net income 42,000 Less dividends paid (7,000) Ending retained earnings 85,000 85,000 Accumulated other comprehensive income Foreign $8,000 currency translation adjustment gain End-of-year shareholders' equity 287,000 The realized loss on the available-for-sale investments is already accounted for in net income. Q76-4 ★At the start of the year, a company's capital contributed by owners and retained earnings accounts had balances of $10,000 and $6,000, respectively. During the year, the following events took place: Net income earned $4,000 Interest paid on debt $500 Repayment of long-term debt $1,000 Proceeds from shares issued $1,000 Dividends paid $600 The end-of-year owners' equity is closest to:(MOCK79-58) A. $19,400 B. $19,900 C. $20,400 Solution: C Start-of-year capital contributed by owners $10,000 255 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Additional shares issued 1,000 Initial retained earnings 6,000 Net income 4,000 Dividends paid (600) Increase in retained earnings 3,400 3,400 Ending owners' equity $20,400 Q77-4 ★Which of the following elements represents an economic resource?（原版书Reading23） A. Asset. B. Liability. C. Owners' equity. Solution：A. An asset is an economic resource of an entity that will either be converted into cash or consumed. Q78-4 ★An analyst has collected the following information regarding a company in advance of its year-end earnings announcement (in millions): Estimated net income $ 200 Beginning retained earnings $1,400 Estimated distributions to owners $ 100 The analyst's estimate of ending retained earnings (in millions) should be closest to:（原版书Reading23） A. $1,300. B. $1,500. C. $1,700. Solution：B. Beginning retained earnings $1,400 + Net income 200 －Distributions to owners (100) = Ending retained earnings $1,500 Q79-4 ★A group of individuals formed a new company with an investment of $500,000. The most likely effect of this transaction on the company's accounting equation at the time of the formation is an increase in cash and: （原版书Reading23） A. an increase in revenue. B. an increase in liabilities. C. an increase in contributed capital. Solution：C. 256 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 This is a contribution of capital by the owners. Assets would increase by $500,000 and contributed capital would increase by $500,000, maintaining the balance of the accounting equation. Q80-4 ★The following information is available for a company ($): December 31, 2011: Total assets 100,000 Net income for the year 4,000 Dividends paid 0 Assets are equally financed with debt and equity 50% of the equity comes from contributed capital December 31, 2012: Total assets 92,000 Net income (loss) for the year (3,000) No new debt or equity issued or repurchased In 2012, the company most likely: (2014 Mock 98-50) A. paid a dividend of $5,000. B. did not pay a dividend because it incurred a loss. C. paid a dividend of $1,000. Solution：A. 2011 2012 ($) ($) Total assets (given) 100,000 92,000 Total debt (50% in 2011, no change in 2012) 50,000 50,000 Total equity 50,000 42,000 (Total assets – Total debt) Equity Components Contributed capital 25,000 25,000 (50% of Equity in 2011, no change in 2012) Retained earnings (solved for) 25,000 17,000 (Total equity – Contributed capital) Retained earnings = Opening RE + Net income – Dividends 2012 Retained earnings = 17,000 = 25,000 – 3,000 – Dividends Dividends = 5,000 R24-4 Accounting Equation掌握公式：  Assets = Liabilities + Owners’ equity 257 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Assets = Liabilities + Contributed Capital + Ending retained Earnings  Assets= Liabilities + Contributed Capital + Beginning Retained Earnings + Revenue – Expenses – Dividends  Owners equity = contributed capital + ending retained earnings. P10-4 Income Statement相关其它特殊交易的处理，如Barter Transactions Q81-4 ★Assume IFRS applies unless otherwise noted. Revenue from barter transactions should be measured based on the fair value of revenue from: A. Similar barter transactions with related parties. B. Similar barter transactions with unrelated parties. C. Similar non-barter transactions with unrelated parties. Solution: C Under IFRS, revenue for barter transactions should be measured based on the fair value of revenue from similar non-barter transactions with unrelated parties. Under . GAAP, revenue for barter transactions can be recognized at fair value only if a company has historically received cash payments for such services and can thus use this historical experience as a basis for determining fair value. Q82-4 ★One firm want to exchange a equipment with another firm, the market value of the equipment is 5,000,000, the original cost is 3,000,000, the revenue realized is: A. 3,000,000 B. 2,000,000 C. 5,000,000 Solution: C Under IFRS, revenue from barter transactions must be based on the fair value of revenue from similar nonbarter transactions with unrelated parties Q83-4 Apex Consignment sells items over the internet for individuals on a consignment basis. Apex receives the items from the owner, lists them for sale on the internet, and receives a 25 percent commission for any items sold. Apex collects the full amount from the buyer and pays the net amount after commission to the owner. Unsold items are returned to the owner after 90 days. During 2006, Apex had the following information:  Total sales price of items sold during 2006 on consignment was €2,000,000.  Total commissions retained by Apex during 2006 for these items was €500,000. How much revenue should Apex report on its 2006 income statement? A. €500,000. B. €.2,000,000 C. €1,500,000. Solution: A. 258 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Apex is not the owner of the goods and should only report its net commission as revenue. C is the amount paid to the owners. B is the total amount collected on behalf of the owners. Income Statement相关其它特殊交易的会计处理： R25-4 ★Barter Transactions  Under IFRS, 收入确认fair value of revenue from similar non-barter transactions with unrelated parties.  Under . GAAP, 收入确认为fair value only if a company has historically received cash payments for such services and can thus use this historical experience as a basis for determining fair value. R26-4 Round Trip：barter transactions的一种形式，比如A公司有一项服务卖给B公司，立刻又从B公司购入了等额的产品，此时A公司的收入等于费用，这样的交易不影响NI，也不影响CF R27-4 ★Gross Revenue and Net Revenue  Gross revenue: 公司分开记录收入和支出。  Net revenue: 公司只记录收入和支出的差额。  确认为gross revenue是有条件的：the company is the primary obligor under the contract, bears risk, can choose the supplier, and has reasonable latitude to establish price；  如果不满足以上条件，确认为net revenue，比如代售，代销确认的就是net P11-4 Income Statement的线下项目 Q84-4 ★Assume IFRS (international financial reporting standard) applies unless otherwise loss from the destruction of property in a fire would most likely be classified as A. Continuing operations. B. An extraordinary item. C. Discontinued operations. Solution: A A fire may be infrequent, but it would still be part of continuing operations. IFRS does not permit classification of an item as extraordinary. Discontinued operations relate to a decision to dispose of an operating division. Q85-4 ★Assume . GAAP applies unless otherwise 2007 Nagano Incorporated, a manufacturing company reported the following items on their income statement: Loss on disposal of fixed assets $60,000 Interest expense $73,400 The correct classification of each of these items on the income statement would be as a(n): Loss on disposal of fixed assets Interest expense A. Non-operating item operating item B. operating item nonoperating item C. operating item operating item Solution: B 259 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The loss on the disposal of fixed assets is an unusual or infrequent item, but it is still part of normal operating activities. The interest expense is the result of financing activities and would be classified as a nonoperating expense by nonfinancial service companies. Q86-4 ★Which of the following is least likely considered a nonoperating transaction from the perspective of a manufacturing firm? (Notes B3-81 11) A. Dividends received from available-for-sale securities. B. Interest expense on subordinated debentures. C. Accruing bad debt expense for goods sold on credit. Solution: C. Bad debt expense is an operating expense. The other choices are nonoperating items from the perspective of a manufacturing firm. Q87-4 A company suffered a substantial loss when its production facility was destroyed in an earthquake against which it was not insured. Geological scientists were surprised by the earthquake as there was no evidence that one had ever occurred in that area in the past. Which of the following statements is most accurate? The company should report the loss on its income statement: （2012-mock83） A. net of taxes if it reports under . GAAP. B. as an extraordinary item if it reports under IFRS. C. as an unusual item if it reports under . GAAP. Solution：A To qualify as an extraordinary item, an item must be both unusual in nature and infrequent in occurrence: The description of the earthquake meets these criteria. Extraordinary items are only allowed under . GAAP and are reported on the income statement net of tax. Income Statement的线下项目 R28-4 FASB要求，在一份基本的Income Statement中，为了得到Net Income，必须包含net income from continuing operations和non-recurring items. R29-4 ★Non-operating income:  For non-financial service company： 在equity or debt securities issued的投资，any dividend, interest (including amortization discount or premium) or profits from sales都视为non-operating income；  For financial service firms, interest income and expense are likely components of operating activities. R30-4 ★Non-recurring items分为三种  分别叫做：Unusual or infrequent items, Extraordinary items, Discontinued operations.  Unusual or infrequent items指Transactions or events that are either unusual in nature or infrequent in occurrence but not both.唯有它列示于net income from continuing operations 之上.包括：(1) gains or losses from the sale of assets or part of a business. (2) impariments, write-offs, write-downs and restructuring costs. 260 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Extraordinary items指性质高度异常的重大损益项目，该项目因企业日常业务活动以外的交易或事项产生，并预期不会再度发生，包含了灾难带来的损失，对于国外没收，及提前赎回债券的损失（美国准则有这项，但是国际准则没有这一项） R31-4 ★Discontinued Operations：the business line in disposal of or intended to dispose generate the income (earnings or loss net of tax); during the phase period (since measurement date to disposal date), should recognize the loss but not the gain. R32-4 ★Accounting changes 包括changes in accounting principles, changes in accounting estimates。  changes in accounting principles需要追溯调整，即retroprospective，放在R/E beginning（在美国准则下这一条已经不再显示了，现在来自于这里的变动全部直接调整期初留存收益）。  changes in accounting estimates一般是由于有了新的信息所导致的估计调整。不需要追溯调整，只考虑以后，即prospective。  error adjustment is recorded in Prior Period Adjustment P12-4 Basic EPS和Diluted EPS计算 Q88-4 ★Assume . GARP applies unless otherwise noted. An analyst gathered the following information about a company: Shares of common stock $1,000,000 Net income for the year $1,500,000 Par value of convertible bonds with a 4% coupon rate $10,000,000 Par value of cumulative preferred stock with a 7% dividend rate $2,000,000 Tax rate 30% The bonds were issued at par and can be converted into 300,000 common shares. All securities were outstanding for the entire year. Diluted earnings per share for the company are closest to: A. $ B. $ C. $ Solution: B Preferred stock dividends of $140,000 (* 2,000,000) should be deducted from net income to derive amount available for common shareholders: $1,360,000 = (1,500,000 - 140,000). Basic EPS = $1,360,000/1,000,000 or $ per share. Diluted EPS would consider the convertible bonds if they were dilutive. Interest on the bonds would be $400,000 and the after-tax add back to net income would be $400,000 () or $280,000. Diluted EPS would be $1,640,000/1,300,000 shares assuming conversion = $ per share. Q89-4 ★An analyst collected data about a company as follows: Net income $1,000, Debt outstanding with a coupon rate of 4% $5,000, 261 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Preferred stocks with dividend rate of 4% $1,000, Tax rate 35% Average weighted number of shares issued 500,000 The preferred stock can be converted to 10,000 common stocks, while the debt is not convertible. The diluted earnings per share is closest to: A. B. C. Solution: A If the convertible preferred shares were converted to common stocks, there would be no preferred dividends paid. Thus, we should add back the convertible preferred dividends that had previously been subtracted from net income in the numerator. Basic EPS = (net income – dividend from preferred stocks) / average weighted number of shares issued = ( – ) / = Diluted EPS = (net income – dividend from preferred stocks+ dividend from preferred stocks) / (average weighted number of shares issued + shares from conversion of preferred stocks) = ( – + ) / (+) = > , diluted EPS is . Q90-4 Cell Services (CSI) had 1,000,000 average shares outstanding during all of 2007. During 2007, CSI also had 10,000 options outstanding with exercise priccs of $10 each. The avcragc stock pricc of CST during 2007 was $15. For purposes of computing diluted earnings per share, how many shares would he used in the denominator? A. 1,000,000. B. 1,003,333. C. 1,010,000. Solution:B . With stock options, the treasury stock method must be used. Under that method, the company would receive $100,000 (10,000 × $10) and would repurchase 6,667 shares ($100,000/$15). The shares for the denominator would be: Shares outstanding 1,000,000 Options exercised 10,000 Treasury shares purchased (6,667) Denominator 1,003,333 Q91-4 ★★What is least likely to cause a distortion in the true free cash flow of a company assuming that a large stock buyback has taken place to offset the dilutions from options exercised? A. Stock bought back on the open market. B. Classifying the cash expended to buy back stock as a financing activity. C. Classifying the tax benefit of option exercises as an operating cash flow. 262 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution：A. Most stock buy backs occur in the open market and do not result in any distortion of cash flow. Q92-4 ★★Which of the following is the least important reason why an analyst should review the cash flow statement, the stockholders' equity statement, and the notes to the financial statements for information regarding stock options? To determine:（2012原版书后重点题） A. the volume of options exercised in the period. B. the extent to which cash flows are affected by the tax benefit on stock options. C. whether the company follows APB No. 25 or SFAS 123(R) to account for stock options. Solution：C. Since 2005, . GAAP require all companies to follow SFAS 123(R) which requires options to be expensed. R33-4 EPS掌握计算： 1) 公式： basicnet income-preferred dividednds EPS=weighted average number of common shares outstandingDiluted EPS＝（NI-Preferred dividend）/[发行在外普通股加权数＋Option×（1-X/平均市场价格）]，如果存在Stock option时，如果平均的市场价格>执行价X，则用此公式。 2) 步骤：firstly, Calculate basic EPS; then，to identify dilutive securities; in the end, to calculate diluted EPS 3) 关键  ★考试中经常出现的是weighted average number of common shares outstanding，要记得stock dividend和stock split要追溯处理，stock new issue和repurchase只要时间加权  Diluted EPS的计算，就是convertible bond，convertible preferred stock和stock option，warrant是否会让basic EPS稀释。对于各自可稀释性债券分子，分母需要考虑什么，一定要记熟  ★如果公司有option或者warrant的情况下，计算的Diluted EPS用的是treasury stock method，如果在考试中遇到这个称法不要觉得陌生，其实不影响计算的过程。事实上，treasury stock method 的意思是假设公司使用收入的期权实行费用来回购股票，抵消一部分稀释。 当期权执行价格低于股票市场平均价格，该期权是稀释的。  ★注意，在计算可转债带来的稀释时，不要忽略税盾。  Treasury stock投票权问题：Treasury stock has no voting rights and does not receive dividends. P13-4 Comprehensive Income Q93-4 Assume . GARP applies unless otherwise noted. For financial assets classified as available for sale, how are unrealized gains and losses reflected in shareholders’ equity? A. They are not recognized. 263 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. They flow through retained earnings. C. As a separate line item (other comprehensive income). Solution: C For financial assets classified as available for sales, unrealized gains and losses are not recorded on the income statement but do appear on the balance sheet. Shareholders’ equity is adjusted through a separate line item for valuation gains and losses termed “other comprehensive income. Q94-4 ★Which of the following transactions affects owners' equity but does not affect net income?(NotesB3-83 19) A. Foreign currency translation gain. B. amount on a bond issued at par. C. Dividends received from available-for-sale securities. Solution: A A foreign currency translation gain is not included in net income but the gain increases owners' equity. Dividends received are reported in the income statement. The repayment of principal does not affect owners' equity. Q95-4 Which of the following is not included in other comprehensive income? A. Adjustments for minimum pension liability. B. Unrealized gains and losses from cash flow hedging derivatives. C. Unrealized gains and losses from hold-for-maturity securities. Solution: C OCI includs:  Foreign currency translation gains and losses.  Adjustments for minimum pension liability.  Unrealized gains and losses from cash flow hedging derivatives.  Unrealized gains and losses from available-for-sale securities. Unrealized gains and losses from hold-for-maturity securities is reported in income statement as holding period gains and losses. Q96-4 Selected information for a company and the common size data for its industry are provided below. Company(￡) Common Size Industry Data (% of sales) EBIT 76,000 28,0 Pretax profit 66,400 Net income 44,488 Sales 400,000 Total assets 524,488 264 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Total equity 296,488 ROE % % The main driver of the company's inferior ROE compared to that of the industry is most likely the result of its lower:(MOCK79-49) A. EBIT margin B. tax burden ratio C. Interest burden ratio Solution: A Calculation Company Industry EBIT Margin EBIT/Sales 76,000/400,000= Tax Burden ratio Net Inc/EBT 44,488/66,400= Interest Burden ratio EBT/EBIT 66,400/76,000= The company has a higher interest burden ratio bur a lower EBIT margin than the industry, and the same tax burden ratio; the lower EBIT margin relative to the industry is the cause of the company's poor relative performance EBT: Pretax profit (earnings before tax) Net Inc: Net Income Q97-4 The following information is available from a company’s accounting records: （2012mock85-48） €millions Revenues for the year 12,500 Total expenses for the year 10,000 Gains from available-for-sale securities 1,475 Loss on foreign currency translation adjustments on a foreign subsidiary 325 Dividends paid 500 The company’s total comprehensive income (in millions) is closest to: A. €1,150. B. €3,150. C. €3,650. Solution: C Total comprehensive income = Net income + other comprehensive income Net Income = revenues - expenses Other comprehensive income includes gains or losses on available-for-sale securities and translations adjustments on foreign subsidiaries. (Revenues - expenses) + gain on AFS -loss on FX translation (12,500 - 10,000) + 1,475 -325 = 3,650. Use the following information to answer 2 Questions followed. At the beginning of the year, Company P purchased 1,000 shares of Company S for $80 per 265 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 share. During the year, Company S paid a dividend of $4 per share. At the end of the year, Company S's share price was $75. Q98-4 What amount should Company P report on its balance sheet at year-end if the investment in Company S is considered a trading security, and what amount should be reported if the investment is considered an available-for-sale security? (NotesB3-106 10) Trading Available-for-sale A. $75,000 $75,000 B. $75,000 $80,000 C. $80,000 $80,000 Solution: A Both trading securities and available-for-sale securities are reported on the balance sheet at their fair values. At year-end, the fair value is $75,000 [$75 per share x 1,000 shares]. Q99-4 ★★★What amount of investment income should Company P recognize in its income statement if the investment in Company S is considered trading, and what amount should be recognized if the investment is considered available-for-sale? (NotesB3-107 11) Trading Available-for-sale A. ($,1000) ($,1000) B. ($,1000) $4,000 C. ($5,000) $4,000 Solution: B A loss of $1,000 is recognized if the securities are considered trading securities ($4 dividend x $1,000 shares) — ($5 unrealized loss x 1,000 shares). Income is $4,000 if the investment in Company S is considered available-for-sale [$4 dividend x $1,000]. Q100-4 ★Selected data from Alpha Company's balance sheet at the end of the year follows: Investment in Beta Company, at fair value $150,000 Deferred taxes $86,000 Common stock, $1 par value $550,000 Preferred stock, $100 par value $175,000 Retained earnings $893,000 Accumulated other comprehensive income $46,000 The investment in Beta Company had an original cost of $120,000. Assuming the investment in Beta is classified as available-for-sale, Alpha's total owners' equity at year-end is closest to: (NotesB3-107 13) A. $1,618,000. B. $1,664,000. C. $1,714,000. 266 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B Total stockholders' equity consists of common stock of $550,000, preferred stock of $175,000, retained earnings of $893,000, and accumulated other comprehensive income of $46,000, for a total of $1,664,000. The $30,000 unrealized gain from the investment in Beta is already included in accumulated other comprehensive income. Comprehensive Income的基本了解 R34-4 全面综合收益Comprehensive Income：the change in equity (net asset) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources，单列在NI后面的，不放在I/S中。 R35-4 ★CI=NI + other comprehensive income（在股东权益变动表中也包含这些项目, IFRS下没有CI，但有OCI） R36-4 ★Other comprehensive Income  Foreign currency translation adjustment on a foreign subsidiary  Unrealized G/L on derivatives contracts accounted for as cashflow hedges  Unrealized G/L on available for sale securities  Minimum pension liability adustment R37-4 Accumulated other comprehensive income aggregates past and current OCI并显示在B/S中的equity中（IFRS没有明确规定在B/S中列出Accumulated other comprehensive income的数额） P14-4 Understanding balance sheet Q101-4 Resources controlled by a company as a result of past events are: A. equity. B. assets. C. Liabilities. Solution: B. Assets are resources controlled by a company as a result of past events. Q102-4 ★The carrying value of inventories reflects: A. their original cost. B. their current value. C. the lower of original cost or net realizable value. Solution: C Inventories are carried at historical cost, unless the current replacement cost of the inventory is less. Q103-4 ★Under IFRS, the minority interest in consolidated subsidiaries is presented on the balance sheet: A. as a long-term liability. B. separately, but as a part of shareholders' equity. 267 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. as a mezzanine item between liabilities and shareholders' equity. Solution: B . IFRS requires that minority interest in consolidated subsidiaries be classified as shareholders' equity. P15-4 Accounting Treatment to Marketable Securities Q104-4 ★Which of the following is the least appropriate accounting treatment for marketable securities under IAS No. 39? Category Measurement Method Realized Gains &Losses Reported In A. Trading Fair Value Income Statement B. Available for Fair Value Equity sale C. Held to Amortized Cost Income Statement Maturity Solution: B All categories have realized gains or losses treated in the same way; they are reported on the income statement. It is the unrealized gains and losses that are included in other comprehensive income (in equity) for available-for-sale securities carried at market value. Q105-4 ★Assume . GAAP applies unless otherwise noted. A company issued bonds in 2006 that mature in 2016. The measurement basis used for the bonds on the 2008 balance sheet will be: A. Market value. B. Historical cost. C. Amortized cost. Solution: C Bonds payable issued by a company are financial liabilities measured at amortized cost. Q106-4 Assume a company has the following portfolio of marketable securities which was acquired at the end of 2009: Category Original Cost in € Fair Market Value in € as at the Year End, 2009 as at the Year End, 2010 Held for trading 12,000,000 12,500,000 Available for sale 17,000,000 16,000,000 If the company reports under IFRS instead of . GAAP, its net income will most likely be: A. the same. B. €500,000 lower. C. €500,000 higher. Solution: A 268 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Whether securities are classified as held for trading or available for sale, they are measured at their fair value on the balance sheet, but all gains/losses on held for trading securities are reported on income statements. The unrealized gains/losses on available for sale securities are reported in equity. This treatment is the same for both IFRS and . GAAP reporting. Q107-4 ★★Which of the following statements is most accurate regarding cash flow statements prepared under IFRS and . GAAP? A. Under . GAAP, bank overdrafts should be classified as a financing cash flow. B. Under IFRS, interest paid can be reported either as an operating or an investing cash flow. C. Both the direct and indirect formats of cash flow statements are allowed under IFRS and . GAAP, but indirect is encouraged under IFRS only. Solution: A Under . GAAP, bank overdrafts are not considered part of cash and cash equivalents and are classified as financing cash flows. Q108-4 Distinguishing between current and non-current items on the balance sheet and presenting a subtotal for current assets and liabilities is referred to as: A. a classified balance sheet. B. an unclassified balance sheet. C. a liquidity-based balance sheet. Solution: A A classified balance sheet is one that classifies assets and liabilities as current or non-current and provides a subtotal for current assets and current liabilities. A liquidity-based balance sheet broadly presents assets and liabilities in order of liquidity. Q109-4 The initial measurement of goodwill is most likely affected by:（原版书Reading26） A. an acquisition's purchase price. B. the acquired company's book value. C. the fair value of the acquirer's assets and liabilities. Solution: A. Initially, goodwill is measured as the difference between the purchase price paid for an acquisition and the fair value of the acquired, not acquiring, company's net assets (identifiable assets less liabilities). Q110-4 For financial assets classified as available for sale, how are unrealized gains and losses reflected in shareholders' equity? （原版书Reading26） A. They are not recognized. B. They flow through retained earnings. C. They are a component of accumulated other comprehensive income. Solution：C. 269 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 For financial assets classified as available for sale, unrealized gains and losses are not recorded on the income statement and instead are part of other comprehensive income. Accumulated other comprehensive income is a component Of shareholders' equity. Q111-4 ★★When comparing financial statements prepared under IFRS with those prepared under . generally accepted accounting principles, analysts may need to make adjustments related to:（原版书Reading35） A. realized losses. B. unrealized gains and losses for trading securities. C. unrealized gains and losses for available-for-sale securities. Solution：C. IFRS makes a distinction between unrealized gains and losses on available-for-sale debt securities that arise due to exchange rate movements and requires these changes in value to be recognized in the income statement., whereas . GAAP does not make this distinction. Q112-4 Unrealized gain or loss of available-for-ale should be recognized in： A. Income statement B. Balance sheet C. Cash flow statement Solution: B Available-for-sale securities are debt and equity securities that are not expected to be held to maturity or traded in the near term. Like trading securities, available-for-sale securities are reported on the balance sheet at fair value. However, any unrealized gains and losses are not recognized in the income statement, but are reported in other comprehensive income as a part of shareholders' equity. Q113-4 ★★Oil Exploration LLC paid $45,000 in printing, legal fees, commissions, and other costs associated with its recent bond issue. It is most likely to record these costs on its financial statements as: A. an asset under . GAAP and reduction of the carrying value of the debt under IFRS. B. a liability under . GAAP and reduction of the carrying value of the debt under IFRS. C. a cash outflow from investing activities under both . GAAP and IFRS. Solution: A. Under . GAAP, expenses incurred when issuing bonds are generally recorded as an asset and amortized to the related expense (legal, etc.) over the life of the bonds. Under IFRS, they are included in the measurement of the liability. The related cash flows are financing activities. 金融资产和负债的计量 R38-4 ★判断证券所属的种类，Held-to-maturity、Trading securities还是Available-to-sale，并了解这三种证券不同的accounting treatment（考试常考）： 270 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Category Measurement Unrealized/Realized Gains or Losses Held-to-maturitAmortized cost Unrealized: not reported y Realized: reported in income statement Trading Fair value Unrealized: reported in income securities statement and B/S Realized: reported in income statement Available-to-sale Fair value Unrealized: reported in equity and B/S Realized: reported in income statement ★Dividend and interest income and realized gains and losses are recognized in the income statement for all three classifications of securities. 三种marketable securities 在与IFRS下基本一致：对于Realized gain/loss在I/S中确认；对于AFS，Unrealized G/L在OCI中确认；对于trading，Unrealized G/L在I/S中确认。两者唯一的差别是，对于Debt AFS，在IFRS下，对于汇率变化的影响在I/S中确认；在GAAP下，对于汇率变化的影响全部在OCI中确认。 R39-4 金融资产和负债的计量（需要了解）： Measured at fair value Measured at cost or amortized cost Financial assets: Financial assets: A. TS(stocks and bonds) A. Loans and B. AFS(stocks and bonds) receivable C. Derivatives whether stand-alone or embedded in B. HTM(bonds) non-derivative instruments D. Non-derivative instr ments with fair value exposures hedged by derivative(A) Financial liabilities: Financial liabilities: A. Derivatives All other B. Financial liabilities held for trading liabilities(such as C. Non-derivative instruments with fair value bonds payables, notes exposures hedged by derivative(L) payable) P16-4 掌握bad debt的计算： Q114-4 ★★Based on the following information about a company, the bad debt expense (in millions) for 2011 is closest to: （2012-mock85-49） ￡millions 2011 2010 Accounts receivables，gross 6,620 4,840 Allowance for doubtful accounts 92 56 Write-offs during the year 84 42 A. £36. B. £84. 271 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. £120. Solution: C The allowance for doubtful accounts increases by the bad debt expense recognized for the year and decreases by the amounts written off during the year. Beginning balance allowance 56 Plus bad debt expense ? Less write-offs (84) Ending balance allowance 92 Therefore Bad debt expense =120 R40-4 掌握bad debt的计算： Beginning balance allowance + Bad expenses — write-offs = Ending balance allowance Bad debt 会增加 allowance for debtful accounts（contra-assets accounts） Bad debt 注销会减少 gross receivable and allowance account P17-4 理解各种activity的classification Q115-4 Assume . GAAP applies unless otherwise noted. The sale of a building for cash would be classified as what type of activity on the cash flow statement? A. Operating. B. Investing. C. Financing. Solution: B Purchases and sales of long-term assets are considered investing activities. Note: Absent information to the contrary, it is assumed that the sale of a building involves cash. If, for example, the transaction had involved the exchange of a building for common stock or the exchange of a building for a long-term note payable, it would have been considered a significant non-cash activity. Q116-4 Which of the following is an example of a financing activity on the cash flow statement under . GAAP? A. Payment of dividends. B. Receipt of dividends. C. Payment of interest. Solution: A Answers B and C are items that are included in operating cash flows. Note: International accounting standards allow companies to include receipt of interest and dividends as either operating or investing cash flows, and international accounting standards allow companies to 272 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 include payment of interest and dividends as either operating or financing cash flows Q117-4 When a company buys shares of its own stock to be held in treasury, it records a reduction in: (原版书Reading26) A. both assets and liabilities. B. both assets and shareholders' equity. C. assets and an increase in shareholders' equity. Solution：B. Share repurchases reduce the company's cash (an asset). Shareholders' equity is reduced because there are fewer shares outstanding and treasury stock is an offset to owners' equity. Q118-4 ★Miller Corporation has 160,000 shares of common stock authorized. There are 92,000 shares issued and 84,000 shares outstanding. How many shares of treasury stock does Miller own?(NotesB3-107 12) A. 8,000 B. 68,000 C. 76,000 Solution：A. The difference between the issued shares and the outstanding shares is the treasury shares. Except the solution is A rather than B, all other explanation is correct. Q119-4 ★★An analyst has gathered the following information about a company: （2012-mock85-50） Cdn $ millions Cash flow from operating activities Cash flow from investing activities () Cash flow from financing activities Net change in cash for the year Interest paid(included in CFO) Taxes pa id(tax rate of 30％) Total debt，end of year The cash flow debt coverage ratio for the year is closest to: A. %. B. %. C. %. Solution: A Cash flow debt coverage ratio = CFO ÷ Total debt. ÷ = % 同时，还有比较重要的一个coverage ratio的公式是： Cash flow interest coverage ratio= (CFO+Interest paid+Taxes paid)/Interest paid 273 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Other cash flow ratio的公式总结如下： Other cash flow ratios Performance ratios Calculation Cash flow to revenue CFO/ Revenue Cash return on assets CFO/ Average total assets Cash return on equity CFO / Average total equity Cash to income CFO/ Operating income Cash flow per share (CFO – Preferred dividends) / Weighted average number of common shares Other cash flow ratios Coverage ratio Calculation Debt coverage CFO / Total debt Interest coverage (CFO+Interest paid+Taxes paid)/Interest paid Reinvestment CFO / Cash paid for long-term assets Debt payment CFO / Cash long-term debt repayment Dividend payment CFO/ dividend paid Investing and financing CFO / Cash outflows from investing and financing activities Q120-4 ★★A company recorded the following events in 2010: （2012-mock85-61） $’000s Purchase of securities for trading purposes 240 Proceeds from the sale of trading securities 300 Proceeds from issuance of bonds 500 Purchase of 30% of shares of an affiliated company 275 On the 2010 statement of cash flows, the company’s cash flow from investing activities (in ‘000s) is closest to: A. -$275. B. -$215. C. $285. Solution: A Only the cash flows for the purchase of the shares in an affiliated company are cash from investing activities; therefore the net amount is - $275,000. Cash flows from trading securities are operating activities. Q121-4 The following financial statement data are available for a company:（MOCK92-50） Metric (€ thousands) Net income 500 Depreciation 150 Cash flow from operations 600 274 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Free clash flow to the firm 300 Beginning total assets 4,000 Ending total assets 6,000 Book value 3,000 The company’s cash return on assets ratio is closest to: A. 10%. B. 12%. C. 13%. Solution: B Cash return on assets = CFO / Average total assets. = % 60012 (6,000υ4,000) Q122-4 Which of the following items is least likely considered a cash flow from financing activity under . GAAP? (NotesB3-134 6) A. Receipt of cash from the sale of bonds. B. Payment of cash for dividends. C. Payment of interest on debt. Solution：C. The payment of interest on debt is an operating cash flow under . GAAP. Q123-4 Which of the following would be least likely to cause a change in investing cash flow? (NotesB3-134 7) A. The sale of a division of the company. B. The purchase of new machinery. C. An increase in depreciation expense. Solution：C. Depreciation does not represent a cash flow. To the extent that it affects the firm's taxes, an increase in depreciation changes operating cash flows, but not investing cash flows. Q124-4 ★Which of the following is least likely a change in cash flow from operations under . GAAP? (NotesB3-134 8) A. A decrease in notes payable. B. An increase in interest expense. C. An increase in accounts payable. Solution：A A change in notes payable is a financing cash flow. 275 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 . Q125-4 Where are dividends paid to shareholders reported in the cash flow statement under . GAAP and IFRS? (NotesB3-132 9) . GAAP IFRS A. Operating or financing activities Operating or financing activities B. Financing activities Operating or financing activities C. Operating activities Financing activities Solution：B Under . GAAP, dividends paid are reported as financing activities. Under IFRS, dividends paid can be reported as either operating or financing activities. Q126-4 Martin, Inc. had the following transactions during 20X7: Purchased new fixed assets for $75,000. Converted $70,000 worth of preferred shares to common shares. Received cash dividends of $12,000. Paid cash dividends of $21,000. Repaid mortgage principal of $17,000. Assuming Martin follows . GAAP, which of the following amounts represents Martin's cash flows from investing and cash flows from financing in 20X7, respectively? (NotesB3-136 24) Cash flows from investing Cash flows from financing A. ($5,000) ($21,000) B. ($75,000) ($21,000) C. ($75,000) ($38,000) Solution：C Purchased new fixed assets for $75,000 — cash outflow from investing Converted $70,000 of preferred shares to common shares — noncash transaction Received dividends of $12,000 — cash inflow from operations Paid dividends of $21,000 — cash outflow from financing Mortgage repayment of $17,000 — cash outflow from financing CFI = —75,000 CFF = —21,000 — 17,000 = —$38,000 Q127-4 In preparing a common-size cash flow statement, each cash flow is expressed as a percentage of: (NotesB3-137 25) A. total assets. B. total revenues. C. the change in cash. Solution：B The cash flow statement can be converted to common-size format by expressing each line item as a percentage of revenue. Q128-4 ★Which of the following transactions is least likely to increase reported operating 276 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 cash flow for the period? A. Financing of payables. B. Securitization of receivables. C. Exercise of employee stock options. Solution：A Financing payables actually reduces operating cash flow as payables are reclassified as short-term debt. Companies may decrease operating cash flows reported under the indirect method by using this strategy. Securitization of receivables increases operating cash flows as the funds received are treated as an operating cash inflow. Exercise of employee stock options increases operating cash flows due to tax benefits associated with exercise. Q129-4 ★★Two firms are identical except that the first pays higher interest charges and lower dividends, while the second pays higher dividends and lower interest charges. Both prepare their financial statements under . GAAP. Compared to the first, the second will have cash flow from financing (CFF) and earnings per share (EPS) that are: CFF EPS A. The same Higher B. Lower Higher C. Lower The same Solution：B Interest paid is an operating cash flow, and dividends paid are a financing cash flow, so the firm that pays higher dividends will have lower CFF. The firm with lower interest expense will have higher EPS. 理解各种Activities的区分： R41-4 三种activities  Operating activities和每天的运营相关的现金流的流进流出  Investing activities和由于投资引起的购买或出售相关  Financing activities包含长期借钱，还钱，发新股，回购，分红（不包括付息）, 但是对于金融公司，这些都属于operating activities. R42-4 ★特别注意公司的主营业务和投资产品的主要性质  如果是银行，存款和贷款就是Operating activities，因为本身就是银行的主营业务  如果投资的产品持有期很短，高流动性，或者本身就是以交易为目的，就不考虑在Investing activities当中 P18-4 CFO直接法和间接法的理解 Q130-4 ★★Assume . GAAP applies unless otherwise noted. An analyst gathered the following information from a company’s 2005 financial statements ($ millions): Balances as of year ended 31 December 2004 2005 Retained earnings 120 145 Accounts receivable 38 43 277 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Inventory 45 48 Accounts payable 36 29 The company declared and paid cash dividends of $10 million in 2005 and recorded depreciation expense in the amount of $25 million for 2005. The company’s 2005 cash flow from operations ($ millions) was closest to A. 25. B. 35. C. 45. Solution: C Net income (NI) for 2005 can be computed as the change in retained earnings, $25, plus the dividends paid in 2005, $10. NI can also be calculated from the formula: beginning retained earnings + NI — dividends paid = ending retained earnings. Depreciation of $25 would be added back to net income while the increases in accounts receivable, $5, and in inventory, $3, would be subtracted from net income because they are uses of cash. The decrease in accounts payable is also a use of cash and, therefore, a subtraction from net income. Thus, cash flow from operations for 2005 is $25 + $10 + $25 — $5 — $3 — $7 = $45 ($ millions). Q131-4 ★★Using the following information, what is the firm's cash flow from operations?(NotesB3-132 1) Net income $120 Decrease in accounts receivable 20 Depreciation 25 Increase in inventory 10 Increase in accounts payable 7 Decrease in wages payable 5 Increase in deferred tax liabilities 15 Profit from the sale of land 2 A. $158 B. $170 C. $174 Solution: B Net income — profits from sale of land + depreciation + decrease in receivables — increase in inventories + increase in accounts payable — decrease in wages payable + increase in deferred tax liabilities = 120 — 2 + 25 + 20 — 10 + 7 — 5 + 15 = $170. Note that the profit on the sale of land should be subtracted from net income to avoid double counting the gain in net income and investing activities. Q132-4 According to the direct method, calculate the cash received from customer: 278 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Seagraves Supply Company Operating Cash Flow — Direct Method For the year ended December 31, 20X7 Cash paid to suppliers 265,866 Cash paid for operating expenses 124,784 Cash paid for interest 4,326 Cash paid for taxes 14,956 Operating cash flow $20,048 A. $425,654 B. $429,980 C. $275,698 Solution: B 265,866 + 124,784 + 4,326 + 14,956 + 20,048 = $429, 980 Q133-4 ★★The following items are from a company’s cash flow statement. Classification of cash flow Description Amount (£000s) Operating activities Cash received from customers 55,000 Investing activities Interest and dividends received 10,000 Financing activities Net repayment of revolving credit loan 12,000 Which of the following standards and formats did the company most likely use in the preparation of its financial statements? (Mock84-51) A. IFRS, direct format B. IFRS, indirect format C. Either IFRS or . GAAP, direct format Solution: A The direct method of cash flow statement presentation shows the specific cash inflows and outflows that result in reported cash flow from operating activities (cash from customers, cash to suppliers, etc.). Companies using IFRS can decide to report interest and dividend receipts as either an investing or operating activity, whereas under . GAAP, they must report such income as an operating activity. The listed operating and investment activities indicate that the company reports under IFRS, using the direct method. Q134-4 Assuming . GAAP, use the following data to answer Questions 2 through 4. Net income $45 Depreciation 75 Taxes paid 25 Interest paid 5 279 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Dividends paid 10 Cash received from sale of company building 40 Sale of preferred stock 35 Repurchase of common stock 30 Purchase of machinery 20 Issuance of bonds 50 Debt retired through issuance of common stock 45 Paid off long-term bank borrowings 15 Profit on sale of building 20 Cash flow from operations is: (NotesB3-132 2) A. $70 B. $100 C. $120 Solution: B Net income — profit on sale of building + depreciation = 45 — 20 + 75 = $100. Note that taxes and interest are already deducted in calculating net income, and that the profit on the sale of the building should be subtracted from net income. Q135-4 ★If a nonfinancial company securitizes its accounts receivables for less than their book value, the most likely effect on the financial statements is to increase: A. net income. B. cash from operations. C. cash from financing activities. Solution: B The securitization of accounts receivables for less than book value would result in a loss on the income statement, but an increase in the cash from operations, reflecting the proceeds received. Q136-4 ★A conversion of a face value $1,000,000 convertible bond for $1,000,000 of common stock would most likely be: A. reported as a $1,000,0011 financing cash outflow and inflow. B. reported as supplementary information to the cash flow statement. C. reported as a $1,000,000 financing cash outflow and a $1,000,000 investing cash inflow. Solution: B. Noncash transactions, if significant, are reported as supplementary information, not in the investing or financing sections of the cash flow statement. Q137-4 ★★Assume . GAAP applies unless otherwise noted. In 2008, a company reported 280 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 net income of $200 million and cash flow from operations of $120 million. All else equal, the most likely explanation for the difference between net income and cash flow from operations in 2008 is that the company: A. Tightened credit policies and increased collection efforts during the year. B. Sold a long-term investment for an amount equal to book value at the end of the year. C. Increased raw materials inventory in anticipation of increased sales at the end of the year. Solution: C NI=$200 million and CFO=$120, so NI>CFO, and CFO=NI + dep./amor. - gain + loss - changes in current assets + changes in current liabilities. Tightened credit policies and increased collection efforts will increase CFO; and to sell a long-term investment for an amount equal to book value at the end of the year is an investment activity, so increased raw materials inventory in anticipation of increased sales at the end of the year will lead to CFO decreased, and less than NI. Q138-4 Assume . GAAP applies unless otherwise noted. An analyst gathered the following information about three equipment sales that a company made at the end of the year: Original Cost Accumulated Depredation at Date of Sale Sale Proceeds 1 $200,000 $150,000 $70,000 2 $200,000 $200,000 $30,000 3 $300,000 $250,000 $40,000 All else equal for that year, the company’s cash flow from operations will most likely be: A. $40,000 less than net income. B. $10,000 less than net income. C. $40,000 more than net income. Solution: A Equipment sale 1 results in a gain of $20,000, sale 2 results in a gain of $30,000, and sale 3 results in a loss of $10,000. The net gain is $40,000. The amount that would be deducted from net income to determine CFO is equal to the net gain of $40,000. Q139-4 Assume . GAAP applies unless otherwise noted. The following information is from a company’s 2007 financial statements ($ millions): Balances as of the year ended 31 December 2007 2006 Retained earnings 140 120 Accounts receivable 43 38 Inventory 48 45 Accounts payable 29 36 The company declared and paid cash dividends of $5 million in 2007 and recorded depreciation expense of $25 million for 2007. The company’s 2007 cash flow from operations ($ millions) was closest to: 281 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. 25. B. 30. C. 35. Solution: C The change in retained earnings is $20 and dividends are paid from retained earnings. 2007 net income would equal the change in retained earnings plus any dividends paid during 2007. Depreciation expense would be added to net income and the changes in balance sheet accounts would also be considered to determine cash flow from operations. $20 + 5 (dividends) + 25 (depreciation) - 5 (increase in receivables) - 3 (increase in inventory) - 7 (decrease in payables) = $35 million. Q140-4 ★ Interest paid is classified as an operating cash flow under:（原版书reading27） A. . GAAP but may be classified as either operating or investing cash flows under IFRS. B. IFRS but may be classified as either operating or investing cash flows under . GAAP. C. . GAAP but may be classified as either operating or financing cash flows under IFRS. Solution：C. Interest expense is always classified as an operating cash flow under . GAAP but may be classified as either an operating or financing cash flow under IFRS. Q141-4 Interest payable decreased during a company’s fiscal year. Compared with the amount of cash interest payments made, interest expense is most likely. (MOCK92-61) A. lower. B. higher. C. the same. Solution：A. If the interest payable decreases during the year, then the interest expense on an accrual basis will be lower than the amount of cash interest payments. The cash paid would be the full amount of the expense plus the amounts paid to reduce the interest payable. For example: Interest expense 100 Plus decrease in interest payable +12 Cash paid for interest 112 Q142-4 ★★An analyst gathered the following information from a company's 2010 financial statements (in $ millions): （原版书reading27） Year Ended 31 December 2009 2010 Net sales Cost of goods sold (D&A excluded) Accounts receivable 282 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Inventory Accounts payable Based only on the information above, the company's 2010 statement of cash flows in the direct format would include amounts (in $ millions) for cash received from customers and cash paid to suppliers, respectively, that are closest to: cash received from customers cash paid to suppliers A. B. C. Solution：C. Cash received from customers = Sales + Decrease in accounts receivable = + = . Cash paid to suppliers = Cost of goods sold + Increase in inventory — Increase in accounts payable = + — = . Q143-4 ★An analyst gathered the following information from a company's 2010 financial statements (in $ millions): Balances as of Year Ended 31 December 2009 2010 Retained earnings 120 145 Accounts receivable 38 43 Inventory 45 48 Accounts payable 36 29 In 2010, the company declared and paid cash dividends of $10 million and recorded depreciation expense in the amount of $25 million. The company considers dividends paid a financing activity. The company's 2010 cash flow from operations (in $ millions) was closest to: （原版书reading27） A. 25. B. 45. C. 75. Solution：B. All dollar amounts are in millions. Net income (NI) for 2010 is $35. This amount is the increase in retained earnings, $25, plus the dividends paid, $10. Depreciation of $25 is added back to net income, and the increases in accounts receivable, $5, and in inventory, $3, are subtracted from net income because they are uses of cash. The decrease in accounts payable is also a use of cash and, therefore, a subtraction from net income. Thus, cash flow from operations is $25 + $10 + $25 — $5 — $3 — $7 = $45. Q144-4 The following items are from a company’s cash flow statement. （2012mock84） Classification of cash flow Description Amount (£000s) 283 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Operating activities Cash received from customers 55,000 Investing activities Interest and dividends received 10,000 Financing activities Net repayment of revolving credit loan 12,000 Which of the following standards and formats did the company most likely use in the preparation of its financial statements? A. IFRS, direct format B. IFRS, indirect format C. Either IFRS or . GAAP, direct format Solution：A The direct method of cash flow statement presentation shows the specific cash inflows and outflows that result in reported cash flow from operating activities (cash from customers, cash to suppliers, etc.). Companies using IFRS can decide to report interest and dividend receipts as either an investing or operating activity, whereas under . GAAP, they must report such income as an operating activity. The listed operating and investment activities indicate that the company reports under IFRS, using the direct method. Q145-4 ★★Which of the following is least likely to be a reason a company would securitize its accounts receivable? To increase: A. net income. B. operating cash flows. C. financing cash flows. Solution: C. The securitization of accounts receivable results in an increase in operating cash flows (as receivables decrease), and they are frequently sold at a gain, which increases net income. Financing cash flows are not affected. Q146-4 ★With regard to the exercise of employee stock options, which of the following is least likely a concern to the analyst? A. Increased operating cash flow from the tax benefits of exercise of the options. B. Effects of exercise on investing cash flows. C. Classification of the cash flow to repurchase shares. Solution: B. There are no effects on investing cash flows from the exercise of employee stock options. Option exercise results in a tax deduction that reduces taxes and increases operating cash flow. Since employee incentive stock options are properly part of compensation expense, cash expenditures to repurchase shares and avoid dilution are properly classified as operating cash flows rather than as financing cash flows (their classification under accounting standards). 284 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 CFO掌握概念及公式： R43-4 CFO计算方式：直接法和间接法，熟练掌握2种方法 (公式) R44-4 Both IFRS and US GAAP都鼓励使用直接法，但都可以使用间接法。在GAAP下，直接法下必须披露间接法，IFRS没有这样的要求；如果用间接法，没有要求披露直接法。 R45-4 CFO理解：firstly, 考题中会出现计算是无疑的；secondly，考题中会考核考生对CFO和NI之间关系的掌握；lastly，CFO和working capital之间的关系，有时也会成为考核点 R46-4 ★CFO补充公式  FAopening + purchasing – depreciation – disposal = FAending（可以计算CFO间接法中的dep；也可以计算CFI中的purchase）  CFO=NI + depreciation – gain of asset sale + Loss of asset sale – ΔA/R –Δinv ＋ΔA/P，如果购买的固定资产多，则折旧多，则CFO>NI；如果存货增加，CFO<NI。找CFO和NI差距的原因。  Gain or Loss = Proceeds received – Disposal（可以计算CFO间接法中的G/L；也可以计算CFI中的proceed received）  Opening R/E + NI – div. declared = Ending R/E（严谨地说，我们计算的Div应该是Div. declared，但是一般题目中只需要计算Div. paid，所以公式可以简化为Opening R/E + NI – Div= Ending R/E）  Div. paid =- Div. declared + change in div. payables R47-4 ★Notes payable 被视为CFF R48-4 How to determine CFO Additions Subtractions Dep. of tangible assets Bond amortized premium Amor. of intangible assets Gain on sale of assets Depletion of natural resources Gain on retirement of debt Bond amortized discount Changes in current assets Loss on sale or write down of assets Loss on retirement of debt Changes in current liabilities P19-4 CFI和CFF的理解 Q147-4 Assume . GAAP applies unless otherwise noted. At the end of the year, a company sold equipment for $40,000 cash. The company paid $100,000 for the equipment several years ago and had accumulated depreciation of $60,000 for the equipment at the time of sale. All else equal, the equipment sale will result in the company's cash flow from: A. investing activities decreasing by $10,000. B. investing activities increasing by $40,000. C. operating activities being $40,000 more than net income. Solution: B 285 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The increase in inventory (working capital investment) would reduce CFO relative to net income. Q148-4 Assume . GAAP applies unless otherwise noted. Jaderong Plinkett Stores reported net income of $25 million, which equals the company’s comprehensive income. The company has no outstanding debt. Using the following information from the comparative balance sheets (in millions), what should the company report in the financing section of the statement of cash flows? Balances sheet item 12/31/2005 12/31/2006 change Common stock $100 $102 $2 Additional paid-in capital common stock $100 $140 $40 Retained earnings $100 $115 $15 Total stockholders’ equity $100 $357 $57 A. Issuance of common stock $42 million; dividends paid of $10 million. B. Issuance of common stock $38 million; dividends paid of $10 million. C. Issuance of common stock $42 million; dividends paid of $40 million. Solution: A The increase of $42 million in common stock and additional paid-in capital indicates that the company issued stocks during the year. The increase in retained earnings of $15 million indicates that the company paid $10 million in cash dividends during the year, determined as beginning retained earnings of $100 million plus net income of $25 million, minus ending retained earnings of $115, which equals $10 million in cash dividends. CFI和CFF掌握理解及公式： R49-4 理解：CFI consist of the inflows and outflows of cash resulting from the acquisition or disposal of long-term assets and certain investments.  计算方式：proceeds received – purchasing；也就是sales – purchasing  ★CFI=- (BV1+depreciation-BV0)+gain-loss R50-4 理解：CFF consist of the inflows and outflows of borrowing, repayment, new issue, repurchase, div paid P20-4 FCFE和FCFF的理解 Q149-4 Which of the following is an appropriate method of computing flee cash flow to the firm? A. Add operating cash flows plus capital expenditures and deduct after-tax interest payments. B. Add operating cash flows plus after-tax interest payments and deduct capital expenditures. C. Deduct both after-tax interest payments and capital expenditures from operating cash flows. Solution: B. Free cash flow to the firm can be computed as operating cash flows plus after-tax interest 286 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 expense less capital expenditures. Q150-4 ★Assume . GAAP applies unless otherwise noted. An analyst gathered the following annual information ($ millions) about a company that pays no dividends and has no debt: Net income Depreciation Loss on sale of equipment Decrease in accounts receivable Increase in inventories Increase in accounts payable Capital expenditures Proceeds from sale of stock The company's annual free cash flow to equity ($ millions) is closest to: A. . B. . C. . Solution: C CFO = net income + depreciation + loss on sale of equipment + decrease in accounts receivable - increase in inventories + increase in accounts payable. (The loss on sale of equipment is added back when calculating CFO.) It would have been deducted in the calculation of net income but the loss is not the cash impact of the transaction (the proceeds received, if any, would be the cash effect) and cash flows related to equipment transactions are investing activities, not operating activities.) CFO = + + + – + = $ million; so FCFE = $ - $ = $ million. Q151-4 ★★An analyst is planning to make a valuation on a privately held company by using a FCF Model. In order to determine the free cash flow to all capital suppliers, he collected the following data (in million): Operating cash flow 500 Interest paid 30 Investment in working capital 80 Investment in fixed asset 60 Tax rate 30% The free cash flow the analyst is planning to determine is closest to: A. 440. B. 381. C. 461. Solution: C Free cash flow = CFO + interest paid (1 - tax rate) – investment in fixed asset = 500 + – 60 = 461 287 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R51-4 ★FCFE&FCFF掌握概念及公式：（需要重点掌握，经常考到） 1) 公式：FCFF = NI + NCC + [ Int* (1 - tax rate) ] – FCInv – WCInv 2) 公式：FCFF＝CFO- FCInv＋Int*(1-t) 3) 公式：FCFE = CFO – FCInv + Net borrowing 4) 为什么FCFF会小于FCFE？因为Net borrowing较大 5) 计算公司价值的时候，用FCFF，并且折现率使用WACC(二级内容） 6) 计算股东价值的时候，用FCFE，并且折现率用re FmvalueFWCFF Equtir aFCFtEityvluet11 ACCt11rtt FirmvalueWAFCCCFF1FCFF01g gWACCg EqueFCFE1FCFE01gity valurgrg P21-4 CF Statement中其它知识点理解 Q152-4 ★Interest expense may be classified as an operating cash flow A. Under . GAAP, but may be classified as either operating or investing cash flows under IFRS. B. Under IFRS, but may be classified as either operating or investing cash flows under . GAAP C. Under . GAAP, but may be classified as either operating or financing cash flows under IFRS. Solution: C Interest expense is always classified as an operating cash flow under . GAAP but may be classified as either an operating or financing cash flow under IFRS. CF Statement中其它知识点理解： R52-4 Comparison of classification between IFRS and GAAP（需要牢记，经常考到）  Interest received: Classified as CFO under . GAAP; CFO or CFI under IFRS.  Interest paid: Classified as CFO under . GAAP; CFO or CFF under IFRS.  Dividend received: Classified as CFO under . GAAP; CFO or CFI under IFRS.  Dividend paid: Classified as CFF under . GAAP; CFO or CFF under IFRS.  Overdraft: IFRS: cash equivalent; GAAP: CFF R53-4 Comparison of presentation between IFRS and GAAP（重点掌握）  Direct method is encouraged under both  US. GAAP: a direct method must also disclose indirect method. IFRS: not required  US. GAAP: tax and interest can be reported in CF/S or in the footnotes. IFRS: should be disclosed separately in the CF/S under direct and indirect method. R54-4 Non-cash transactions are not reported in CF statement, but is required to be disclosed, 288 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 either in a separate note or a supplementary schedule to the cash flow statement（.比如可转债由债转成股） P22-4 Financial Analysis Techniques Q153-4 ★An analyst has calculated a ratio using as the numerator the sum of operating cash flow, interest, and taxes, and as the denominator the amount of interest. What is this ratio, what does it measure, and what does it indicate? A. This ratio is an interest coverage ratio, measuring a company's ability to meet its interest obligations and indicating a company's solvency. B. This ratio is an effective tax ratio, measuring the amount of a company's operating cash flow used for taxes, and indicating a company's efficiency in tax management. C. This ratio is an operating profitability ratio, measuring the operating rash flow generated arrounting for taxes and interest and indicating a company's liquidity. Solution: A. This is the interest coverage ratio using operating cash flow rather than earnings before interest, tax, depreciation, and amortization (EBITDA). Q154-4 In order to assess a company's ability to fulfill its long-term obligations, an analyst would most likely examine: A. activity ratios. B. liquidity ratios. C. solvency ratios. Solution: C. Solvency ratios are used to evaluate the ability of a company to meet its long-term obligations Q155-4 ★Which of the following ratio is solvency ratio? A. return on assets B. interest coverage C. return on equity Solution: B Solvency ratios measure the firm's ability to satisfy its long-term obligations. Solvency ratios include the long-term debt-to-equity ratio, the total debt-to-equity ratio, the debt ratio, and the financial leverage ratio. Q156-4 Which of the following ratio is activity ratio？ A. cash ratio B. net profit margin C. inventory turnover Solution: C 289 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Activity ratios includes several ratios also referred to asset utilization or turnover ratios (., inventory turnover, receivables turnover, and total assets turnover). They often give indications of how well a firm utilizes various assets such as inventory and fixed assets. Q157-4 ★Marcus Lee is examining the solvency of Apex Manufacturing and has collected the following data (in millions of euros): 2005 2004 2003 Total debt €2,000 €1,900 €1,750 Total equity €4,000 €4,500 €5,000 Which of the following would be the most appropriate conclusion for Lee? A. The company is becoming increasingly less solvent, as evidenced by the increase in its debt-to-equity ratio from to from 2003 to 2005. B. The company is becoming less liquid, as evidenced by the increase in its debt-to-equity ratio from to from 2003 to 2005. C. The company is becoming increasingly more liquid, as evidenced by the increase in its debt-to-equity ratio from to from 2003 to 2005. Solution: A. The company is becoming increasingly less solvent, as evidenced by its debt-to-equity ratio increasing from to from 2003 to 2005. B is incorrect because it incorrectly interprets the debt-to-equity ratio as a measure of liquidity. C is incorrect because it incorrectly interprets the direction of the trend and misinterprets the ratio as an indicator of liquidity. Debt to equity: 2005: 2,000/4,000 = 2004: 1,900/4,500 = 2003: 1,750/5,000 = Q158-4 An analyst who is interested in a company's long-term solvency would most likely examine the: (NotesB3-175 3) A. return on total capital. B. defensive interval ratio. C. fixed charge coverage ratio. Solution: C. Fixed charge coverage is a solvency ratio. Return on total capital is a measure of profitability and the defensive interval ratio is a liquidity measure. Q159-4 Paragon Co. has an operating profit margin (EBIT / revenue) of 11%; an asset turnover ratio of ; a financial leverage multiplier of times; an average tax rate of 35%; and an interest burden of . Paragon's return on equity is closest to: (NotesB3-177 16) A. 9 % 290 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. 10%. C. 11%. Solution: A. Tax burden = 1 - = . ROE = x x x x = . Q160-4 ★A firm has a dividend payout ratio of 40%, a net profit margin of 10%, an asset turnover of times, and a financial leverage multiplier of times. The firm's sustainable growth rate is closest to: (NotesB3-177 17) A. %. B. %. C. %. Solution: B. g = (retention rate)(ROE) ROE = net profit margin x asset turnover x equity multiplier = ()()() = g = (1 — )() = % Q161-4 Assuming no changes in other variables, which of the following would decrease ROA? A. A decrease in the effective tax rate. B. A decrease in interest expense. C. An increase in average assets. Solution: C Assuming no changes in other variables, an increase in average assets (an increase in the denominator) would decrease ROA. A decrease in either the effective tax rate or interest expense, assuming no changes in other variables, would increase ROA. Q162-4 ★Which of the following choices best describes reasonable conclusions an analyst might make based on this ROE decomposition? A decomposition of ROE for Integra SA is as follows: 2005 2004 ROE. % % Tax burden Interest burden EBIT margin % % Asset turnover Leverage A. Profitability and the liquidity position both improved in 2005. B. The higher average tax rate in 2005 offset the improvement in profitability, leaving ROE unchanged. 291 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. The higher average tax rate in 2005 offset the improvement in efficiency, leaving ROE unchanged. Solution: C. The increase in the average tax rate in 2005, as indicated by the decrease in the value of the tax burden (the tax burden equals one minus the average tax rate), offset the improvement in efficiency indicated by higher asset turnover); as a result, ROE remained unchanged at percent. Statement A is not correct because the EBIT margin, measuring profitability, was unchanged in 2005; furthermore, no information is given on liquidity. Statement B is not correct because profitability was unchanged in 2005. Q163-4 In general, a creditor would consider a decrease in which of the following ratios to be positive news? A. Interest coverage (times interest earned). B. Debt to total assets. C. Return on assets. Solution: B In general, a creditor would consider a decriewie in debt to total assets as positive news. A higher level of debt in a company's capital structure increases the risk of default and will result in higher borrowing costs for the company to compensate lenders for assuming greater credit risk. Q164-4 ★If a firm's inventory turnover and number of days of payables both increase, the effect on a firm's cash conversion cycle is: A. to shorten it. B. to lengthen it. C. uncertain. Solution: A Cash conversion cycle = collection period + inventory period — payables period. An increase in inventory turnover will decrease the inventory period and shorten the cash conversion cycle. An increase in the payables period will also shorten the cash conversion cycle. Q165-4 Selected information for a company is provided below. $ millions Sales 4,800 Cost of goods sold 2,880 Purchases 2,940 Average receivables 625 Average inventory 710 Average payables 145 292 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The company’s cash conversion cycle (in days) is closest to: (Mock84-62) A. 84. B. 120. C. 138. Solution: B Cash conversion cycle = Days sales outstanding + Days of inventory on hand — Days of payables Accounts receivable Inventory Accounts payables Days Days in sales(DSO) Days on hand(DHO) in payables Turnover SAalesost of Goods Sold/RC InventochasesryPur Payables 4,800÷625 2,880÷170 2,940÷145 = times = times = times In days 365÷ 365÷ 365÷ =48days =90days =18days Cash conversion cycle=DSO+DOH-Days in Payables=48+90-18=120 days Q166-4 ★The following information is summarized from Famous, Inc.'s financial statements for the year ended December 31, 20X0: Sales were $800,000. Net profit margin was 20%. Sales to assets was 50%. Equity multiplier is . Interest expense was $30,000. Dividends declared were $32,000. Famous, Inc.'s sustainable growth rate based on results from this period is closest to: (NotesB3-318 6) A. %. B. %. C. %. Solution: C Famous, Inc.'s sustainable growth rate = (retention rate)(ROE). ROE = (800,000) / [(800,000/)(1/)] = 160,000/1,000,000 = 16%. Alternatively: ROE = ()()() = = 16% Retention rate = (1 — dividend payout ratio) = 1 — {32,000/[()(800,000)]} = . Sustainable growth = (16%) = %. Q167-4 ★★Selected information for a company and the common size data for its industry are provided below. 293 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Company Common Size (£) Industry Data (% of sales) EBIT 76,000 Pretax profit 66,400 Net income 44,500 Sales 400,000 Total assets 524,488 Total equity 296,488 ROE % % Which of the following is most likely a contributor to the company’s inferior ROE compared to that of the industry? The company’s: (Mock83) A. tax burden ratio. B. interest burden ratio. C. financial leverage ratio. Solution: C Calculation Company Industry Tax burden ratio Net Inc/EBT 44,500/66,400 = = Financial leverage Total assets/Equity 524,488/296,488 = 140/74 = Interestburden ratio EBT/EBIT 66,400/76,000 = = The company has a lower financial leverage ratio relative to the industry, which is one of the causes of the company’s lower relative ROE performance. The tax burden ratio is the same as the industry and the interest burden ratio is higher, which would increase ROE. EBT: Pretax profit (earnings before tax) Net Inc: Net income Financial Analysis Techniques Common-size statement 了解income statement和balance sheet 的common-size statement 构建方法的不同.  ★Liqudity ratio (measure liquidity，这些比率越高，公司的短期偿债能力越好):  C urrent ratio current assetscurrent liabilities Quick ratiocash marketable securities receivablescurrent liabilities C ash ratio cash marketable securitiescurrent liabilities C ash conver ♦♣sales days of ytion cycdays le ♦inventor ÷•number of days o♥utstanding ÷•♣≠o♥n hand≠ o♦♣f paybales ÷•♥≠294 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 如果cash convertion cycle提高，说明存货与A/R周转期较长，A/P较短（重点掌握）  ★Solvency ratio (measure leverage，这些比率越高，公司风险越大)  Long termra total g debt tiolon-term debttotal equity D ebt ratio total debttotal equity Total debt ratio total debttotal equity Financial leverage total assetstotal equity InterestEBI coverage Tinterest payments  ★Activity ratio (measure asset utilization这些比率最好与行业平均标准接近)  R ceivableturnover annual sales average receivables D 收回账款的平均时间 ays of sales outstanding 365receivables turnover Inventory turnover COGSaverage inventory D存货循环的平均时间 ays of inventory on hand 365inventory turnover Payableurnover purchases taverage Total asset turnover revenueaverage total assets net fixed assets需要减去累计折旧 Fixed assetsver revenue turnoaverage net fixed assets W orkrevening cap ueital turnoveraverage working capital ★Profitability ratios  N et profit margin net incomerevenue G ross profit margin gross profitrevenue O perating profit margin EBITrevenue R eturn on assets net incometotal assets 295 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  R eturn on equity net incomeaverage equity R eturn on common equity net income-preferred dividendsaverage common equity ★DuPont system of analysis 杜邦分因素分析析是十分重要的，3因素和5因素都要掌握，尤其是5因素分析。  R eturn on equity net incomesalesassetssa υassets υlesequity Returnon equ 3因素分析 ity profit margin υasset turnover υfinancial leverage R eturn on equity netE inBcTome υEB υEBITIT υrevenue υassetrevenueassetsequity 5因素分析 Return on equ ♦♣ taxity interstburdenden ÷•mE♦♣BIT assetfinancia♥ ÷•♦♣l≠b♥ur≠♥argin ÷•♦♣≠turover ÷•♥≠♦♣leverage ÷•♥≠ 杜邦分析的内容有可能和权益里的内容一起考，通过ROEretention rate, 来计算g，进而使用DDM进行估值。 P23-4 Inventory的理解 Q168-4 ★A company incurs the followings costs related to its inventory during the year: Cost ¥ millions Purchase price 100,000 Trade discounts 5,000 Import duties 20,000 Shipping of raw materials to manufacturing facility 10,000 Manufacturing conversion costs 50,000 Abnormal costs as a result of waste material 8,000 Storage cost prior to shipping to customers 2,000 The amount charged to inventory cost (in millions) is closest to: A. ¥175,000. B. ¥177,000. C. ¥185,000. Solution: A The costs to include in inventories are all costs of purchase, costs of conversion, and other costs incurred in bringing the inventories to their present location and condition. Cost ¥ millions Purchase price 100,000 Less Trade discounts (5,000) Import duties 20,000 Shipping of raw materials to manufacturing facility 10,000 Manufacturing conversion costs 50,000 Total inventory costs 175,000 Q169-4 Mustard Seed PLC adheres to IFRS. It recently purchased inventory for €100 million and spent €5 million for storage prior to selling the goods. The amount it charged to 296 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 inventory expense (€ millions) was closest to: A. €95. B. €100. C. €105. Solution: B Inventory expense includes costs of purchase, costs of conversion, and other costs incurred in bringing the inventories to their present location and condition. It does not include storage costs not required as part of production. Q170-4 ★The following information (in millions) on a company is available: Cost of goods sold $ 500 Increase in total assets 250 Increase in total liabilities 200 Change in inventory (30) Change in accounts payable (25) The amount of cash (in millions) that the company paid to its suppliers is closest to: A. $445. B. $495. C. $505. Solution: B Cost of goods sold $500 Less: Decrease in inventory (30) Equals purchases from suppliers $470 Plus: Decrease in accounts payable 25 Cash paid to suppliers $495 Q171-4 ★A . pulp brokerage firm which prepares its financial statements according to . GAAP and uses a periodic inventory system had the following transactions during the year: Activity Beginning inventory Tons $ per Ton Date (000s) February Purchase 5 650 May Sale 2 700 August Purchase 3 680 November Sale 4 750 The cost of sales (in ‘000s) is closest to: A. $3,990 using FIFO. B. $3,930 using LIFO. C. $3,968 using weighted average. 297 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C FIFO cost of sales is $3,930 as per the table. LIFO cost of sales is $3,990 as per the table. 3,968 using weighted average. Q172-4 ★A review of a company’s inventory records for the year indicates that the following costs were incurred: Fixed production overhead: $500,000 Direct material and direct labor: 300,000 Storage costs incurred during production: 25,000 Abnormal waste costs: 30,000 If the company operated at full capacity during the year, the total capitalized inventory cost is closest to: A. $800,000. B. $825,000. C. $855,000. Solution: B The total capitalized costs include fixed production costs, the direct conversion costs of material and labor, storage costs required as part of production but not abnormal waste costs. $500,000 + 300,000 + 25,000 = $825,000 Q173-4 ★A snowmobile manufacturer that uses LIFO begins the year with an inventory of 3,000 snowmobiles, at a carrying cost of $4,000 each. In January, the company sells 2,000 snowmobiles at a price of $10,000 each. In July, the company adds 4,000 snowmobiles to inventory at a cost of $5,000 each. Compared to using a perpetual inventory system, using a periodic system for the firm's annual financial statements would: A. increase COGS by $2 million. B. leave ending inventory unchanged. C. decrease gross profit by $4 million. Solution: A Under a perpetual inventory system, the snowmobiles sold in January are associated with the $4,000 cost of the beginning inventory. Cost of sales is $8 million, gross profit is $12 million, and end-of-year inventory is $24 million. Under a periodic inventory system, the snowmobiles sold in January would be associated with the $5,000 cost of the snowmobiles manufactured in July. Cost of sales would be higher by $2 million, gross profit would be lower by $2 million, and ending inventory would be lower by $2 million. Q174-4 Which inventory valuation has the same results under periodic and permanent system? A. FIFO B. LIFO 298 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. weighted average method Solution: A FIFO has the same results under periodic and permanent system. Q175-4 ★★Assume the price increases and many times of sales and purchasement during the period, which inventory valuation will surely have the different results under periodic and permanent system? A. FIFO B. LIFO C. weighted average method Solution: C Weighted average method will surely result in different results, while LIFO may have same results as long as purchase will be sold out immediately. Q176-4 Select information from a company that uses FIFO inventory method is provided below. Event Units $/Units Total ($) Opening 1,000 7,500 inventory Purchases 250 1,900 Sales 550 6,600 Purchases 300 2,310 Sales 600 7,200 Ending Inventory 400 If the company uses the perpetual inventory system versus the periodic inventory system, the gross margin would most likely be: (Mock84-63) A. lower. B. higher. C. the same. Solution: C When using the FIFO inventory method the ending inventory, the cost of goods sold and the gross margin are the same under either the perpetual or periodic methods. Q177-4 In a period of rising prices, when compared with a company that uses weighted average cost for inventory, a company using FIFO will most likely report higher values for its: A. return on sales. B. inventory turnover. C. debt-to-equity ratio. 299 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A in periods of rising prices FIFO results in a higher inventory value and a lower cost of goods sold and therefore a higher net income. The higher net income increases return on sales. The higher reported net income also increases retained earnings, and therefore results in a lower debt-toequity ratio. The combination of higher inventory and lower cost of goods sold decreases inventory turnover (COGS/inventory). Q178-4 Which of the following is allowed under both . GAAP and IFRS? A. inventory write down B. LIFO liquidation C. inventory reverse Solution: A Inventory write down is allowed under both US GAAP and IFRS. Q179-4 ★Assume . GAAP applies unless otherwise Corporation uses the LIFO inventory method, but most of the other companies in Sipex industry use FIFO. Which of the following best describes one of the adjustments that would be made to Sipex's financial statements to compare that company with other companies in the industry? To adjust Sipex's ending inventory to the FIFO method, the amount reported for Sipex's ending inventory should be: A. increased by the ending balance in Sipex's LIFO reserve. B. decreased by the ending balance in Sipex's LIFO reserve. C. increased by the change in Sipex's LIFO reserve for that period. Solution: A Adding the ending balance in the LIFO reserve to the LIFO inventory would equal the ending balance for inventory on FIFO basis. Q180-4 ★Assume . GAAP applies unless otherwise noted. Sauerbraten Corp. reported 2007 sales ($ in millions) of $2,157 and cost of goods sold of $1,827. Inventories at year-end 2007 and 2006, respectively, were $553 and $562. The company uses the LIFO method for inventory valuation and discloses that if the FIFO inventory valuation method had been used, inventories would have been $ million and $ million higher in 2007 and 2006, respectively. Compared to the inventory turnover ratio reported, if Sauerbraten had exclusively used the FIFO method its inventory turnover ratio would have been closest to A. . B. . C. . Solution: A Inventory turnover is cost of goods sold divided by average inventory. As reported, this was 300 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 $1,827 / $ = . Under FIFO, cost of goods sold would have been $1, and inventory would have been $ and $ (average $). Adjusted inventory turnover would thus be . Q181-4 Assume . GAAP applies unless otherwise noted. Camden Company’s appliance inventory transactions in 2004 were as follows:  Beginning inventory of 40 appliances at $600 each.  Purchased 80 appliances on April 15 at $625 each.  Purchased 100 appliances on August 7 at $650 each.  Sold 160 appliances on October 8.  Purchased 120 appliances on December 31 at $675 each. Using the average cost method, what is Camden’s cost of goods sold for the year ended December 31, 2004? A. $101,091 B. $103,530 C. $100,000 Solution: B Under the average cost method, goods available for sale (inventory plus purchases) are valued at their weighted average cost per unit. Camden’s goods available for sale cost an average of (40 $600) + (80 $625) + (100 $650) + (120 $675) / 340 = $ each. Cost of goods sold for 2001 was (160 $ =) $103,530. Q182-4 An investor collected a company’s inventory data as follows: 2009 2008 COGS 1200 1430 LIFO Reserve 800 820 If the company used FIFO method to recognize, what would the cost of goods sold be? A. 1220 B. 1200 C. 1180 Solution: A COGS(FIFO) = COGS(LIFO) – (ending LIFO reserve – beginning LIFO reserve) = 1200 – (800-820) = 1220 Q183-4 ★Carrying inventory at a value above its historical cost would most likely be permitted if: （原版书Reading 29） A. the inventory was held by a producer of agricultural products. B. financial statements were prepared using . GAAP. C. the change resulted from a reversal of a previous write-down. Solution：A. 301 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 IFRS allow the inventories of producers and dealers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products to be carried at net realisable value even if above historical cost. (. GAAP treatment is similar.) Q184-4 Which of the following is most likely for a firm with high inventory turnover and lower sales growth than the industry average? The firm: (NotesB3-202 8) A. is managing its inventory effectively. B. may have obsolete inventory that requires a writedown. C. may be losing sales by not carrying enough inventory. Solution：C. High inventory turnover coupled with low sales growth relative to the industry may be an indication of inadequate inventory levels. In this case, the firm may be losing sales by not carrying enough inventory. Q185-4 ★Compared to using the weighted average cost method to account for inventory, during a period in which prices are generally rising, the current ratio of a company using the FIFO method would most likely be: （原版书Reading 29） A. lower. B. higher. C. dependent upon the interaction with accounts payable. Solution：B. In a rising price environment, inventory balances will be higher for the company using the FIFO method. Accounts payable are based on amounts due to suppliers, not the amounts accrued based on inventory accounting. Q186-4 ★Zimt AG wrote down the value of its inventory in 2007 and reversed the write-down in 2008. Compared to the ratios that would have been calculated if the write-down had never occurred, Zinn's reported 2007:（原版书Reading 29） A. current ratio was too high. B. gross margin was too high. C. inventory turnover was too high. Solution：C. The write-down reduced the value of inventory and increased cost of sales in 2007. The higher numerator and lower denominator mean that the inventory turnover ratio as reported was too high. Gross margin , and the current ratio were both too low. Q187-4 Zimt AG wrote down the value of its inventory in 2007 and reversed the write-down in 2008. Compared to the results the company would have reported if the write-down had never occurred, reported 2008: （原版书Reading 29） A. profit was overstated. B. cash flow from operations was overstated. 302 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. year-end inventory balance was overstated. Solution：A. The reversal of the write-down shifted cost of sales from 2008 to 2007. The 2007 cost of sales was higher because of the write-down, and the 2008 cost of sales was lower because of the reversal of the write-down. As a result, the reported 2008 profits were overstated. Inventory balance in 2008 is the same because the write-down and reversal cancel each other out. Cash flow from operations is not affected by the non-cash write-down, but the higher profit in 2008 likely resulted in higher taxes and thus lower cash flow from operations. Q188-4 Carey Company adheres to . GAAP, whereas Jonathan Company adheres to IFRS. It is least likely that: （原版书Reading 29） A. Carey has reversed an inventory write-down. B. Jonathan has reversed an inventory write-down. C. Jonathan and Carey both use the FIFO inventory accounting method. Solution：A. . GAAP do not permit inventory write-downs to be reversed. Q189-4 ★★In the notes to its financial statements, Gilbert Company discloses a €400,000 reversal of an earlier writedown of inventory values, which increases this inventory's carrying value to €2,000,000. It is most likely that: A. the reasons for this reversal are also disclosed. B. a gain of €400,000 appears on the income statement. C. the net realizable value of this inventory is €2,000,000. Solution：A. Required disclosures related to inventories under IFRS include the amount of any reversal of previous writedowns and the circumstances that led to the reversal. Under IFRS, the reversal of an inventory writedown is not recognized as a gain, but instead as a reduction in the cost of sales for the period. From only the information given, we cannot conclude that the net realizable value of the inventory is €2,000,000. This value may be the original cost of the inventory. Q190-4 ★★An analyst can most accurately identify a LIFO liquidation by observing a(n): （2012-mock85-66） A. increase in gross margin. B. decrease in the LIFO reserve. C. change in inventory out of line with change in sales. Solution：B The most appropriate way to identify a LIFO liquidation is by reviewing the inventory footnotes for a decrease in the LIFO reserve. Although LIFO liquidation may result in an increase in gross margin or changes in inventory out of line with changes in sales, there are other factors could 303 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 explain those changes. Q191-4 A retailer that prepares its financial statements in accordance with IFRS has 100 office chairs in its inventory with a suggested retail price of $240 each. • It paid on average $200 each to a supplier for these chairs. • Demand for office chairs has been low for quite a while and the retailer estimates it can sell those chairs for $180 each if it offers free shipping to its customers at an average cost of $10 per chair. • The supplier has also lowered its price to $160 in response to the low demand. The total carrying amount of these 100 office chairs on the retailer’s balance sheet would be closest to: (2014 Mock 99-56) A. $16,000. B. $18,000. C. $17,000. Solution：C IFRS measures inventory at the lower of cost and net realizable value. Under IFRS, net realizable value (NRV) is defined as the estimated selling price less the estimated costs necessary to get the inventory ready for sale and make the sale: Selling price $180 Costs to get ready to sell $10 (Free shipping is required to sell the chairs at $180.) NRV per chair $170 For 100 chairs $17,000 Q192-4 A firm incurred the following costs related to production during the past year: $ millions Fixed production overhead costs Raw materials costs Labor costs Freight-in costs for raw materials Warehousing costs for finished goods The total capitalized inventory cost (in US$ millions) for the year is closest to: (2014 Mock 99-67) A. . B. . C. . Solution：C Total Capitalized Inventory Cost $ millions Fixed production costs Raw materials Labor costs 304 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Freight-in Total capitalized inventory cost Inventory掌握公式及两种方法的比较： Cost capitalization and expense R55-4 ★Capitalized cost (product cost) include: （重点掌握，很有可能考）  Purchase cost.  Conversion cost.  Allocation of fixed production overhead based on normal capacity levels.  Other costs necessary to bring the inventory to its present location and condition. R56-4 ★Expensed cost (period cost)  Unallocated portion of fixed production overhead  Abnormal waste of materials, labor, or overhead.  Storage costs ( unless required as part of the production process).  Selling cost. R57-4 ★两种方法的转换：(2012年开始一级考试删除了，放在了二级中)  EI=BI + P – COGS  NVF = INVL + LIFO reserve  COGSF = COGSL – △LIFO reserve  △NI = △LIFO reserve (1-t)  R/E = LIFO reserve (1-t) R58-4 ★了解在两种不同的会计准则下存货的计价方式：  . GAAP: 1) Lower of cost or market 2) NRV-normal profit margin < market (replacement cost) < NRV 3) no write-up allowed under and no reversal after devaluation  IFRS: 1) Lower of cost or NRV 2) NRV = sales price-selling cost 3) inventory can be written up but only limited to the loss recognized previously Reporting inventory above the historical cost is only permitted under IFRS and . GAAP in certain industries such as agricultural and forest products, mineral ores, and precious metals. R59-4 ★LIFO下，COGS高，存货少，inventory turnover ratio 大，利润小，现金流大。在价格上升的情况下，只有COGS和CF和价格上升反方向，其余全是正方向（利润小，税少）, current ratio小（inventory 小），debt to equity ratio大。 R60-4 ★LIFO liquidation, the inventory value under FIFO is lower, and COGS under LIFO is lower；LIFO liquidation是财务舞弊的一种方式，可以从footnotes中观察到，在物价水平上升的情况下，通过使用老旧存货降低COGS，达到操作net income的手段。LIFO liquidation 的重要特征是LIFO reserve 下降。 R61-4 ★LIFO真实反映了COGS，FIFO真实反映了存货的价值，所以LIFO对利润表更合适，FIFO对资产负债表更合适。 R62-4 只有存货计价方法会影响现金流，其它方法都不会影响总体现金流，因为存货记账 305 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 方法会影响税收。 R63-4 LIFO真实反映了COGS（I/S reflect economic value），FIFO真实反映了存货的价值 (B/S reflect economic value), regardless of the direction of change in price.. weighted-average cost method介于二者之间，计算方法也需要掌握 R64-4 IFRS不允许用LIFO的方法；LIFO方法是美国特有的，而且专有“LIFO conformity rule”允许美国公司在财务报表上也用LIFO计算 R65-4 ★Under IFRS and US GAAP, producers of minerals and mineral products, and commodity broker, report inventories at NRV (fair value - costs to sell). R66-4 如果存在active market，就用quoted market price；如果没有active market，就用market-determined prices or values (. the most recent market transaction price)度量inventory R67-4 Changes in the value of inventory (increases or decreases) are recognised in profit or loss in the period of the change. R68-4 Inventory adjustment：  Under IFRS：the firm must demonstrate that the change will provide reliable and more relevant information.  Under . GAAP：the firm must explain why the change in cost flow method is preferable  An exception to retrospective application：when a firm changes to LIFO from FIFO，no adjustments are made to the prior periods. With prospective application, the carrying value of inventory under the old method simply becomes the first layer of inventory under LIFO in the period of the change. P24-4 Depreciation的理解 Q193-4 Assume . GAAP applies unless otherwise noted. All else equal, the net profit margin for a company will be highest if, for new depreciable assets, that company uses: A. Low salvage value estimates and long average lives. B. High salvage value estimates and long average lives. C. High salvage value estimates and short average lives. Solution: B A high salvage value estimate reduces the depreciable base and thus depreciation expense; long average lives reduce the annual depreciation expense for any given depreciable base. The combination of the two would result in the lowest depreciation expense, which leads to the highest net income and profit margins. Q194-4 Which of the following statements about indefinitely lived intangible assets is most accurate?(NotesB3-227 2) A. They are amortized on a straight-line basis over a period not to exceed 40 years. B. They are reported on the balance sheet indefinitely. C. They never appear on the balance sheet unless they are internally developed. Solution: B 306 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Indefinite-lived intangible assets are not amortized; rather, they are reported on the balance sheet indefinitely unless they are impaired. Q195-4 In the early years of an asset's life, a firm using the double-declining balance method, as compared to a firm using straight-line depreciation, will report lower: (NotesB3-227 3) A. depreciation expense. B. operating cash flow. C. retained earnings. Solution: C In the early years, accelerated depreciation will result in higher depreciation expense; thus, lower net income. Lower net income will result in lower retained earnings. Q196-4 ★Assume . GAAP applies unless otherwise noted. Which of the following adjustments to the assumed useful life and assumed salvage value of a company’s assets would most likely decrease the company’s total asset turnover ratio? Assumed useful life Assumed salvage value A. Longer Lower B. Longer Higher C. Shorter Lower Solution: B A longer useful life and higher salvage value are consistent with lower depreciation expense, which results in a higher net asset value. Asset turnover (Sales/Total assets) would decrease because sales would be constant while assets would be higher due to smaller depreciation charges. Q197-4 ★Assume . GAAP applies unless otherwise noted. An analyst gathered the following information ($ millions) about four companies operating in the same industry: Company Annual Depreciation Expense Accumulated Depreciation 1 2 3 4 Although the companies have different levels of sales and assets, they are all experiencing sales growth at about the same rate and use the same type of equipment in the manufacturing process. All four companies also use the same depreciation method. Based only on the information above, which company is least likely to require major capital expenditures in the near future? A. Company 1 B. Company 2 307 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. Company 3 Solution: C Average life of F/A= Accumulated depreciation/ annual depreciation expense, choose the least, which is least likely to require major capital expenditure in the near future. Q198-4 ★A US-based company wrote down its inventories last year because it thought that the target market was shrinking and the resale price was declining sharply. This year, it estimated that emerging markets would have more demand than expected and cause the market value to rise over the original cost. Which of the following measures can the company take to respond the changing market conditions? A. Reversing the writing-down to the initial cost. B. Revaluing the inventories up to the market value. C. No action can be taken. Solution: C Based on US GAAP, if the current cost exceeds the original cost, it’s not permitted for reversal of inventory writing-down. Q199-4 Which combination of depreciation methods and useful lives is most conservative in the year a depreciable asset is acquired?（原版书Reading25） A. Straight-line depreciation with a short useful life. B. Declining balance depreciation with a long useful life. C. Declining balance depreciation with a short useful life. Solution：C. This would result in the highest amount of depreciation in the first year and hence the lowest amount of net income relative to the other choices. Q200-4 ★At the beginning of the year, Triple W Corporation purchased a new piece of equipment to be used in its manufacturing operation. The cost of the equipment was $25,000. The equipment is expected to be used for 4 years and then sold for $4,000. Depreciation expense to be reported for the second year using the double-declining-balance method is closest to: (NotesB3-81 10) A. $5,250. B. $6,250. C. $7,000. Solution: B Year 1: (2 / 4) x 25,000 = $12,500. Year 2: (2 / 4) x (25,000 — 12,500) = $6,250. Q201-4 ★★An analyst in the finance department of BOOLDO ., a French corporation, is computing the amortisation of a customer list, an intangible asset, for the fiscal year 308 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 ended 31 December 2009. She gathers the following information about the asset: Acquisition cost €2,300,000 Acquisition date 1 January 2008 Expected residual value at time of acquisition €500,000 The customer list is expected to result in extra sales for three years after acquisition. The present value of these expected extra sales exceeds the cost of the list. If the analyst uses the straight-line method, the amount of accumulated amortisation related to the customer list as of 31 December 2009 is closest to:（2012原版书后Reading30） A. €600,000. B. €1,200,000. C. €1 ,533,333. Solution：B. Using the straight-line method, accumulated amortisation amounts to Accumulated amortisation = [(2, — 500,000) / 3 years] x 2 years = 1,200,000. Q202-4 ★★A financial analyst at BETTO . is analyzing the result of the sale of a vehicle for 85,000 Argentine pesos (ARP) on 31 December 2009. The analyst compiles the following information about the vehicle: Acquisition cost of the vehicle ARP 100,000 Acquisition date 1 January 2007 Estimated residual value at acquisition date ARP 10,000 Expected useful life 9 years Depreciation method Straight-line The result of the sale of the vehicle is most likely:（2012原版书后Reading30） A. a loss of ARP 15,000. B. a gain of ARP 15,000. C. a gain of ARP 18,333. Solution：B. The result on the sale of the vehicle equals Gain or loss on the sale = Sale proceeds – Carrying amount =Sale proceeds – (Acquisition cost – Accumulated depreciation) = 85,000 – [100,000 – 1((100,000 – 10,000)/9 years) X 3 years] = 15,000. 309 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q203-4 All else being equal and ignoring tax effects, compared with using the straight-line method of depreciation, the use of an accelerated method of depreciation in the early years of an asset's life would most likely result in a decrease in the firm's: (2014 Mock 99-46) A. cash flow from operations. B. asset turnover ratio. C. shareholders' equity. Solution：C An accelerated method of deprecation produces greater expenses in the early years and lowers net income, which in turn lowers the retained earnings resulting in a decrease in shareholders' equity. Q204-4 A company acquired a customer list for $300,000 and a trademark for $5,000,000. Management expects the customer list to be useful for three years, and it expects to use the trademark for the foreseeable future. The trademark must be renewed every 10 years with the Patent and Trademark office for a nominal amount; otherwise it expires. If the company uses straight-line depreciation for all its intangible assets, the annual amortization expense for these two assets will be closest to: (2014 Mock 99-53) A. $100,000. B. $600,000. C. $0. Solution：A The trademark can be renewed at a minimal cost; therefore, it is considered to have an indefinite life, and amortization expense is not required. Annual amortization expense on the customer list = $300,000 / 3 = $100,000. R69-4 Depreciation掌握计算及灵活运用：  Most firms use the ST depreciation method for financial reporting purposes. It results that most assets generate more benefits in the early years of their economic life and fewer benefits in the later years. 所以直线法折旧，随时间增加，ROA是不断增加的  ★Acelerated depreciation method is more appropriate for matching the expenses to revenues. P25-4 Impairment的理解 Q205-4 ★★Assume . GAAP applies unless otherwise noted. An analyst determined the following information concerning Franklin, Inc.’s stamping machine: Acquired January 1, 1998 Cost $22 million Depreciation straight line method Estimated useful life 12 years 310 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Salvage value $4 million As of December 31, 2004, the stamping machine is expected to generate $1,500,000 per year for five more years and will then be sold for $1,000,000. The stamping machine is: A. impaired because its carrying value exceeds expected future cash flows. B. impaired because expected salvage value has declined. C. Not impaired because annual expected revenue exceeds annual depreciation. Solution: A The carrying value of the stamping machine is its cost less accumulated depreciation. Depreciation taken through 2004 was (($22,000,000 - $4,000,000) / 12*7 =) $10,500,000 so carrying value is ($22,000,000 - $10,500,000 =) $11,500,000. Because the $11,500,000 carrying value is more than expected future cash flows of ((5*$1,500,000) + $1,000,000 =) $8,500,000, the stamping machine is impaired. Q206-4 ★★A Canadian printing company which prepares its financial statements according to IFRS has experienced a decline in the demand for its products. The following information relates to the company’s printing equipment as of 31 December 2010. C$ Carrying value of equipment (net book value) 500,000 Undiscounted expected future cash flows 550,000 Present value of expected future cash flows 450,000 Fair Value 480,000 Costs to sell 50,000 Value in use 440,000 The impairment loss (in C$) is closest to: A. 0. B. 60,000. C. 70,000. Solution: B Under IFRS, an asset is considered to be impaired when its carrying amount exceeds its recoverable amount (the higher of fair value less cost to sell or value in use). Fair value less costs to sell: 480,000 – 50,000 = 430,000 Value in use = 440,000 Recoverable amount (higher value) = 440,000 Impairment loss under IFRS = Carrying value – recoverable amount = 500,000 – 440,000 = 60,000 Q207-4 ★Assume . GAAP applies unless otherwise noted. All else equal, will a company's implementation of the accounting standard (SFAS 143) related to asset retirement obligations incurred because of environmental damage most likely increase or decrease that company's: return on assets net income 311 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. Increase Increase B. Increase Decrease C. Decrease Decrease Solution: C Implementation of SFAS 143 requires that companies record an asset and related liability for costs involved in the remedy of environmental damage. The increase in assets will decrease return on assets and the increase in depreciation and accretion expense will reduce net income. Q208-4 ★★An analyst is studying the impairment of the manufacturing equipment of WLP .-based corporation that follows IFRS. He gathers the following information about the equipment: Fair value £16,800,000 Costs to sell £800,000 Value in use £14,500,000 Net carrying amount £19,100,000 The amount of the impairment loss on WLP Corp.'s income statement related to its manufacturing equipment is closest to:（2012原版书后Reading30） A. £2,300,000. B. £3,100,000. C. £1,600,000. Solution：B. The impairment loss equals £3,100,000. Impairment = max(Recoverable amount; Value in use) – Net carrying amount = max(16,800,000 – 800,000; 14,500,000) – 19,100,000 = –3,100,000. Q209-4 ★★Two years ago, Metcalf Corp. purchased machinery for $800,000. At the end of last year, the machinery had a fair value of $720,000. Assuming Metcalf uses the revaluation model, what amount, if any, is recognized in Metcalf's net income this year if the machinery's fair value is $810,000? (NotesB3-228 7) A. $0 B. $80,000 C. $90,000 Solution：B. Under the revaluation method, Metcalf reports the equipment on the balance sheet at fair value. At the end of last year, an $80,000 loss was recognized (from $800,000 to $720,000) in the income statement. Any recovery is recognized in the income statement to the extent of the loss. Any remainder is recognized in shareholders' equity as revaluation surplus. Thus, at the end of this year, an $80,000 gain is recognized in the income statement, and a $10,000 312 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 revaluation surplus is recognized in shareholders' equity. Q210-4 ★★Due to significant changes in the marketplace, the demand for a company’s product has fallen and is not expected to recover to previous levels. The following information is related to the patent under which the product is produced:（MOCK92-53） Item Description $ (thousands) Carrying value amount 36,000 Undiscounted expected future cash flows 38,000 Present value of expected future cash 32,000 flows Fair value if sold 34,000 Costs to sell 4,000 Which of the following statements is most accurate? The patent is impaired under: A. IFRS only. B. . GAAP only. C. both IFRS and . GAAP. Solution：A. Under IFRS, first you must determine the recoverable amount that is the higher of:  Value in use, which is the present value of the future cash flows: $32,000.  Fair value less costs to sell: $34,000 - 4,000 = $30,000. The recoverable amount ($32,000) is lower than the carrying value ($36,000). Therefore, the asset is impaired and should be written down to that amount. Under . GAAP, to assess impairment the carrying value ($36,000) is compared with the undiscounted expected future cash flows ($38,000). In this case, the carrying value is lower, so the patent is not impaired. Q211-4 A firm recently recognized a $15,000 loss on the sale of machinery used in its manufacturing operation. The original cost of the machinery was $100,000 and the accumulated depreciation at the date of sale was $60,000. What amount did the firm receive from the sale? (NotesB3-228 9) A. $25,000. B. $45,000. C. $85,000. Solution：A. Gain or loss is equal to the sale proceeds minus the carrying value (cost minus accumulated depreciation) at the time of sale. Given the loss of $15,000 and carrying value of $40,000 ($100,000 — $60,000), we can solve for the proceeds of $25,000 (-15,000 + 40,000). R70-4 ★Impairment under US GAAP  Recoverability的度量标准：carrying value> undiscounted cash flow 313 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Loss measurement: carrying value- fair market value/discounted cash flow  Cann’t reverse the recognized loss R71-4 ★Impairment under IFRS  Carrying value> max [Fair Value- selling cost, PV(value in use)]  Can reverse the loss, the revaluation will be recognized in equity. Revaluing the asset's value upward is even permitted under IFRS. R72-4 ★Impairment effect  PP&E cost (asset) decrease & NI decrease (due to impairment expenses)  But NI of next year will higher caused by lower PP&E level  impairment 对ratio的影响：在确认减值的当期，ROA，ROE较小。在以后的几期，ROA, ROE变大（decreased depreciation)。  The impact of Valuing asset upward to financial ratios: low leverage (high asset),high ROA/ROE in the period of revaluation and low ROA/ROE in subsequent periods. R73-4 Held for sale (same under US GAAP and IFRS)  Stop depreciation and impairement test  If carrying value> Fair Value –selling cost, impairement  Can reverse the loss P26-4 关于Capitalized和Expensed的理解 Q212-4 ★★Assume . GAAP applies unless otherwise companies are identical except for their accounting treatment of R&D costs. One company expenses all such costs immediately, while the other capitalizes a portion of the costs. Compared with the company that capitalizes costs, the company that expenses immediately will most likely: A. Earn a lower return on assets. B. Have lower financial leverage. C. Report lower cash flow from operations in the statement of cash flows. Solution: C Companies that capitalize R&D costs report those expenditures in CFI; companies that expense R&D costs report those expenditures in CFO. Q213-4 Under . GAAP, firms are required to capitalize: A. any asset with a useful economic life of more than one year. B. interest paid on loans to finance construction of a long-lived asset. C. research and development costs for a drug that will almost certainly provide a revenue stream of five years or more. Solution: B Interest on loans that specifically fund construction of long-lived assets must be capitalized under . GAAP. Assets of insignificant value (., metal waste basket) are typically expensed even when their useful lives are many years. R&D costs are expensed under . GAAP. 314 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q214-4 ★During 2010, the following events occurred at a company. The company: 1. purchased a customer list for $100,000, which is expected to provide equal annual benefits for the next 4 years. 2. recorded $200,000 of goodwill in the acquisition of a competitor. It is estimated that the acquisition would provide substantial benefits for the company for at least the next 10 years. 3. spent $300,000 on media placements announcing the company had donated products and services to the community. The CEO believes the firm’s reputation was enhanced substantially and the company will likely benefit from it for the next 5 years. Based on those events, the amortization expense that the company should report in 2011 is closest to: (Mock-84-50) A. $25,000. B. $45,000. C. $85,000. Solution：A The customer list is the only identifiable intangible asset, and it should be amortized on a straight-line basis over its expected future life: $100,000 ÷ 4 = $25,000/year. Goodwill is an unidentifiable intangible and should be tested for impairment but not amortized. All advertising and promotion costs, such as the media placements, are typically expensed. If the reputation of the company has been enhanced as the CEO suggests, this is an internally generated intangible that is not recorded on the balance sheet and is therefore not amortized. Q215-4 After reading the financial statements and footnotes of a company that follows IFRS, an analyst identified the following intangible assets: product patent expiring in 40 years; copyright with no expiration date; and goodwill acquired 2 years ago in a business combination. Which of these assets is an intangible asset with a finite useful life? Product Patent Copyright Goodwill A. Yes Yes No B. Yes No No C. No Yes Yes Solution: B A product patent with a defined expiration date is an intangible asset with a finite useful life. A copyright with no expiration date is an intangible asset with an indefinite useful life. Goodwill is no longer considered an intangible asset under IFRS and is considered to have an indefinite useful life. 315 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q216-4 SF Corporation has created employee goodwill by reorganizing its retirement benefit package. An independent management consultant estimated the value of the goodwill at $2 million. In addition, SF recently purchased a patent that was developed by a competitor. The patent has an estimated useful life of five years. Should SF report the goodwill and patent on its balance sheet? Goodwill Patent A. Yes No B. No Yes C. No No Solution: B Goodwill developed internally is expensed as incurred. The purchased patent is reported on the balance sheet. Q217-4 ★Train Company paid $8 million to acquire a franchise at the beginning of 20X5 that was expensed in 20X5. If Train had elected to capitalize the franchise as an intangible asset and amortize the cost of the franchise over eight years, what effect would this decision have on Train's 20X5 cash flow from operations (CFO) and 20X6 debt-to-assets-ratio?(NotesB3-323 10) A. Both would be higher with capitalization. B. Both would be lower with capitalization. C. One would be higher and one would be lower with capitalization. Solution: C If the cost were amortized rather than expensed, the $8 million cost of the franchise would be classified as an investing cash flow rather than an operating cash flow, so CFO would increase (and CFI decrease). The asset created by capitalizing the cost would increase assets, so the debt-to-assets ratio would decrease. Q218-4 ★★On 1 January, a company, which prepares its financial statements according to IFRS, arranged financing for the construction of a new plant. The company: （mock85-52） • borrowed NZ$5,000,000 at an interest rate of 8%, • issued NZ$5,000,000 of preferred shares with a cumulative dividend rate of 6%, and • during the first year of construction the company was able to temporarily invest NZ$2,000,000 of the loan proceeds for the first six months and earned 7% on that amount. The amount of financing costs to be capitalized (NZ$) to the cost of the plant in the first year is closest to: A. 330,000. B. 400,000. C. 630,000. 316 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A The interest costs can be capitalized. Under IFRS any amounts earned by temporarily investing the funds are deducted from the capitalized amount． The costs related to the preferred shares cannot be capitalized. Capitalized costs Interest costs ×5,000,000=400,000 Less interest income ×2,000,000×=(70,000) Total capitalized costs 330,000 Q219-4 ★★If a company chooses to capitalize an expenditure related to capital assets instead of expensing it, ignoring taxes, the company will most likely report: （2012-mock85-56） A. a lower cash flow per share in that period. B. a higher earnings per share in future periods. C. the same free cash flow to the firm in that period. Solution: C Example Capitalizing delivery cost as opposed to expensing it. FCFF CFO + interest ×(1-t)—capital expenditures Capital If capitalized，the amount capitalized increases expenditures capital expenditures and is recorded as a cash outflow from investing activities． CFO The CFO will be higher by amount capitalized, ., the amount not expensed. Since capital expenditures and CFO increase by the same amount, FCFF is unchanged. Q220-4 ★A company recently purchased a warehouse property and related equipment (shelving, forklifts, etc.) for €50 million, which were valued by an appraiser as follows: Land €10 million, building €35 million, and equipment €5 million. The company incurred the following additional costs in getting the warehouse ready to use: （2012-mock83） • € million for repairs to the building’s roof and windows • € million to modify the interior layout to meet their needs (moving walls and doors, inserting and removing partitions, etc.) • € million on an orientation and training session for employees to familiarize them with the facility The cost to be capitalized to the building account (in millions) for accounting purposes 317 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 is closest to: A. €. B. €. C. €. Solution：B The capitalized cost of the building would include the other costs that are directly attributable to the building and are involved in extending its life or getting it ready to use: Initial cost € Repairs to roof and windows Modifications to interiors Total cost € million Q221-4 The following data are available for a company and its industry: （2012mock84） Company Common-Size Balance Sheet As at 31 December 2010 Assets (%) Cash & Short-Term Investments Accounts Receivable Inventory Total Current Assets Net Property, Plant, and Equipment Goodwill Other Long-Term Assets Total Assets Liabilities and Shareholders’ Equity Short-Term Debt Accrued Liabilities and Accounts Payable Total Current Liabilities Long-Term Debt Other Long-Term Liabilities Total Liabilities Total Stockholders’ Equity Total Liabilities & Shareholders’ Equity Data for comparison Industry Current ratio Debt-to-equity % Long-term debt-to-equity % 318 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Which of the following statements about the company is most appropriate? The company: A. operates in the manufacturing industry. B. has made significant acquisitions in the past. C. has higher financial leverage than the industry. Solution：B Goodwill makes up 40% of total assets; therefore, the company has made significant acquisitions at some point because goodwill is only recognized during acquisitions. Leverage is below the industry average for both the debt-to-equity ratio of 40% [( + ) ÷ 54] versus the industry average of 50% and long-term debt-to-equity ratio of 37% [ ÷ 54] versus the industry average of 40%. The low PP&E and inventory levels also indicate the company is not likely a manufacturer. Q222-4 ★JOOVI Inc. has recently purchased and installed a new machine for its manufacturing plant. The company incurred the following costs: Purchase price $12,980 Freight and insurance $1,200 Installation $700 Testing $100 Maintenance staff training costs $500 The total cost of the machine to be shown on JOOVI's balance sheet is closest to:（原版书Reading30） A. $14,180. B. $14,980. C. $15,480. Solution：B. Only costs necessary for the machine to be ready to use can be capitalised. Therefore, Total capitalised costs = 12,980 + 1,200 + 700 + 100 = $14,980. Q223-4 ★★Under IFRS, BAURU, ., a Brazilian corporation, borrows capital from a local bank to finance the construction of its manufacturing plant. The loan has the following conditions: Borrowing date 1 January 2009 Amount borrowed 500 million Brazilian real (BRL) Annual interest rate 14 percent Term of the loan 3 years Payment method Annual payment of interest only. Principal amortisation is due at the end of the loan term. The construction of the plant takes two years, during which time BAURU earned BRL 10 million 319 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 by temporarily investing the loan proceeds. Which of the following is the amount of interest related to the plant construction (in BRL million) that can be capitalised in BAURU's balance sheet?（原版书Reading30） A. 130. B. 140. C. 210. Solution：A. Borrowing costs can be capitalised under IFRS until the tangible asset is ready for use. Also, under IFRS, income earned on temporarily investing the borrowed monies decreases the amount of borrowing costs eligible for capitalisation. Therefore, Total capitalised interest = (500 million X 14% X 2 years) — 10 million = 130 million. Q224-4 ★★MARU . de CAT., a Mexican corporation that follows IFRS, has elected to use the revaluation model for its property, plant, and equipment. One of MARU's machines was purchased for 2,500,000 Mexican pesos (MXN) at the beginning of the fiscal year ended 31 March 2010. As of 31 March 2010, the machine has a fair value of MXN 3,000,000. Should MARU show a profit for the revaluation of the machine?（2012原版书Reading30） A. Yes. B. No, because this revaluation is recorded directly in equity. C. No, because value increases resulting from revaluation can never be recognised as a profit. Solution：B. In this case, the value increase brought about by the revaluation should be recorded directly in equity. The reason is that under IFRS, an increase in value brought about by a revaluation can only be recognised as a profit to the extent that it reverses a revaluation decrease of the same asset previously recognised in the income statement. Q225-4 Which is most accurate about revaluation? A. must be used in all assets if elected B. must be used in all intangible asset if elected C. can be used in a part of assets Solution：C. Under IFRS，同类资产采用同样的方式，不同类的资产可以选择Cost 或者Revaluation。 Q226-4 A financial analyst is studying the income statement effect of two alternative depreciation methods for a recently acquired piece of equipment. She gathers the following information about the equipment's expected production life and use: Year 1 Year 2 Year 3 Year 4 Year 5 Total 320 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Units of production 2,000 2,000 2,000 2,000 2,500 10,500 Compared with the units-of-production method of depreciation, if the company uses the straight-line method to depreciate the equipment, its net income in Year 1 will most likely be: (原版书Reading30) A. lower. B. higher. C. the same. Solution: A If the company uses the straight-line method, the depreciation expense will be one-fifth (20 percent) of the depreciable cost in Year 1. If it uses the units-of-production method, the depreciation expense will be 19 percent (2,000/10,500) of the depreciable cost in Year 1. Therefore, if the company uses the straight-line method, its depreciation expense will be higher and its net income will be lower. Q227-4 Which of the following amortization methods is most likely to evenly distribute the cost of an intangible asset over its useful life? (原版书Reading30) A. Straight-line method. B. Units-of-production method. C. Double-declining balance method. Solution：A The straight-line method is the method that evenly distributes the cost of an asset over its useful life because amortisation is the same amount every year. Q228-4 According to IFRS, all of the following pieces of information about property, plant, and equipment must be disclosed in a company's financial statements and footnotes except for. (原版书Reading30) A. useful lives. B. acquisition dates. C. amount of disposals. Solution: B IFRS do not require acquisition dates to be disclosed. Q229-4 According to IFRS, all of We following pieces of information about intangible assets must be disclosed in a company's financial statements and footnotes except for (原版书Reading30) A. fair value. B. impairment loss. C. amortisation rate. 321 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A IFRS do not require fair value of intangible assets to be disclosed. Q230-4 Which of the following characteristics is most likely to differentiate investment property from property, plant, and equipment? (原版书Reading30) A. It is tangible. B. It earns rent. C. It is long-lived. Solution: B Investment property earns rent. Investment property and property, plant, and equipment are tangible and long-lived. Q231-4 Which of the following expenses could be capitalized？ A. Advertising B. R&D C. Software development costs. Solution: C Costs incurred to develop software for sale to others are expensed as incurred until the product's technological feasibility has been established, after which costs are capitalized under both IFRS and . GAAP. R74-4 Capitalized和Expensed的理解：  资本化： 准备用于长时间生产的设备、厂房的建造和购买费用。（耕牛）  费用化：准备在短时间内出售的资产的费用。（肉牛）  Product costs should be capitalized in the inventories account; Period costs should be expensed in the period occurred R75-4 利息的资本化和费用化：  Capitalized expenditures are classified as CFI. Expensed expenditures are classified as CFO；The asset you capitalized today will be expensed in the future.  Under IFRS：Income earned by temporarily investing borrowed funds reduces the interest that is eligible for capitalization.  under . GAAP：no such reduction of capitalized interest R76-4 ★资本化和费用化对财务报表的影响（重点掌握，经常考）  Net income: 费用化的NI当期较低，以后较高；资本化的NI当期高，以后稍低，利润表随时间波动小。  Shareholder's equity与Net Income的变化趋势相同。  Cash flow: 费用化的现金流支出归入CFO，因而费用化的CFO低；资本化的现金流归入CFI，所以资本化CFI低。  Financial ratios: ROA/ROE与NI同向变化，费用化当期ROA/ROE比较低，以后比较高，资本化当期ROA/ROE高，以后比较低，资本化ROA/ROE比较平稳。  Interest coverage ratio (EBIT/ interest expense): 资本化前期Interest coverage ratio 比较322 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 大，因为interest expense小，后期比较小，因为EBIT小；费用化前期Interest coverage ratio比较小，因为interest expense比较大，后期比较大，因为EBIT后期比较大。 R77-4 如果问哪一种财务处理较保守、激进，相对应地，应该是资本化激进，费用化保守。 R78-4 ★Tangible asset：折旧就是一种将资产资本化的方式  Tangible asset not used in the operations of the firm should be classified as investment assets.  Land不必折旧  Land improvement 需折旧  Lease Improvement需折旧  Long-lived assets held for sale: tested for impairement immediately, no longer depreciate; NRV>carrying value, imparied and can be reversed up to the total loss R79-4 ★component depreciation  IFRS requires to depreciate the components of an asset seperately.  GAAP allows but is seldom used R80-4 ★Intangible asset：amotize 摊销  Finite-lived intangible assets are amortized over their useful lives.  一般的讲，企业本身开发的无形资产的费用应该费用化。例外：R&D，software.  GAAP, R&D的费用要费用化；IFRS, research的费用应该费用化development的费用应该资本化。  Software: GAAP要求在技术可行性确立完成之前的费用费用化（研发费用），之后的费用资本化（光盘费用）。但是，对于自用的软件，研究和开发支出全部资本化。  Infinite-lived intangible asset values are not amortized but are tested for impairment at least annually.  Goodwill不折旧，不摊销，只做annual impairment test（还要掌握goodwill的定义）  Under IFRS, good will 的减值，直接将帐面价值与Implied value进行比较。  Gas and oil reserve是资源，需要Depletion R81-4 Upward revaluation  ★upward revaluation of assets在IFRS下是允许的，但. GAAP是不允许的.  ★reversal of impairment is permitted under IFRS for inventory (回转到原来的值), not permitted under . GAAP unless for held for sale的资产 P27-4 关于investment property Q232-4 ★★A company, which prepares its financial statements according to IFRS, owns several investment properties on which it earns income. It values the properties using the fair value model based on prevailing rental markets. A summary of the properties’ valuations is as follows: （2012-mock85-64） •Original cost (acquired in 2009) €50 million •Fair value valuation as at 31 December 2009 € million •Fair value valuation as at 31 December 2010 € million •Fair value valuation as at 31 December 2011 € million Which of the following best describes the impact of the revaluation on the 2011 financial statements? A. € million charge to net income. 323 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. € million charge to revaluation surplus. C. € million charge to revaluation surplus and € million charge to net income. Solution: A For investment properties, when using the fair value model of revaluing assets, all increases and decreases affect the net income. Here, it is — = . Q233-4 When a firm value its investment property, the unrealized gain is recognized in its income statement, which of the following model is the company used in valuation？ A. Cost model B. Fair value model C. Revaluation Solution: B Investment property. Under IFRS, investment property includes assets that generate rental income or capital appreciation. . GAAP does not have a specific definition of investment property. Under IFRS, investment property can either be reported at amortized cost (just like PP&E) or fair value. Under the fair value model, any change in fair value is recognized in the income statement. Q234-4 ★★If a company uses fair value model to value investment property, changes in the fair value of the asset arc least to affect: A. net income. B. net operating income. C. other comprehensive income. Solution: C. When a company uses the fair value model to value investment property, changes in the fair value of the property are reported in the income statement—not in other comprehensive income. Q235-4 ★★A company is most likely to:（2012原版书后Reading30） A. use a fair value model for some investment property and a cost model for other investment property. B. change from the fair value model when transactions on comparable properties become less frequent. C. change from the fair value model when the company transfers investment property to property, plant, and equipment. Solution：C. A company will change from the fair value model to either the cost model or revaluation model when the company transfers investment property to property, plant, and equipment. Q236-4 ★★A firm that purchases a building that it intends to rent out for income would 324 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 report this asset as investment property using the cost model under: (NotesB3-324 18) A. . GAAP only. B. IFRS only. C. both . GAAP and IFRS. Solution：B. Under IFRS, a firm may value investment property using either the cost model or the fair value model. . GAAP does not distinguish investment property from other types of long-lived assets. R82-4 Investment property（新增考点；注意IFRS和GAAP下的区别，重点掌握） IFRS：includes assets that generate rental income or capital appreciation. either be reported at amortized cost (just like PP&E) or fair value（Under the fair value model, any change in fair value is recognized in the income statement）. . GAAP：does not have a specific definition of investment property. Under IFRS 注意：（原版书 volume3-478）investment property的转换 Transfer From Transfer To Financial Statement Treatment Owner-occupied Investment property Treat as revaluation: recognize gain through I/S only if it reverses previously recognized loss Inventory Investment property Recognize gain or loss if fair value is different from carrying amount Investment Owner-occupiedor Fair value of asset at date of transfer will property inventory be its cost under new classification P28-4 关于Debt Security的理解 Q237-4 ★A company issues €1 million of bonds at face value. When the bonds are issued, the company will record a: (原版书Reading32) A. cash inflow from investing activities. B. cash inflow from financing activities. C. cash inflow from operating activities Solution:B. The company receives €1 million in cash from investors at the time the bonds are issued, which is recorded as a financing activity. Q238-4 ★Fairmont Golf issued fixed rate debt when interest rates were 6 percent. Rates have since risen to 7 percent. Using only the carrying amount (based on historical cost) reported on the balance sheet to analyze the company's financial position would most likely cause an analyst to: A. overestimate Fairmont's economic liabilities. B. underestimate Fairmont's economic liabilities. 325 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. underestimate Fairmont's interest coverage ratio. Solution: A. When interest rates rise, bonds decline in value. Thus, the carrying amount of the bonds being carried on the balance sheet is higher than the market value. The company could repurchase the bonds for less than the carrying amount, so the economic liabilities are overestimated. Because the bonds are issued at a fixed rate, there is no effect on interest coverage. Q239-4 ★ A company had the following events related to $5 million of 10-year bonds with a coupon rate of 8% payable semiannually on 30 June and 31 December: • Issued on 1 January 2005, when the market rate of interest was 6%. • Bought back in an open market transaction on 1 January 2011, when the market rate of interest was 8%. Which of the following statements best describes the effect of the bond repurchase on the financial statements for 2011? If the company uses the indirect method of calculating the cash from operations, there will be a: (Mock84-54) A. $346,511 gain on the income statement. B. $743,873 gain on the income statement. C. $350,984 decrease in the cash from operations. Solution: C The book value of the bonds on 1 January 2011 is equal to the present value of the remaining coupon payments and principal discounted at the market rate at time of issue (3% per period). Coupon = ××5,000,000 = 200,000; there are 4 years remaining or 8 coupon payments. Book value = 200,000 PV Annuity (n = 8; i = 3%) + ,000 PV (n = 8; i = 3%) = 1,403,938 + 3,947,046 = 5,350,984 Using a financial calculator PMT = 200,000; FV = 5,; (I % = 3%; N = 8); Compute PV = 5,350,984 Because the market interest rate when the bonds are bought back（8%）is equal to the coupon rate, the company can buy back the bonds at par $5,000,000. Cost of repurchase $5000,000 Book value 5,350,984 Gain on retirement 350,984 On the cash flow statement the gain would be deducted from net income in calculating the cash from operations under the indirect method, and the cash paid to repurchase the bonds would be a cash outflow in the financing section. Q240-4 ★★Princeton Company calls its $1,000,000, 9% bonds for $1,010,000. On the call date, the bonds have a book value of $980,000 and unamortized issue costs of $24,000. Under . GAAP, Princeton should report a: (NotesB3-325 22) A. $54,000 loss. B. $30,000 loss. 326 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. $10,000 gain. Solution: A. Under . GAAP, unamortized issue costs are reported on the balance sheet as an asset and are not included in the book value of the bond liability. Thus, the remainder of the issue costs must be written off when the bond is called. Gain or loss on redemption = book value — reacquisition price — unamortized issue costs = $980,000 — $1,010,000 — $24,000 = $54,000 loss. Q241-4 ★★Assume . GAAP applies unless otherwise noted. Madison Inc. is planning a bond issue. They are considering issuing either a straight coupon bond or a coupon bond with warrants attached. The proceeds from either Issue would be the same. What will be the effect on their interest expense and balance sheet liability if they issue the bonds with warrants as compared to the straight bonds? For the bonds with warrants the: interest expense will be balance sheet liability will be A. lower Lower B. lower Higher C. higher Lower Solution: A The portion of the proceeds attributable to the warrants would be classified as equity, thus the portion classified as a liability would be smaller (lower). The lower balance sheet value would lead to a lower interest expense when it is calculated. The interest expense is based on the liability at the beginning of the period. Not the coupon Davment. Q242-4 ★On 1 January 2010 the market rate of interest on a company's bonds is 5 percent and it issues a bond with the following characteristics: (MOCK 79-65) Face value €50 million Coupon rate, paid annually 4% Maturity date December 31,2019 (10 years) Issue price If the company uses IFRS, its interest expense (in millions) in 2010 is closest to: A. € B. € C. € Solution: B IFRS recommends the effective interest method for the amortization of bond discounts/premiums. The bond is issued for million= . Interest expense=%= 327 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Debt Security的理解： R83-4 ★报表记录：对于discount bond，premium bond的报表记录，特别掌握如何用实际利率法计算int. exp（用mkt. rate at issuance date）  Step 1：计算bond的PV  Step 2：计算bond第一期真正的int. exp；then计算第一期结束的carrying value  Step 3：根据第一期结束的carrying value，计算bond第二期真正的int. exp  如此推导下去 R84-4 ★amortization对CFO间接法的影响 (premium是减去，discount是加上)  For premium bonds, the total portion of coupon is treated as CFO. For analytical purpose, CFO have to be increase by the amount of amortization, while CFF has to be increased by the same amount. The same adjustment can be applied to discount bond CF adjustment. R85-4 ★Disclose in footnotes as bond: The nature of liabilities；Maturity dates；Stated and effective interest rates；Call provisions and conversion privileges；Restrictions imposed by creditors；Assets pledged as security；The amount of debt maturing in each of the next five years R86-4 Bond redemption. When bond is redeemed, a gain or loss is recognized by subtracting the redemption price from the book value of the bond liability, which is reported in the income statement. In the CF statement, it is treated as CFF. R87-4 ★注意conventional bond与bond with warrants，convertible bond的比较：. GAAP：bond with warrants分拆为liability和equity两部分确认计量；但是conventional bond不需要拆分；IFRS：concertiable bond和bond with warrants都需要拆. R88-4 For analytical purpose, if the stock price is significantly higher than the conversion price, the convertible bond should be treated as equity, in contrast, if the stock price is vastly lower than the conversion price, convertible bond should be treated as liability. R89-4 该表格需要重点掌握，考到的几率很大 Par bonds Premium bonds Discount bonds Market rate=coupon rate Market rate<coupon rate Market rate>coupon rate Cash paid=CR.*Par Interest expense = cash paid Interest expense = cash paid - amortization of premium + amortization of discount Interest expense is constant Interest decreases over time Interest increases over time CFO低估；CFF高估 CFO高估；CFF低估 P29-4 Lease for lessor and lessee Q243-4 ★Assume . GAAP applies unless otherwise noted. At the beginning of the year, a lessee company enters into a new lease agreement that is correctly classified as a finance lease, with the following terms: Annual lease payments due at the end of the year $100,000 Lease term 5 years Appropriate discount rate 12% Depreciation method straight-line basis Estimated salvage value $0 With respect to the effect of the lease on the company’s financial statements in the first 328 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 year of the lease, which of the following is most accurate? The reduction in the company’s: A. Pretax income is $72,096. B. Cash flow from financing is $56,742. C. Cash flow from operations is $72,096. Solution：B The present value of the lease is $360,. (n = 5, I = 12%, PMT = $100,000) 12% of the original PV is $43, and represents the interest component of the payment in the first year. The difference between the annual payment and the interest is the amortization of the lease obligation included in cash flow from financing. $100,000 – 43, = $56,. Depreciation is $360, / 5 or $72, so the total reduction in pretax income would be interest plus depreciation or $115,. Cash flow from operations would be reduced by the amount of the interest only because the depreciation would be added back to determine cash flow from operations. Q244-4 ★If Lizard Inc., a lessee, treats a 5-year lease as a finance lease with straight line depreciation rather than as an operating lease: (NotesB3-324 13) A. it will have greater equity at lease inception. B. its operating income will be less in the first year of the lease. C. its CFO will be greater and CFF will be less in the second year of the lease. Solution: B With a finance lease, only the interest portion of the lease payment is classified as CFO, so CFO will be greater than it would be with an equivalent operating lease. CFF will be less for a finance lease because the principal portion of each lease payment is classified as a financing cash outflow. Operating income, EBIT, will be reduced only by the (equal) annual depreciation expense with a finance lease, so operating income will be greater for a finance lease than for an operating lease (for which the entire lease payment will be an operating expense). At inception, a finance lease will increase assets and liabilities by the same amount so there is no effect on equity. Q245-4 ★★A company prepares its financial statements according to . GAAP and leased a piece of equipment on 1 January 2012. Information relevant to the transaction is as follows: (MOCK92-67) 1. Five annual lease payments of $25,000, with the first payment due 1 January 2012. 2. Interest rate on similar company debt is currently 8%. 3. The fair value of the equipment is $115,000. 4. Useful life of the equipment is seven years. 5. The company depreciates other equipment in the same asset class on a straight-line basis. The total expense related to the lease on the company’s 2012 income statement will be closest to: A. $22,024. 329 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. $25,000. C. $28,185. Solution: C The lease would qualify as a finance (capital) lease under . GAAP because the present value of the lease payments is more than 90% of the fair value. Using a financial calculator for an annuity due at the beginning of the period: PV of lease payments: PMT = 25,000, i = 8%, N = 5, BGN Compute PV. PV = $107,803, 90% of the fair value: x 115,000 = $103,500. Therefore, the lease is greater than 90% and would be capitalized at $107,803. With the first payment made immediately, the outstanding balance in 2012 = 107,803 -25,000 = 82,803. Interest expense in 2012 x 82,803 6, Amortization expense for the year using the lease 107,803 / 5 21, term as the useful life (no indication that the lease will be renewed beyond the initial term) Total expense in 2012 28, Q246-4 ★Assume . GAAP applies unless otherwise noted. On 1 January a company entered into a capital lease resulting in an obligation of $10,000 being recorded on the balance sheet. The lessor’s implicit interest rate was 12%. At the end to the first year of the lease, the cash flow from financing activities section of the lessee’s statement of cash flows showed a use of cash of $1,300 applicable to the lease. The cash the company paid the lessor in the first year of the lease was closest to: A. $1,200 B. $1,300 C. $2,500 Solution: C 1,300+10,00012%. The cash flow from financing section of the statement of cash flows contains the amortization of the capital lease obligation. The cash flow from operations contains the interest expense associated with the capital lease the total of the amortization add interest expense in the lease payment. Q247-4 ★Assume . GAAP applies unless otherwise noted. On January 1, 2008, InTec Products Inc. entered into a lease agreement to lease a piece of machinery as the lessor. The annual lease payments are $50,000, due December 31, the lease term is for 5 years, the machine has an estimated useful life of 6 years, and Peoria currently records the machine on its balance sheet at its cost of $160,000. The incremental rate of the lease is 8% and they are reasonably assured of the collection of the lease payments. Which of the following best describes the classification and effect of the lease on Peoria's income statement for 2008? A. Direct financing lease. Gross profit of $39,635 plus interest income of $15,971. B. Direct financing lease. Interest income of $15,971. 330 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. Sales type lease. Gross profit of $39,635 plus interest income of $15,971. Solution: C 先判断对于出租人是什么类型的lease: the lease period covers more than 75% of its useful life (5/6), and Peoria currently records the machine on its balance sheet at its cost of $160,000.所以是一个capital lease；之后因为InTec Products Inc.是一个manufacturer，而且cost可以确认，被视为出租人方capital lease中的sales-type：PV of the lease payments ($199,635) (PMT = $50,000, N=5, i=8%). 之后确认the gross profit: PV of series of lease payment- cost of goods sold (cost of goods sold=租赁资产的帐面价值-残值现值, 题目中没有提到残值, 就不用考虑了) (199,635 - 160,000 = 39,635，如果残值高估，则成本低估，经营利润高估)。所以Interest income on the net investment in the lease: x 199,635 = 15,971. Q248-4 ★Compared with a capital lease, which impact will an operating lease have on a company’s financial statements? A. Interest coverage ratio will deteriorate. B. Leverage ratio will improve. C. Profitability will deteriorate in the first years. Solution: B Compared with capital lease, operating lease will result in higher operating expense but higher net income, thus, profitability will increase in the first year. Q249-4 Compared with a capital lease, which impact will an operating lease have on a company’s CFO? A. CFO will be higher B. CFO will remain the same C. CFO will be lower Solution: C Compared with capital lease, operating lease will result in higher operating expense and lower CFO. Q250-4 ★Under . GAAP, a lessor's reported revenues at lease inception will be highest if the lease is classified as a(n): A. sales-type lease. B. operating lease. C. direct financing lease. Solution: A. sales-type lease treats the lease as a sale of the asset, and revenue is recorded at the time of sale equal to the present value of future lease payments. Under a direct financing lease, only interest income is reported as earned. Under an operating lease, revenue from rent is reported when collected. 331 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q251-4 ★A company has announced that it is going to distribute a group of long-lived assets to its owners in a spin-off. The most appropriate way to account for the assets until the distribution occurs is to classify them as: A. held for sale with no depreciation taken. B. held for use until disposal with no depreciation taken. C. held for use until disposal with depreciation continuing to be taken. Solution: C. Long-lived assets that will be disposed of other than by sale (such as a spin-off, an exchange for other assets, or abandonment) are classified as held for use until disposal and continue to be depreciated until that time. Q252-4 Which of the following is most likely a reason that a lessor can offer attractive lease terms and lower cost financing to a lessee? Because the: （2012-mock83） A. lessor retains the tax benefits of ownership. B. lessor avoids reporting the liability on its balance sheet. C. lessee is better able to resell the asset at the end of the lease. Solution：A The lessor often retains the tax benefits of ownership of the leased asset, which allows the lessor to pass those savings along to the lessee in the form of lower financing costs or other attractive terms. Q253-4 Which of the following will most likely increase a company’s operating cash flow? An increase in: （2012mock84） A. days sales payable (DSP). B. gains on the sale of long-term assets. C. use of operating leases versus financing leases. Solution：A An increase in the days sales payable would indicate the company is stretching out its payables, which would increase the cash from operations. Q254-4 ★An analyst is making the necessary adjustments to convert operating leases to capital leases for comparison with other companies. The most likely effect of the adjustments will be that the: (2014 Mock 98-62) A. debt-to-capital ratio will increase. B. current ratio will increase. C. interest coverage ratio will not be affected. Solution：A Converting an operating lease to a capital lease will increase the total debt by the present value of the lease payments. This change will increase both debt and the total capital, but because the 332 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 debt/total capital must be less than 1, equal additions to the numerator and denominator increase the ratio. 关于承租人和出租人的Lease： R90-4 承租人（常考）  Operating lease vs. Capital lease (capital lease also can be called as finance lease) R91-4 ★Under IFRS, capital lease when transfer the risk and return of title, applying to both lessee and lessor.  To lessee, No specific condition and focus on substance of transaction, if transfer, capital lease to lessee and lessor.  To lessor, If PV of lease payment larger than Fair Value, sales-type. R92-4 ★Capital lease 的条件under US GAAP with specific conditions： 1. The title to the leased asset is transferred to the lessee at the end of the lease period. 2. A bargain purchase option exists: to permit the lessee to purchase the leased asset for a price that is significantly lower than the fair market value of the asset on the exercisable date. 3. The lease period is at least 75% of the asset’s economic life. 4. The present value of the lease payments is equal to or greater than 90% of the fair value of the leased asset. The discount rate used is the lower of the lessee’s incremental borrowing rate or the interest rate implicit in the lease (the discount rate that the lesser used to determine the lease payment.) R93-4 ★两种lease的方式对于报表呈现各项和ratio的影响（凡是capital的处理，都会引起A和L的增加, CFO被高估，在capital lease中Dep., Int.也会同时增加，所以NI低；但是dep.不会大于lease payment，所以相对operating lease，EBIT高。 Remember, all the financial ratios deteriorate with financial lease, except EBIT and CFO) R94-4 在Capital lease中，增加的Liability部分包含ST和LT，其中ST是利息—即为CFO；LT是本金—即为CFF R95-4 ★Capital lease的计算：和bond的计算相似  先将MLP折现，然后A和L都会增加PV of MLP  Dep.：按照在A上确认的PV of MLP，用直线折旧法  Int.：每期的都用carrying valuer，carrying value=carrying value（上期）- principal repaid（考试会考第二年或第三年的利息） R96-4 ★出租人：只要能区分direct financing & sales type under US GAAP  判断是什么类型的lease：对于出租人，lease也分为两类—operating lease和capital lease。  对于lessor，判断capital lease的判断条件：  Firstly, 满足对于lessee是capital lease；Secondly，collectability of the MLPs is reasonably predictable and there are no significant uncertainties regarding the amount of unreimbursable costs yet to be incurred by the lessor under the provisions of the lease agreement  Lessor的capital lease又分为两种：sales-type (PV> Fair Value of leased asset) 和direct-financing 333 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  记账区别：sales-type在期初会确认一笔毛利gross profit= PV of MLP – (Cost of assets – PV of salvage)；但是direct-financing不确认毛利，而是把PV of MLP当做一笔借款借给承租 人，将来收利息  期初现金流区别：sales-type在期初有现金流；而direct-financing没有现金流  期中现金流区别：sales-type和direct-financing有CFO inflow，都是int. revenue R97-4 ★Disclose in footnotes as lease: 特别是lease payment that are due in each of the next five years and after five-year aggregate (can be); but interest rate is not always disclosed R98-4 Take-or-pay commitment&sale of receivable with recourse  Take or pay commitment: the liability should be increased by amount of the commitment.  Sale of receivable with recourse : should be treated as borrowing collateralized by receivable. To specific, add receivables back and treat the proceeds of the sale as debt. CFO of the amount of the proceeds of sale should be treated as CFF.  Thus, leverage ratio are higher with off-balance sheet items without adjustment. P30-4 Deferred Tax Q255-4 ★Using the straight-line method of depreciation for reporting purposes and accelerated depreciation for tax purposes would most likely result in a(原版书Reading31) A. valuation allowance. B. deferred tax asset. C. temporary difference. Solution: C. Because the differences between tax and financial accounting will correct over time, the resulting deferred tax liability, for which the expense was charged to the income statement but the tax authority has not yet been paid, will be a temporary difference. A valuation allowance would only arise if there was doubt over the company's ability to earn sufficient income in the future to require paying the tax Q256-4 ★Deferred tax liabilities should be treated as equity when(原版书Reading31): A. they are not expected to reverse. B. the timing of tax payments is uncertain. C. the amount of tax payments is uncertain. Solution: A. If the liability will not reverse, there will be no required tax payment in thc Future and thc "liability" should be treated as equity Q257-4 ★When accounting standards require recognition of an expense that is not permitted under tax laws, the result is a: A. deferred tax liability. 334 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. temporary difference. C. permanent difference. Solution: C. Accounting items that are not deductible for tax purposes will not be reversed and thus result in permanent differences. Q258-4 ★Victory Corp. received interest income from federally tax exempt bonds of $40,000 in the year 20X0. Its statutory tax rate is 40%. The effect of this difference between taxable and pre-tax income is most likely a(n): (NotesB3-325 20) A. decrease in its effective tax rate to below 40%. B. increase in its deferred tax asset of $16,000. C. increase in its deferred tax liability of $16,000. Solution: A. The receipt of the tax-exempt interest income will create a permanent difference between pretax income and taxable income. Since the tax-free interest increases pre-tax income, but not income tax expense, the effective tax rate will be less than 40%. No deferred tax liability is created because the difference between pretax and taxable income will never reverse. Q259-4 ★In its first year of operations, a firm produces taxable income of —$10,000. The prevailing tax rate is 40%. The firm's balance sheet will report a deferred tax: (NotesB3-252 11) A. asset of $4,000. B. asset of $10,000. C. liability of $4,000. Solution: A. The tax loss carryforward results in a deferred tax asset equal to the loss multiplied by the tax rate. Q260-4 ★An analyst is comparing a firm to its competitors. The firm has a deferred tax liability that results from accelerated depreciation for tax purposes. The firm is expected to continue to grow in the foreseeable future. How should the liability be treated for analysis purposes? (NotesB3-252 12) A. It should be treated as equity at its full value. B. It should be treated as a liability at its full value. C. The present value should be treated as a liability with the remainder being treated as equity. Solution: A. The DTL is not expected to reverse in the foreseeable future. The liability should be treated as equity at its full value. 335 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q261-4 Which one of the following statements is most accurate? Under the liability method of accounting for deferred taxes, a decrease in the tax rate at the beginning of the accounting period will: (NotesB3-252 13) A. increase taxable income in the current period. B. increase a deferred tax asset. C. reduce a deferred tax liability. Solution: C If the tax rate decreases, balance sheet DTL and DTA are both reduced Taxable income is unaffected. Q262-4 ★★An analyst gathered the following information about a company: (NotesB3-249 14) Taxable income is $40,000. Pretax income is $50,000. Current tax rate is 50%. Tax rate when the reversal occurs will be 40%. What is the company's deferred tax liability at the end of year 1? A. $3,500. B. $4,000. C. $5,000. Solution: B The tax rate that should be used is the expected tax rate when the liability reverses. The deferred tax liability will be $10,000 x 40% = $4,000. Q263-4 While reviewing a company, an analyst identifies a permanent difference between taxable income and pretax income. Which of the following statements most accurately identifies the appropriate financial statement adjustment? (NotesB3-253 15) A. The amount of the tax implications of the difference should be added to the deferred tax liabilities. B. The present value of the amount of the tax implications of the difference should be added to the deferred tax liabilities. C. The effective tax rate for calculating tax expense should be adjusted. Solution: C If a permanent difference between taxable income and pretax income is identifiable, the effective tax rate for calculating tax expense should be adjusted. Q264-4 ★★An analyst is reviewing a company with a large deferred tax asset on its balance sheet. She has determined that the firm has had cumulative losses for the last three years and has a large amount of inventory that can only be sold at sharply reduced prices. Which of the following adjustments should the analyst make to account for the 336 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 deferred tax assets? (NotesB3-253 16) A. Record a deferred tax liability to offset the effect of the deferred tax asset on the firm's balance sheet. B. Recognize a valuation allowance to reflect the fact that the deferred tax asset is unlikely to be realized. C. Do nothing. The difference between taxable and pretax income that caused the deferred tax asset is likely to reverse in the future. Solution: B A valuation allowance is used to offset deferred tax assets if it is unlikely that those assets will be realized. Because the company has a history of losses and inventory that is unlikely to generate future profits, it is unlikely the company will realize its deferred tax assets in full. Q265-4 ★Assume . GAAP applies unless otherwise company reports net income of $800,000 for the year. The table below indicates selected items which were included in net income and their associated tax status. Included in Tax Status determining net Income Depreciation Expense $70,000 $90,000 allowed for tax purposes Dividend Income $120,000 Dividends not taxable Fine related to $100,000 Not deductible for tax purposes environmental damage R&D Expenditures $50,000 $20,000 allowed for tax purposes The company’s tax rate is 35 percent. The company’s current income taxes payable (in $) is closest to: A. 206,500. B. 276,500. C. 360,500. Solution: B Net income $800,000 Add back book depreciation 70,000 Deduct tax allowed depreciation (90,000) Deduct Dividend income (120,000) Add back Fine 100,000 Add back book R&D 50,000 Deduct tax allowed R&D (20,000) Taxable income 790,000 Current taxes payable 35% x $790,000=276,500 Q266-4 ★Assume . GAAP applies unless otherwise noted. Which of the following best describes taxes payable? 337 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. Total liability for current and future taxes B. Expense based on current period pre-tax income C. Tax return liability resulting from current period taxable income Solution: C Taxes payable is the current liability resulting from the current period taxable income based on taxable income. Q267-4 Assume . GAAP applies unless otherwise Corp., a highly profitable company, purchased a new asset on 1 January 2002 for $1,000,000. The following information applies to the asset: ξFor financial statements purposes, straight-line depreciation over 10 years with no salvage value ξFor tax purposes, three-year MACRS depreciation class with first year MACRS factor = ξTax rate = 40% The effect of the asset purchase on Deltax’s deferred tax liability for 2002 is closest to a: A. $233,000 decrease. B. $93,200 decrease. C. $93,200 increase. Solution: C The timing difference results in an increase in deferred tax liability: ($333,000-$100,000)= $93,200 Q268-4 ★★A company has recently revalued one of its depreciable properties and estimated that its remaining useful life would be another 20 years. The applicable tax rate for all years is 30% and the revaluation of the property is not recognized for tax purposes. Details related to this asset are provided in the table below, with all £-values in millions. Accounting Purposes Tax Purposes Original values and estimates, start of 2007 2007 Acquisition cost £8,000 £8,000 Depreciation, straight-line 20 years 8 years Accumulated depreciation end of 2009 £1,200 £3,000 Net balance end of 2009 £6,800 £5,000 Re-estimated values and estimates, start of 2010 Revaluation balance start of 2010 £10,000 Not applicable 338 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 New estimated life 20 years The deferred tax liability (in millions) as at the end of 2010 is closest to: A. £690. B. £960. C. £1,650. Solution: A Accounting Tax Purposes Revaluation surplus(10,P0u00rp –o s6e,8s0 0) no revaluation =3,200 allowed Depreciation, straight-line 20 years 5 years remaining 2009 start of year balance after 10,000 5,000 revaluation Depreciation 2009 500 1,000 Net balance end of 2009 9,500 4,000 Less revaluation surplus (3,200) _____ Carrying value for purposes of 6,300 4,000 deferred taxes Deferred tax liability = x (6,300 – 4,000) = 690 Q269-4 ★★Assume . GAAP applies unless otherwise noted. Fred Company has a deferred tax liability balance of $1,200,000 at the end of 2005. Tax rates increased from 30 percent to 40 percent in 2005. Fred Company should increase its tax liability account and also increase its: A. 2005 income tax expense by $120,000. B. 2005 income tax expense by $400,000 C. Income taxes payable by $400,000. Solution: B The change in Fred’s rates causes its deferred tax liability account to increase (((40 – 30) / 30) $1,200,000 =) $400,000. The corresponding increase is to current income tax expense. Q270-4 ★The following information is available about a company: (all figures in $ thousands) 2010 2009 Deferred tax assets 200 160 Deferred tax liabilities (450) (360) Net deferred tax liabilities (250) (200) Earning before taxes 4,000 3,800 Income taxes at the statutory rate 1,200 1,140 Income tax payable (Current income tax expense) 1,000 900 The company's 2010 income tax expense (in thousands) is closest to:(MOCK79-51) 339 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. $1,000 B. $1,050 C. $1,250 Solution: B Income tax expense reported on the income statement=income tax payable+ net changes in the deferred tax assets and deferred tax liabilities. The change in the net deferred tax liability is a $50 increase (indicating that the income tax expense is $50 in excess of the income tax payable (or current income tax expense)) and representing an increase in the expense. Therefore, the income tax expense= $1,000+50=. $1,050 Q271-4 ★★★A company purchased equipment in 2009 for £25,000; the year-end values for accounting purposes and tax purposes are as follows: （2012-mock85-65） 2010 2009 Carrying amount for accounting £20,000 £22,500 purposes Tax base for tax purposes £16,000 £20,000 Tax rate 25% 30% Which of the following statements best describes the effect of the change in the tax rate on the company’s 2010 financial statements? The deferred tax liability: A. increased by £250. B. decreased by £200. C. decreased by £800. Solution: B Evaluate the impact of tax rate changes on a company’s financial statements and ratios. Deferred tax liability=taxable temporary difference×tax rate In 2010 if the rates had not changed, and deferred tax ×4,000= £1200 liability would be: But with the lower tax rate, the deferred tax liability will be: ×4,000= £1000 Effect of the change in rate therefore is a decrease in the £(200) liability Alternative calculation=change in rate×taxation difference -5%×4,000 £(200) Q272-4 The following information is available about a company: （2012-mock83） (all figures in $ thousands) 2011 2010 Deferred tax assets 200 160 Deferred tax liabilities (450) (360) Net deferred tax liabilities (250) (200) Earnings before taxes 4,000 3,800 Income taxes at the statutory rate 1,200 1,140 Current income tax expense 1,000 900 340 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The company’s 2011 income tax expense (in thousands) is closest to: A. $1,000. B. $1,050. C. $1,250. Solution: B. Income tax expense reported on the income statement = Income tax payable + Net changes in the deferred tax assets and deferred tax liabilities. The change in the net deferred tax liability is a $50 increase (indicating that the income tax expense is $50 in excess of the income tax payable [or current income tax expense] and representing an increase in the expense). Therefore, the income tax expense = 1,000 + 50 = 1,050. Q273-4 ★★A company purchased equipment for $50,000 on 1 January 2009. It is depreciating the equipment over a period of 10 years on a straight-line basis for accounting purposes, but for tax purposes, it is using the declining balance method at a rate of 20%. Given a tax rate of 30%, the deferred tax liability as at the end of 2011 is closest to: （2012mock84-66） A. $420. B. $2,820. C. $6,720. Solution：B The deferred tax liability is equal to the tax rate times the difference between the carrying amount of the asset and the tax base. Value for accounting purposes after 3 years: 50,000 – [3 x (50,000 ÷ $35,000 10)]= Value for tax purposes: Carrying amount = Start of year balance × (1 – ) 50,000 × × × = 25,600 After three years: Difference between accounting and tax values 9,400 Deferred tax liability @ 30%: 30% × 9,400 = 2,820 Q274-4 An analyst is analyzing two companies in the same industry and believes that they have similar strategies regarding the use of property, plant, and equipment (PP&E). He also thinks that the PP&E assets of the two companies are roughly of the same age and have the same expected useful lives remaining. Company A uses the LIFO method of inventory valuation, and Company B uses the FIFO method. The following additional information is available from the companies’ financial statements: （2012mock84-67） $ millions Company A Company B 341 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Current assets 5,800 6,300 Inventory LIFO reserve 1,100 N/A Current liabilities 4,300 4,200 Gross PP&E 2,500 3,000 Accumulated depreciation 1,250 1,200 Depreciation expense 125 120 In the analyst’s opinion, which of the following conclusions is most appropriate? Compared with Company A, Company B: A. is more liquid. B. has a higher quality of earnings. C. uses more aggressive accounting estimates related to PP&E. Solution: C. Company A Company B Current ratio as reported (CA ÷ CL) Current ratio adjusted to FIFO for Company A (5,800 + 1,100) ÷ 4,300 Co A is more liquid Net PPE 1,250 1,800 Estimated average remaining useful life (Net PPE ÷ Depreciation expense) 10 years 15 years The analyst believes the two companies’ PP&E are of the same age; however, the useful life remaining for Company B’s assets is 15 years compared with 10 for Company A, implying B is using a longer useful life or more aggressive accounting policies. The more aggressive PP&E estimates combined with the use of FIFO indicate that Company B has a lower quality of earnings, not higher. The adjusted current ratio for Company A (adjusted to include the LIFO reserve to convert the balance sheet to FIFO for comparison) is higher than the current ratio for B, indicating that A is more liquid. Q275-4 Analysts should treat deferred tax liabilities that are expected to reverse as: A. equity. B. liabilities. C. neither liabilities nor equity. Solution：B. If the liability is expected to reverse (and thus require a cash tax payment) the deferred tax represents a future liability. Q276-4 When both the timing and amount of tax payments are uncertain, analysts should treat deferred tax liabilities as: A. equity. 342 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. liabilities. C. neither liabilities nor equity. Solution: C. The deferred tax liability should be excluded from both debt and equity when both the amounts and timing of tax payments resulting from the reversals of temporary differences are uncertain. Q277-4 ★★When certain expenditures result in tax credits that directly reduce taxes, the company will most likely record: A. a deferred tax asset. B. a deferred tax liability. C. no deferred tax asset or liability. Solution: C. Tax credits that directly reduce taxes are a permanent difference, and permanent differences do not give rise to deferred tax. Q278-4 ★★When accounting standards require an asset to be expensed immediately but tax rules require the item to be capitalized and amortized, the company will most likely record: A. a deferred tax asset. B. a deferred tax liability. C. no deferred tax asset or liability. Solution: A. The capitalization will result in an asset with a positive tax base and zero carrying value. The amortization means the difference is temporary. Because there is a temporary difference on an asset resulting in a higher tax base than carrying value, a deferred tax asset is created. Q279-4 ★★Zimt presents its financial statements in accordance with . GAAP. In 2007, Zimt discloses a valuation allowance of $1,101 against total deferred tax assets of $19,201. In 2006, Zimt disclosed a valuation allowance of $1,325 against total deferred tax assets of $17,325. The change in the valuation allowance most likely indicates that Zimt's: A. deferred tax liabilities were reduced in 2007. B. expectations of future earning power has increased. C. expectations of future earning power has decreased. Solution: B. The valuation allowance is taken against deferred tax assets to represent uncertainty that future taxable income will be sufficient to fully utilize the assets. By decreasing the allowance, Zimt is signaling greater likelihood that future earnings will be offset by the deferred tax asset. 343 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q280-4 The author of a new textbook received a $100,000 advance from the publisher this year. $40,000 of income taxes were paid on the advance when received. The textbook will not be finished until next year. Determine the tax basis of the advance at the end of this year.(NotesB3-253 17) A. $0. B. $40,000. C. $100,000. Solution: A. For revenue received in advance, the tax base is equal to the carrying value minus any amounts that will not be taxed in the future. Since the advance has already been taxed, $100,000 will not be taxed in the future. Thus, the textbook advance liability has a tax base of $0 ($100,000 carrying value - $100,000 revenue not taxed in the future). Q281-4 ★★According to IFRS, the deferred tax consequences of revaluing held-for-use equipment upward is reported on the balance sheet: (NotesB3-253 18) A. as an asset. B. as a liability. C. in stockholders' equity. Solution: C. The deferred tax consequences of revaluing an asset upward under IFRS are reported in stockholders' equity. Q282-4 KLH Company reported the following: Gross DTA at the beginning of the year $10,500 Gross DTA at the end of the year $11,250 Valuation allowance at the beginning of the year $2,700 Valuation allowance at the end of the year $3,900 Which of the following statements best describes the expected earnings of the firm? Earnings are expected to: (NotesB3-253 19) A. increase. B. decrease. C. remain relatively stable. Solution: B. The valuation allowance account increased from $2,700 to $3,900. The most likely explanation is the future earnings are expected to decrease, thereby reducing the value of the DTA. Q283-4 If a company has a deterred tax asset reported on its statement of financial position and the tax authorities reduce the tax rate, which of the following statements is most accurate concerning the effect of the change? The existing deferred tax asset will: (MOCK92-66) 344 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. not be affected. B. increase in value. C. decrease in value. Solution: C. A decrease in the tax rate will result in a decrease in the previously reported amounts of deferred tax assets. That is, the value of the future tax assets, based on the new lower rate, is reduced for offsetting future tax payments. Q284-4 Which of the following events will most likely result in a decrease in a valuation allowance for a deferred tax asset under . GAAP? A(n): (2014 Mock 99-60) A. reduction in tax rates B. extension in the tax loss carry-forward period C. decrease in interest rates Solution: B Under . GAAP, deferred tax assets must be assessed at each balance sheet date. If there is any doubt whether the deferral will be recovered, the carrying amount should be reduced to the expected recoverable amount. The asset is reduced by increasing the valuation allowance. Should circumstances change so that it is more probable that the deferred tax benefits will be recovered, the deferred asset account will be increased (and the valuation allowance decreased). An increase in the carry-forward period for tax losses extends the possibility that benefits will be realized from the deferred tax asset and would likely result in a decrease in the valuation allowance and an increase in the deferred tax asset. Deferred Tax的理解： R99-4 DTA和DTL的理解：凡是产生deferred tax都是由于会计处理和税务处理的暂时性差异（Temporal difference）引起的，比如折旧、计提准备金、保修费等; R100-4 ★Revenue/Expense approach：Profit Before Tax > Taxable Income，就产生DT expense (DTL)；PBT < 就产生DT benefit (DTA)； R101-4 ★Asset/Liability approach（asset tax base）：  （Asset）Asset tax base = deductible asset in the future (from the taxing)  （Asset）Accounting base = Carrying value of asset (from the accounting) =BV-accumulated depreciation-impairment  Accounting base < tax base asset, treat as DTA  Accounting base > tax base asset, treat as DTL（会计多记资产，必须增加负债） R102-4 ★Asset/Liability approach（asset tax base）：  (Liability) Liability tax base = carrying value of the liability - any amounts that will be deductible on the tax return in the future或者carrying value - any amounts of the revenue that will not be taxable in the future  (Liability) Accounting base= carrying value of the liability  (Liability) Accounting base- Liability tax base＝be deductible on the tax return in 345 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 the future或者not be taxable in the future  Accounting base < tax base liability, treat as DTL  Accounting base > tax base liability, treat as DTA（会计多记负债，必须增加资产）  Tax credit is permenant difference which will not affet tax expense. R103-4 ★计算由于税率改变引起的income tax expense变化  New-DTL = Old-DTL / Old-Rate New-Rate  Income tax expense = tax payable + △DTL - △DTA  Tax rate ↑ DTL↑ DTA↑  Tax rate↓ DTL↓ DTA↓ R104-4 一般在题目中，dep.形成DTL；impairment，warranty确认为DTA R105-4 . GAAP business combination时确认的goodwill不在报表上确认递延税 R106-4 . GAAP vs. IFRS（相对重要的几个部分） IFRS . GAAP 将所得税资产和所得税负FAS109要求，Tax pa able在Tax payable 债与其他资产和负债分开B/S中确认为流动负债 列报； Classification of Always non-current (Net) non-current /current DTA or DTL Tax rate for Use enacted or Use enacted tax rate measuring substantively enacted tax DTL or DTA rate. Recognize the p obable Recognize in full and then Recognition of portion. reduce by a valuation deferred tax assets allowance, for the non-probable portion. DTA va is allowed RevluationReverseerse is prohibited R107-4 Valuation allowance for DTA:  当由于企业经营状况恶化，从而可能导致DTA未来无法回转时，要确认Valuation allowance.  Increaseing the valuation allowance can decrease DTA, increase income tax expense and decrease net income. The net DTA can be reversed by decreasing valuation allowance, resulting in higher earing. R108-4 ■在分析时，当分析师认为DTL不会回转时，DTL全额视为equity；会反转时，现值作为负债，剩余部分计入到Equity，再计算D/E。 P31-4 Revaluation of Long-lived Assets Q285-4 ★A company, which prepares its financial statements in accordance with IFRS uses the revaluation model to value land. At the end of the current year the land value of the land has increased and will be adjusted on the balance sheet. Which of the following statements is most accurate? In the current period the revaluation of the land will: 346 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. increase return on sales. B. increase return on assets. C. decrease the debt to equity ratio. Solution: C The increase in the value of the land bypasses the income statement and goes directly to a revaluation surplus account in equity. Equity increases thereby decreasing the debt to equity ratio. Q286-4 Taking an impairment charge due to a decrease in the value of a long-lived depreciable asset is least likely, in the period the impairment is recognized, to reduce a firm's: (NotesB3-324 15) A. net income. B. operating income. C. taxes payable. Solution: C. Impairment charges reduce operating income and net income in the period of the charge. Taxes are not affected because any loss in asset value will reduce taxes only when the asset is disposed of and the loss is actually realized. The debt to equity ratio increases in the period of the charge because equity is reduced. P32-4 Derecognition of debt Q287-4 ★★Oil Exploration LLC paid $45,000 in printing, legal fees, commissions, and other costs associated with its recent bond issue. It is most likely to record these costs on its financial statements as: A. an asset under . GAAP and reduction of the carrying value of the debt under IFRS. B. a liability under . GAAP and reduction of the carrying value of the debt under IFRS. C. a cash outflow from investing activities under both . GAAP and IFRS. Solution: A. Under . GAAP, expenses incurred when issuing bonds are generally recorded as an asset and amortized to the related expense (legal, etc.) over the life of the bonds. Under IFRS, they are included in the measurement of the liability. The related cash flows are financing activities. Q288-4 The following information is available from a company’s 2011 financial statements: （2012-mock83） Note 6: Employee costs (in thousands) 2011 2010 Wages and salaries $21,000 $18,500 Share-based payment costs 600 425 Defined contribution pension plan 1,525 1,462 Retirement benefit obligations (note 17) 728 620 347 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Other employee costs 3,233 3,080 Total employee costs $27,086 $24,087 Note 17: Retirement benefit obligations Amounts recognized in the income statement for the year (in thousands) 2011 2010 Current service cost $ 692 $ 588 Interest cost on pension obligation 80 65 Expected return on plan assets (50) (45) Past service costs recognized in the year 6 12 Total income statement charge $ 728 $ 620 The pension expense (in thousands) reported in 2011 is closest to: A. $1,525. B. $2,217. C. $2,253. Solution：C The pension expense would be the sum of the expense for the defined contribution plan and the defined benefit plan (retirement benefit obligation): 1,525 + 728 = 2,253. Q289-4 ★Under a defined contribution pension plan, which of the following is recognized as a pension expense? (NotesB3-325 21) A. Actuarial gains and losses. B. Periodic contributions to the plan. C. Service costs incurred during the period. Solution：B Under a defined contribution pension plan, a company's only pension expenses are the predetermined contributions required to be made to the plan for the period. Q290-4 On 1 January 2009, a company that prepares its financial statements according to IFRS issued bonds with the following features: （2012-mock83） • Face value £20,000,000 • Term 5 years • Coupon rate 6% paid annually on December 31 • Market rate at issue 4% The company did not elect to carry the bonds at fair value. In December 2011 the market rate on similar bonds had increased to 5% and the company decided to buy back (retire) the bonds after the coupon payment on December 31. As a result, the gain on retirement reported on the 2011 statement of income is closest to: A. £340,410. B. £371,882. 348 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. £382,556. Solution：C Gain = Book value of debt – Market value both at time of retirement, calculations below 20,754,438 – 20,371,882 = 382,556 The market value of debt at retirement can be determined by discounting the future cash flows at the current market rate (5%) using a financial calculator: FV = 20,000,000; i = 5%; PMT = 1,200,000; N = 2; Compute PV = 20,371,882 The book value after the third interest payment (two payments remaining) can be found either using a financial calculator and the market rate at the time of issue (4%) or an amortization table (shown below). FV = 20,000,000; i = 4%; PMT = 1,200,000; N = 2; Compute PV = 20,754,438. Q291-4 A company issued a $50,000 seven-year bond for $47,565. The bonds pay 9% per annum, and the yield to maturity at issue was 10%. The company uses the effective interest rate method to amortize any discounts or premiums on bonds. After the first year, the yield to maturity on bonds equivalent in risk and maturity to these bonds is 9%. The amount of the bond discount amortization recorded in the first year is closest to: A. $348. B. $0. C. $257. Solution: C Interest paid = Coupon rate at issue × Issued amount of bonds = 9% × $50,000 = 4,500 Interest expense = Market rate at issue × Carrying (book value) of bonds Amortization of discount = Interest expense – Interest paid Interest Interest Amortization Carrying Year Paid (9%) Expense (10%) of Discount Value 0 47,565 1 4,500 4,757 257 47,822 Amortization of the bond discount in the first year is $257. 349 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R109-4 ★Early repayment of Bond：  Under . GAAP：any remaining unamortized bond issuance costs must be written off and included in the gain or loss calculation. Writing off the cost of issuing the bond will reduce a gain or increase a loss.  under IFRS ：No write-off is necessary  gain or loss from redeeming debt：is reported in the income statement, usually as a part of continuing operations, and additional information is disclosed separately.  Redeeming debt： is usually not a part of the firm's day-to-day operations; thus, analysts often eliminate the gain or loss from the income statement for analysis and forecasting.  When presenting the cash flow statement using the indirect method, any gain (loss) is subtracted from (added to) net income in calculating cash flow from operations. The redemption price is reported as an outflow from financing activities. R110-4 Issuance cost of bond  Issuance cost of debt includes printing, legal fees directly related to the issuance of bond  Under IFRS, the amout of issuance cost is deducted from the total proeeds of bond issuance, and recalculate the effective interest rate.  Under GAAP, the amount of issuance cost is recorded as long-term unamortized, which will be amortized during the period of maturity. P33-4 Off-balance sheet financing Q292-4 ★★The following information is taken from a company’s annual report (all figures in millions): Total assets $250 Total debt 150 Total equity 100 Net income 25 “During the year the Company entered into a 20-year take-or-pay contract that requires us to purchase a minimum of $ of hydro-electrical power annually, starting next year.” “The Company’s average cost of long-term borrowing is 7%.” If an analyst were to include the take-or-pay contract in his analysis, the company’s debt-to-equity ratio and return-on-assets, respectively, will be closest to: debt-to-equity ratio return-on-assets A. %. B. %. C. %. Solution: B The total sum of the payments should be added to both liabilities and assets. evised debttoequ[15020(.75)]the 10025the revised % 25020(.75)350 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q293-4 ★Assume . GAAP applies unless otherwise noted. Charles McKinmon, CFA is analyzing the financial statements of Computers On Credit, Inc. (COC). COC has sold $60 million of accounts receivable for proceeds of $50 million, and McKimmon wishes to treat the transaction as collateralized borrowing. McKimmon’s financial statement adjustments will most likely include adding A. $50 million to accounts receivable. B. $50 million to cash flows from financing activity. C. $50 million to cash flows from operating activity Solution: B McKinnon should add $60 million to accounts receivable, reduce cash from operating activities by $50 million, and increase cash from financing activities by $50 million. Q294-4 ★A retail company that leases the majority of its space has total assets of $4,500 million and total long-term debt of $2,125 million bearing an average interest rate of 10 percent. Note 8 to the 2010 financial statements contains the following information about the company's leases: Note 8: Operating leases Year Millions 2011 $140 2012 140 2013 140 2014 140 2015 140 2016 and thereafter 1,260 Total $1,960 After adjustment for the off-balance sheet financing, the debt-to-total-assets ratio for the company is closest to: A. 58% B. 62% C. 72% Solution: A The present value of the operating leases should be added to both the total debt and the total assets. To estimate the present value it is appropriate to estimate the number of years of lease payments reflected in the 2016 and thereafter figure. Based on the constant expense shown in the first 5 years, there are 9 (1,260/140) more payments for a total of 14 payments. N=14, I/Y=10, PMT=140, FV=0, CPT(PV)= Adjusted debt to total assets=(2,125+1,031)/(4,500+1,031)=57% Q295-4 A company has announced that it is going to distribute a group of long-lived assets to its owners in a spin-off. The most appropriate way to account for the assets until the distribution occurs is to classify them as: （2012-mock83） 351 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. held for sale with no depreciation taken. B. held for use until disposal with no deprecation taken. C. held for use until disposal with depreciation continuing to be taken. Solution：C Long-lived assets that will be disposed of other than by sale, such as a spin-off, an exchange for other assets, or abandonment, are classified as held for use until disposal and continue to be depreciated until that time. Off-balance Sheet的理解： R111-4 ★Take-or-pay contracts调整：Should add the PV of minimum future commitments to both property and debt. R112-4 Sales of receivable调整：当A/R还没有收回时，A/R和current liability增加，CFO降低 R113-4 卖A/R的gain或者是loss是要移走的，loss会使得EBIT变大在没有摊销之前，和discount bond的道理是相通的 P34-4 Ratio理解和运用 Q296-4 ★A company reports that to maintain good relations with its suppliers, it has entered into a financing arrangement with a bank whereby it will periodically have the bank pay its suppliers the amounts owed and it will then repay the bank in the following period. The motivation for the company’s behavior is most likely to: A. improve its current ratio. B. improve its relations with its suppliers. C. manage the timing of operating cash flows. Solution: C The company can choose when to enter into the short-term borrowing with the bank and reclassify its accounts payable into short-term financing. It will likely do so when cash flows are seasonally strong, thereby reducing operating cash flows but increasing financing cash flows. On repayment, the cash outflow is treated as a financing activity (loan repayment) instead of an operating cash flow. The result is that the company can manipulate the timing of reported cash flows since the timing and extent of vendor financing is at management’s discretion. Q297-4 ★When analyzing a company that prepares its financial statements according to . GAAP, calculating the price/tangible book value ratio instead of the price/book value ratio is most appropriate if it: A. grows primarily through acquisitions. B. develops its patents and processes internally. C. invests a substantial amount in new capital assets. Solution: A A company growing primarily through acquision will usually record large amount of goodwill, which is intangible asset. 352 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q298-4 ★A company which prepares its financial statements in accordance with IFRS incurred and capitalized €2 million of development costs during the year. These costs were fully deductible immediately for tax purposes, but the company is depreciating them over two years for financial reporting purposes. The company has a long history of profitability which is expected to continue. Which is the most appropriate way for an analyst to incorporate the differential tax treatment in his analysis? He should include it in: A. liabilities when calculating the company’s current ratio. B. equity when calculating the company’s return on equity ratio. C. liabilities when calculating the company’s debt-to-equity ratio. Solution: C The different treatment for tax purposes and financial reporting purposes is a temporary difference and would create a deferred tax liability. Deferred tax liabilities should be classified as debt if they are expected to reverse with subsequent tax payments. The long history of profitability implies that the company will likely be paying taxes in the following years and hence an analyst could reasonably expect the temporary difference to reverse. Under IFRS all deferred tax liabilities are non-current and therefore do not affect the current ratio. Q299-4 ★Assume . GAAP applies unless otherwise noted. An analyst gathered the following information about a company and the industry: Liquidity measure Company Industry Quick ratio Current ratio Days sales outstanding Days payables outstanding Based only on the data above, the measure that should most concern the analyst regarding the company's working capital management is the: A. Quick ratio. B. Day’s sales outstanding. C. Day’s payables outstanding. Solution: B The company’s days sales outstanding is considerably higher than the industry’s, which means the company is slower in collecting its receivables than the average firm. This is a concern because the longer receivables are outstanding, the greater the probability they will not be collected and will have to be charged off, thereby adversely affecting earnings. Q300-4 ★Assume . GAAP applies unless otherwise noted. An analyst has gathered the following data about Geneva Group Inc. and the health care industry in which it operates: Geneva Group Industry Averages as a percent 353 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 ($ millions) of sales Revenues 5,000 100% Cost of goods sold 2,100 45% Operating expenses 1,750 32% Profit margin 475 % Which of the following conclusions can the analyst reasonably make? Compared with the Industry, Geneva: A. spends less on non-operating costs and income taxes. B. has a lower gross profit margin than the industry and spends more on its operating costs. C. is better at controlling product costs, but less effective at controlling operating costs. Solution: C The gross profit for Geneva = 5,000 - 2,100 = 2,900 or gross profit margin = 58%. The gross profit for the industry is 1-45% = 55%. Therefore, Geneva’s cost of goods sold, or product costs, are lower; they must control them better. Operating costs are $1,750 / 5000 = 35% for Geneva and 32% for the industry; hence they are not as effective at controlling their operating costs as the industry. Q301-4 As a result of a change in strategy to selling differentiated products at premium prices, a company's gross margin ratio increased by 5 percentage points (., from 35 percent to 40 percent). The most likely effect on the company's operating margin ratio as a result of the changes in strategy would be an increase; （MOCK79-67） A. equal to 5% B. less than 5% C. greater than 5% Solution: B A strategy of selling differentiated products at premium prices usually requires additional advertising or research and development to support the differentiating features; therefore, the effect on operating profit is normally less than the effect on gross profit margin. Q302-4 Brown Corporation had average days of sales outstanding of 19 days in the most recent fiscal year. Brown wants to improve its credit policies and collection practices and decrease its collection period in the next fiscal year to match the industry average of 15 days. Credit sales in the most recent fiscal year were $300 million, and Brown expects credit sales to increase to $390 million in the next fiscal year. To achieve Brown's goal of decreasing the collection period, the change in the average accounts receivable balance that must occur is closest to:（原版书Reading28） A. +$ million. B. —$ million. C. —$ million. Solution：A. 354 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The average accounts receivable balances (actual and desired) must be calculated to determine the desired change. The average accounts receivable balance can be calculated as an average clay's credit sales times the DSO. For the most recent fiscal year, the average accounts receivable balance is $ million [--= ($300,000,000/365) X 19]. The desired average accounts receivable balance for the next fiscal year is $ million (= ($390,000,000/365) X 15). This is an increase of $ million (= million - million). An alternative approach is to calculate the turnover and divide sales by turnover to determine the average accounts receivable balance. Turnover equals 365 divided by DSO. Turnover is (= 365/19) for the most recent fiscal year and is targeted to be (= 365/15) for the next fiscal year. The average accounts receivable balances are $ million (= $300,000,000/), and $ million (--= $390,000,000/). The change is an increase in receivables of $ million. Q303-4 Income statements for two companies (A and B) and the common-sized income statement for the industry are provided below: （2012-mock85-59） All$ figures in ’000s Company A Company B Industry Sales $10,500 $8,250 % Cost of goods sold 6,353 5,239 % Selling, general, and 2,625 2,021 % administrative expenses Interest expense 840 536 % Pretax earnings 683 454 % Taxes 205 145 % Net earnings $478 $309 % The best conclusion an analyst can make is: A. Company B’s interest rate is lower than the industry average. B. both companies’ tax rates are higher than the industry average. C. Company A earns a higher gross margin than both Company B and the industry. Solution: C Common-sized analysis of the income statements shows that Company A has a lower percentage cost of goods sold and hence a higher gross margin than the industry. Co A Co B Industry Co A Co B Sales $10,500 $8,250 % 100% 100% Cost of goods 6,353 5,239 % % % sGorlods s margin % % % Company A earns a higher gross margin than both Company B and the industry. Pretax earnings 683 454 % % % Taxes 205 145 % % % Tax rate = taxes ÷ 32% 30% 32% pretax earnings The tax rates for the companies are not higher than the industry. 355 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The interest rate is not a function of sales and cannot be analyzed on a common sized income statement . Tax rates are determined based on taxes ÷ pretax earnings, not as a percentage of sales (as shown in common sized analysis) Q304-4 Selected information for a company and the common size data for its industry are provided below. （2012-mock83） Company Common Size (£) Industry Data (% of sales) EBIT 76,000 Pretax profit 66,400 Net income 44,500 Sales 400,000 Total assets 524,488 Total equity 296,488 ROE % % Which of the following is most likely a contributor to the company’s inferior ROE compared to that of the industry? The company’s: A. tax burden ratio. B. interest burden ratio. C. financial leverage ratio. Solution：C Calculation Company Industry Tax burden ratio Net Inc/EBT 44,500/66,400 = = Financial Total assets/Equity 524,488/296,488 = 140/74 = leverage Interest burden EBT/EBIT 66,400/76,000 = = ratio The company has a lower financial leverage ratio relative to the industry, which is one of the causes of the company’s lower relative ROE performance. The tax burden ratio is the same as the industry and the interest burden ratio is higher, which would increase ROE. EBT: Pretax profit (earnings before tax) Net Inc: Net income Q305-4 An analyst has calculated the following ratios for a company: （2012-mock83） Operating Profit Margin % Net Profit Margin % Total Asset Turnover times Return on Assets % 356 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Financial Leverage Debt to Equity The company’s return on equity (ROE) is closest to: A. %. B. %. C. %. Solution：B Using DuPont analysis, there are two ways to calculate ROE from the information provided: ROE = Net profit margin × Asset turnover × Financial leverage × × ROE = ROA × Financial leverage × Given the following information about a company: （2012mock84-55） (€ millions) 2011 2010 Short-term borrowings 2,240 5,400 Current portion of long-term interest bearing debt 2,000 1,200 Long-term interest bearing debt 12,000 9,000 Total shareholders’ equity 23,250 21,175 EBIT 3,850 3,800 Interest payments 855 837 Operating lease payments 800 800 Q306-4 What is the most appropriate conclusion an analyst can make about the solvency of the company? Solvency has: A. improved because the debt-to-equity ratio decreased. B. deteriorated because the debt-to-equity ratio increased. C. improved because the fixed charge coverage ratio increased. Solution: A. The debt–equity ratio decreased, thereby improving solvency; the fixed charge ratio remained the same. 2011 2010 Comments Debt-to-equity ratio 2,240+2,000+125,400+1,200+9Ratio decreased: (Total debt ÷ Equity) ,000/23,250 = ,000/21,175 = Company has less 70% 74% financial risk; more solvent Fixed charge coverage (3,850+800)/(85(3,80+800)/(8No change in FCC ratio ratio = 5+800 )= 37+800) = EBIT + Lease pmts Interest pmts + Lease 357 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 pmts Q307-4 To gain insight into what portion of the company’s assets is liquid, an analyst will most likely use: （2012mock84-64） A. the cash ratio. B. the current ratio. C. common-size balance sheets. Solution：C A common-size balance sheet expresses all balance sheet accounts as a percentage of total assets and provides insight into what portion of a company’s assets is liquid. In contrast, cash and current ratios measure liquidity relative to current liabilities, not relative to total assets. Q308-4 Which of the following will most likely result in an increase in a company's sustainable growth rate? (MOCK88-60) A. Higher tax burden ratio B. Lower interest burden ratio C. Higher dividend payout ratio Solution: A The higher a company's ROE and its ability to finance itself from internally generated funds (a higher retention ratio), the greater will be its sustainable growth rate. In the 5 factor ROE, any factor that increases ROE will increase sustainable growth: ROE= tax burden x interest burden x EBIT margin x asset turnover x leverage A higher tax burden ratio (Net Income/Earnings before tax) implies that the company can keep a higher percentage of pretax profits: this implies a lower tax rate, and a higher ROE. The interest burden ratio is Earnings before tax/EBIT, and a lower ratio means that the company has higher borrowing casts (it gets to keep a lower pre-tax income from a given EBIT), implying a lower ROE and sustainable growth. Q309-4 ★An analyst who is projecting a company's net income and cash flows is least likely to assume a constant relationship between the company's sales and its: A. interest expenses. B. cost of goods sold. C. noncash working capital. Solution：A Projections of net income and cash flows are typically based on assumptions that cost of goods sold, operating expenses, and noncash working capital remain a constant percentage of sales. The projections then show whether additional borrowing is needed during the forecast 358 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 period. If so, the analyst will adjust the interest expense to reflect the additional debt. Ratio的理解： R114-4 Common-sized  Common-sized I/S ratios ---- item in the income statement account / revenues ( net sales)  Common-sized B/S ratios ---- item in the balance sheet account / total assets  Common-sized CF/S ratio ----  item in the CF statement account / revenues  OR CF outflow / total outflows OR CF inflow / total inflows  Common-size一般有横向比较（公司间），纵向比较（年份间），体现公司的trend R115-4 其它的Ratio掌握公式的核心含义；常考的有current ratio, quick ratio, cash ratio, A/R turnover, A/P turnover, inventory turnover, cash conversion cycle, asset turnover, operating margin, net profit margin, ROE, D/E, interest coverage… R116-4 一般关于ratio的考题会和inventory，long-term asset，capitalization & expensing；lease等等之间联系起来，由于会计方法引起的ratio的变化，一定要理解其中的原理 P35-4 Credit analysis的理解 Q310-4 ★Assume . GAAP applies unless otherwise noted. Which of the following would be the most useful to an analyst trying to assess the credit worthiness of a company? A. Return measures related to net income. B. Return measures related to operating cash flow. C. Information related to the scale and diversity of a company's operations. Solution: B Credit analysis is concerned with a company’s debt-paying ability. As returns to creditors are normally paid in cash, the company’s ability to generate cash internally is the most important factor in credit analysis. Q311-4 Credit analysts are likely to consider a company's credit quality to be improving if the company reduces its: A. scale and diversification. B. margin stability. C. leverage. Solution: C Lower leverage improves a company's creditworthiness. Larger scale, more diversification, higher operating efficiency, and more stable margins also tend to indicate better credit quality. Credit Analysis掌握理解： R117-4 Credit analysis is based on many ratios, such as interest coverage ratio, return on 359 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 capital, and D/E.  另外EBITDA也是一个很重要的数据，与EBITDA有关的一些ratio都可以做credit analysis R118-4 ★indicators of a firms’ creditworthiness  Scale and diversification: more different product lines and greater geographic diversification are better credit risks.  Operational efficiency: high operating efficiency is associated with better debt ratings.  Margin stability: stability of margin indicates a higher probability of repayment.  Use of financial leverage: Firm with greater earnings in relation to their debt and in relation to their interest expense are better credit risks. P36-4 Cash Flow Manipulations Q312-4 Assume . GAAP applies unless otherwise noted. Which of the following transactions is least likely to increase a company’s reported cash from operations? A. Securitizing accounts receivable. B. Delaying payments made to suppliers. C. Using short-term debt to reduce an existing account payable. Solution: C A选项是A/R证券化并没有recourse的情况，那么A/R将会降低，CFO上升；B选项是延长付A/P的时间，那么相对A/P是增加，CFO上升；C选项是用short-term debt去reduce an existing account payable，那么A/P是减少，那么CFO减少。直观来讲，只要看一个主体是不是付现金流，对于A，提前收回现金流了，CFO增加；对于B，不付钱给供应商，CFO上升；对于C，用融资的方式，将供应商的钱还了，CFO减少 Q313-4 ★In order to generate cash, Company L securitized its accounts receivable through a special purpose entity. Company M pledged its accounts receivable to a local bank in order to secure a short-term loan. Assuming Company L and Company M are identical in all other respects, which company has higher operating cash flow and which company has higher financing cash flow?(NotesB3-306 3) Higher operating cash flow Higher financing cash flow A. Company L Company L B. Company L Company M C. Company M Company L Solution：B The cash received from securitizing receivables is reported as an operating activity. The cash received from borrowing against accounts receivable is reported as a financing activity. Q314-4 ★Over the past two years, a firm reported higher operating cash flow as a result of securitizing its accounts receivable and from increasing income tax benefits from employee stock options. The tax benefits are solely the result of higher tax rates. 360 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 What should an analyst conclude about the sustainability of these two sources of operating cash flow? (NotesB3-306 4) A. Both sources are sustainable. B. Neither source is sustainable. C. Only one of these sources is sustainable. Solution：B Accelerating operating cash flow by securitizing receivables is not sustainable because the firm only has a limited amount of accounts receivable. An increase in tax benefits as a result of higher tax rates is not sustainable. Tax rates could also decrease in the future. Q315-4 ★An analyst has made three observations in his worksheets about a company that he is reviewing. Which of the observations most likely reduces the quality of earnings of the company? The company: （2012mock84-68） A. reported for the first time an asset titled “Deferred customer acquisition costs.” B. has reduced its estimate of the expected useful life of computer equipment from 8 years to 5 years. C. entered into long-term leases for its manufacturing equipment instead of purchasing it and recorded the leases as capital leases. Solution：A An asset such as “deferred acquisition costs” could indicate the company is deferring current period expenses to future periods, which is a warning sign and an indication of lower quality earnings. Q316-4 Management may be under pressure to misstate earnings, and there are many incentives to do so. Which one of the following is most likely not an incentive to overreport earnings?(原版书Reading33) A. To negotiate concessions from unions. B. To meet analysts' earnings expectations. C. To improve managements' incentive compensation. Solution：A Negotiating concessions from unions would likely be an incentive for management to underreport rather than overreport earnings. Q317-4 Which of the following will most likely result in lower financial reporting quality? (原版书Reading33) A. Engaging in fraudulent financial reporting. B. A low allowance for uncollectable accounts receivables. C. Selecting alternatives within accepted accounting principles that distort results to achieve a desired outcome. Solution：C 361 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Selecting alternatives within GAAP that bias or distort reported results to achieve a desired outcome that differs from the economic structure of the transaction can result in lower financial reporting quality. Q318-4 Accordingly to Statement on Auditing Standards No. 99, Considerations of Fraud in a Financial Statement Audit, which of the following risk factors most likely represents an opportunity for management to commit fraud? (原版书Reading33) A. Revenue estimates that are based on subjective judgments. B. Excessive interest by management in increasing the stock price. C. Excessive competition in the industry resulting in declining margins. Solution：A The need for significant estimates and judgments in the preparation of financial statements provides opportunities to commit fraud. Q319-4 ★Which of the following is most likely an example of accounting fraud? (NotesB3-300 2) A. Using aggressive pension assumptions. B. Booking revenue from a fictitious customer. C. Selecting an acceptable depreciation method that misrepresents the economics of the transaction. Solution：B Booking revenue from a fictitious customer is fraud. Q320-4 ★According to Statement on Auditing Standards No. 99, Consideration of Fraud in a Financial Statement Audit, which of the following is least likely to be a risk factor related to opportunities to commit fraudulent accounting? (NotesB3-300 5) A. Significant related-party transactions. B. High turnover among accounting and information systems personnel. C. Aggressive or unrealistic profitability expectations from third parties. Solution：C Unrealistic profitability expectations from third parties is a risk factor related to incentives and pressures. The other choices are risk factors related to management's opportunities to commit fraud. Q321-4 ★Accounting fraud risk factors related to attitudes and rationalizations are least likely to include: (NotesB3-300 6) A. management has a strained relationship with the current or previous auditor. B. the firm does not effectively communicate an appropriate set of ethical standards. C. a high proportion of management's compensation depends on the firm exceeding targets for earnings or the stock price. 362 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution：C Significant threats to the personal wealth of managers and board members due to the firm not meeting its financial targets are a risk factor related to incentives and pressures. The other choices are risk factors related to attitudes and rationalizations. Q322-4 ★Which of the following actions is least likely to immediately increase earnings? (NotesB3-300 7) A. Selling more inventory than is purchased or produced. B. Lowering the salvage value of depreciable assets. C. Holding the accounting period open past year-end. Solution：B Lowering the salvage value will result in higher depreciation expense, and thus, lower earnings. The other choices will immediately increase earnings. Selling more inventory than is purchased or produced will increase revenue without increasing cost of goods sold, which will increase earnings. Holding the accounting period open past year-end is an aggressive revenue recognition method that will boost earnings. Q323-4 During the period between 31 July 1997 to 30 July 2002, the most significant category of enforcement actions by the SEC was improper: A. revenue recognition. B. accounting for business combinations. C. accounting for foreign payments in violation of the Foreign Corrupt Practices Act. Solution：A As reported in the SEC study, Report Pursuant to Section 704 of the Sarbanes-Oxley Act of 2002, improper revenue recognition accounted for 126 of the 515 enforcement cases. Q324-4 Which of the following will be the most likely consequence if a company with constant sales slows down the rate of payments to its vendors?(原版书Reading33) A. Cost of goods sold will increase. B. Days sales payable will increase. C. Accounts payables will decrease. Solution：B Days sales payable (DSP) is a metric that measures the extension of payables. The metric is calculated by taking the end-of-period accounts payables divided by the cost of goods sold, multiplied by the number of days in the period. As a company slows down payments, accounts payables increase while costs of goods sold and number of days in the period remain constant. Consequently, DSP will increase. Q325-4 Gill Co. has cost of goods sold of $100 million with an accounts payable balance of $92 million at the end of the first quarter. In the second quarter, the company has cost of goods sold of 100 million with an accounts payable balance of $90 million at the end 363 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 of the quarter. Assuming that the first and second quarters have 90 and 92 days respectively, which of the following is the most likely conclusion from this data? Gill Co. has: (原版书Reading33) A. slowed its rate of payment to vendors. B. accelerated its rate of payment to vendors. C. maintained its rate of payment to vendors. Solution：C The days sales payable (DSP) for both periods is the same at days. Quarter 1: ($92 million / $100 million) X 90 days = days and Quarter 2: ($90 million / $100 million) X 92 days = days. [DSP = (Accounts payable / Costs of goods sold) X (Number of days)] Q326-4 If a firm's annual days sales in payables (DSP) was 60 days, and the annual cost of goods sold is expected to increase by 22% (and the number of days remain constant), which of the following changes in the end-of-period accounts payable balance will most likely improve (increase) the operating cash flow? (原版书Reading33) A. 24% decrease. B. 20% increase. C. 24% increase. Solution：C If the accounts payable balance increases by 24%, the days sales payable (DSP) becomes 61 days = (60 days) X (1 + 24%) / (1 + 22%). Thus, the DSP has increased from 60 to 61 days, meaning the company has slowed its payments to vendors, increased accounts payable and thereby increased its operating cash flow. [DSP = (Accounts payable / Costs of goods sold) X (Number of days)]. Q327-4 What is least likely to cause a distortion in the true free cash flow of a company assuming that a large stock buyback has taken place to offset the dilutions from options exercised? (原版书Reading33) A. Stock bought back on the open market. B. Classifying the cash expended to buy back stock as a financing activity. C. Classifying the tax benefit of option exercises as an operating cash flow. Solution：A Most stock buy backs occur in the open market and do not result in any distortion of cash flow. Q328-4 Which of the following is the least important reason why an analyst should review the cash flow statement, the stockholders' equity statement, and the notes to the financial statements for information regarding stock options? To determine: (原版书Reading33) A. the volume of options exercised in the period. B. the extent to which cash flows are affected by the tax benefit on stock options. C. whether the company follows APB No. 25 or SFAS 123(R) to account for stock options. 364 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution：C Since 2005, . GAAP require all companies to follow SFAS 123(R) which requires options to be expensed. Q329-4 Galambos Corporation had an average receivable collection period of 19 days in 2003. Galambos has stated that it wants to decrease its collection period in 2004 to match the industry average of 15 days. Credit sales in 2003 were $300 million, and analysts expect credit sales to increase to $400 million in 2004. To achieve the company's goal of decreasing the collection period, the change in the average accounts receivable balance from 2003 to 2004 that must occur is closest to: (原版书Reading33) A. —$420,000. B. $420,000. C. $836,000. Solution：C Accounts receivable turnover is equal to 365/19 (collection period in days) = for 2003 and needs to equal 365/15 = in 2004 for Galambos to meet its goal. Sales/turnover equals the accounts receivable balance. For 2003, $300,000,000/ = $15,625,000, and for 2004, $400,000,000/ = $16,460,905. The difference of $835,905 is the increase in receivables needed for Galambos to achieve its goal. Q330-4 When screening for potential equity investments based on return on equity, to control risk an analyst would be most likely to include a criterion that requires: (原版书Reading33) A. positive net income. B. negative net income. C. negative shareholders' equity. Solution: A Requiring that net income be positive would avoid selecting companies that report positive return on equity because both net income and shareholders' equity are negative. Q331-4 ★One concern when screening for low price-to-earnings stocks is that companies with low price-to-earnings ratios may be financially weak. What criteria might an analyst include to avoid inadvertently selecting weak companies? (原版书Reading33) A. Current-year sales growth lower than prior-year sales growth. B. Net income less than zero. C. Debt-to-total assets ratio below a certain cutoff Solution: C A lower debt-to-total assets ratio indicates greater financial strength. Requiring that a company's debt-to-total assets ratio be below a certain cutoff point would allow the analyst to screen out highly leveraged and, therefore, potentially financially weak companies. Requiring 365 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 declining sales growth (answer A) or negative income (answer B) would not be appropriate for screening out financially weak companies. Q332-4 When a database eliminates companies that cease to exist because of a merger or bankruptcy, this can result in: (原版书Reading33) A. look-ahead bias. B. backtesting bias. C. survivorship bias. Solution: C Survivorship bias exists when companies that merge or go bankrupt are dropped from the database and only surviving companies remain. Look-ahead bias involves using updated financial information in backtesting that. would not have been available at the time the decision was made. Backtesting involves testing models in prior periods and is not a bias itself. Q333-4 ★Which of the following stock screens is most likely to identify stocks with high earnings growth rates?(NotesB3-319 4) A. Dividend payout ratio greater than 30%. B. Price to cash flow per share ratio less than 12. C. Book value to market value ratio less than 25%. Solution: C Firms with high growth rates will tend to have high market values relative to the book value of their equity. Low price to cash flow ratios would tend to identify value stocks rather than growth stocks. Screening for high dividend payout ratios would tend to identify mature firms with relatively few growth opportunities. Q334-4 An analyst needs to compare the financial statements of Firm X and Firm Y. Which of the following differences in the two firms' financial reporting is least likely to require the analyst to make an adjustment? (NotesB3-319 5) Firm X Firm Y A. Straight-line depreciation Accelerated depreciation B. Direct method cash flows Indirect method cash flows C. IFRS financial reporting . GAAP financial reporting Solution: B Cash flows are the same under either method. Differences in depreciation methods and IFRS versus . GAAP reporting can require an analyst to adjust financial statements to make them comparable. Q335-4 ★When comparing a firm that uses LIFO inventory accounting to firms that use FIFO, an analyst should: (NotesB3-319 6) A. subtract the LIFO reserve from cost of sales. B. add the change in the LIFO reserve to inventories. 366 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. subtract the change in the LIFO reserve from cost of sales. Solution: C To adjust LIFO financial statement data to a FIFO basis, add the LIFO reserve to inventories on the balance sheet and subtract the change in the LIFO reserve from cost of sales on the income statement. Remember that the balance sheet is cumulative (use the full LIFO reserve) while the income statement refers to the most recent period (use the change for the period in the LIFO reserve). Q336-4 An analyst gathered the following data for a company ($ in millions): 31 Dec 2000 31 Dec 2001 Gross investment in fixed assets $ $ Accumulated depreciation $ The average age and average depreciable life, respectively, of the company's fixed assets at the end of 2001 are closest to: (原版书Reading33) Average Age Average Depreciable Life A. years 7 years B. years 14 years C. years 7 years Solution: C There were no additions or deletions to the fixed asset account during the year, so depreciation expense is equal to the difference in accumulated depreciation at the beginning Of the year and the end of the year, or million. Average age is equal to accumulated depreciation/ depreciation expense, or = 4 \TM'S. Average depreciable life is equal to ending gross investment/depreciation expense = = 7 years. Q337-4 ★A company that provides cruise ship vacations uses term loans to finance the acquisition of new cruise ships. Which of the following is most likely a negative covenant for the loans? The company must:（MOCK92-55） A. ensure that the ships are insured. B. seek lender approval to pay dividends. C. maintain a minimum level of working capital. Solution: B Solution:B Negative covenants require that a borrower not take certain actions. The requirement to seek the lender’s approval before paying dividends is an example of a negative covenant. The other two are affirmative covenants. Q338-4 Which of the following is an off-balance sheet financing technique? (原版书Reading33) 367 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The use of: A. the LIFO inventory method. B. capital leases. C. operating leases. Solution: C Operating leases can le used as an off-balance sheet financing technique because neither the asset no liability appears on the balance sheet. Inventory and capital leases are reported on die balance sheet. Q339-4 The following information is available about a company (in $ thousands). Year Reported Operating Accounts Ending Earnings Cash Flow Receivables Inventory 2011 1,500 1,200 500 1,300 2012 1,800 1,300 1,400 1,600 2013 2,500 1,400 3,500 2,200 Which of the following would least likely be an accounting warning sign for this company? The relationship between reported earnings and: (2014 Mock 99-52) A. accounts receivables. B. ending inventory. C. operating cash flow. Solution: B The relationship between reported earnings and inventory appears consistent over the three years and thus is not likely to be considered an accounting warning sign. Operating cash flow is increasing at a much slower growth rate than reported earnings and thus is likely an accounting warning sign. Accounts receivables are increasing much more rapidly than reported earnings, a potential sign of early revenue recognition. 掌握会计操纵： R119-4 ★四种现金流操纵的方式，并了解其对于CF/S的影响：  Stretching accounting payable: delay pmt → CFO↑  Financing accounts payable: manage timing of CFO  Securitizing accounts receivable: sale A/R → CFO↑  Repurchasing stock to offset dilution: option exercise → CFF↑; repurchase → CFO↑& CFF↓ R120-4 Incentives that might induce a company management to over-report or underreport earnings  overstate net income  understating net income  manage balance sheet R121-4 ★Fraud triangle  incentive/pressure: the motive to commit fraud 368 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  opportunity: the firm has a weak internal control system  attitudes/rationalization: the mindset that fraud is justified Common accounting warning sign and methods of detecting R122-4 ★掌握几种财务警示信号及如何发现它们  Aggressive revenue recognition  Different growth rates of CFO and earnings  Abnormal sales growth as compared to the economy, industry, or peers  Abnormal inventory growth as compared to sales grow  Boosting revenue with non-operating income and nonrecurring gains  Delaying expense recognition  Abnormal use of operating leases by lessees  Hiding expenses by classifying them as extraordinary or nonrecurring P37-4 . GAAP vs. IFRS Q340-4 ★Assume . GAAP applies unless otherwise noted. Where are the unrealized gains and losses arising from changes in the market value of available-for-sale securities reported under . GAAP and IFRS? They are reported in: . GAAP IFRS A. equity Equity B. equity income statement C. income statement Equity Solution: A Under both . GAAP and IFRS, the unrealized gains and losses arising from carrying available for sale securities at market value are reported in equity as part of accumulated other comprehensive income. Q341-4 ★★The following information is available about a manufacturing company: $ million Cost of ending inventory computed using FIFO Net realizable value Current replacement cost Compared to . GAAP, the company's gross profit ($ millions) computed under International Financial Reporting Standards (IFRS) is most likely:( Mock88-63) A. the same B. lower C. higher CFA协会解答如下： Solution: C Under IFRS, the inventory would be written down to its net realizable value ($ million) 369 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 whereas, under . GAAP, market is defined as current replacement cost and hence would be written down to its current replacement cost ($). The smaller write-down under IFRS will reduce the amount charged to the cost of goods sold, as compared to . GAAP, and result in a higher gross profit of $ million. 此题解释有误，原版书中的正确解释： Under IFRS, "inventories shall be measured at the lower of cost and net realisable value." Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to get the inventory in condition for sale and to make the sale. The assessment of net realisable value is typically done by item or by groups of similar or related items. In the event that the value of inventory declines below the carrying amount on the balance sheet, the inventory carrying amount must be written down to its net realisable value and the loss (reduction in value) recognised as an expense on the income statement. Rather than write down the inventory through the inventory account, a company may use an inventory valuation allowance (reserve) account. The inventory amount net of the valuation allowance equals the carrying amount of the inventory after write-downs. In each subsequent period, a new assessment of net realisable value is made. Reversal (limited to the amount of the original write-down) is required for a subsequent increase in value of inventory previously written down. The amount of any reversal of any write-down of inventory arising from an increase in net realisable value is recognised as a reduction in cost of sales (a reduction in the amount of inventories recognised as an expense). Under . GAAP, inventory is measured at the lower of cost or market. Market value is defined as current replacement cost subject to upper and lower limits. Market value cannot exceed net realisable value (selling price less reasonably estimated costs of completion and disposal). The lower limit of market value is net realisable value less a normal profit margin. Any write-down reduces the value of the inventory, and the loss in value (expense) is generally reflected in the income statement in cost of goods sold. . GAAP prohibit the reversal of a write-down; this rule is different from the treatment under IFRS. 正确做法： 1) 此题没有正确选项 2) 在IFRS下，inventory = min(cost, NRV)=min(, )= 3) 在US GAAP下，inventory = min(cost, market)，且NRV-normal profit margin<market<NRV，由于题目中没有给出normal profit margin，我们可以认为maket就是，ending inventory= 4) IFRS下，存货从降至，减值损失计入expense，不是COGS，所以gross profit不受影响 5) US GAAP下，存货从降至，减值损失计入COGS，因此gross profit会比IFRS下低 R123-4 ★详细对比——增值资料（国际与美国准则对比） 特别注意：HTM、AFS、TS的处理；关于固定资产和存货的reversal of revaluation；递延税的确认；convertible bond的拆分；存货方法的使用；收入确认原则；利息和股利收付的现金流确认 370 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P38-4 综合 Q342-4 ★★Assume . GAAP applies unless otherwise noted. Lazlo Ltd, a European-based telecommunications provider, follows IFRS and capitalizes new product development costs. During 2007 they spent €25 million on new product development and reported an amortization expense related to a prior year’s new product development of €10 million. Other Information related to 2007 is as follows: in € millions Net income 225 Average assets 1,875 Cash flow from operations 290 An analyst would like to compare Lazlo with a .-based telecommunications provider and has decided to adjust their financial statements to . GAAP. Under . GAAP, and ignoring tax effects, the return on assets (ROA) and cash flow from operations (CFO) for Lazlo would be closest to (millions): ROA CFO A. % €265 B. % €275 C. % €265 Solution: C If all development costs had been expensed, net income would be reduced by the amount spent, and increased by the amortization of the previously capitalized amounts: 225 - 25 + 10 = 210 million. ROA= 210 / 1,875 = %. (注意：average asset需要adjustment的, 应该减去资产的增加部分). CFO would be lower by the amount spent on development 290 - 25 = 265 million. Note: The amortization of previous development costs is a non-cash expense so does not affect cash flow. Q343-4 ★★On 1 January 2010, Elegant Fragrances Company issues £1,000,000 face value, five-year bonds with annual interest payments of £55,000 to be paid each 31 December. The market interest rate is percent. Using the effective interest rate method of 'amortisation, Elegant Fragrances is most likely to record: A. an interest expense of £55,000 on its 2010 income statement. B. a liability of 082,674 on the 31 December 2010 balance sheet. C. a £58,736 cash outflow from operating activity on the 2010 statement of cash flows. Solution: B. The bonds will be issued at a discount because the market interest rate is higher than the stated rate. Discounting the future payments to their present value indicates that at the time of issue, the company will record £978,938 as both a liability and a cash inflow from financing activities. Q344-4 ★An analyst is comparing two firms, one that reports under IFRS and one that reports under FASB standards. An analyst is least likely to do which of the following to 371 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 facilitate comparison of the companies? (NotesB3-325 23) A. Add the LIFO reserve to inventory for a .-based firm that uses LIFO. B. Add the present values of each firm's future minimum operating lease payments to both assets and liabilities. C. Adjust the income statement of one of the firms if both have significant unrealized gains or losses from changes in the fair values of trading securities. Solution: C. Unrealized gains and losses on trading securities are reported in the income statement under both . and IFRS standards. Since LIFO is not permitted under IFRS, adjusting the inventory amount for a LIFO firm is a likely adjustment. To account for differences in how companies report leases, adding the present value of future minimum operating lease payments to both the assets and liabilities of a firm will remove the effects of lease reporting methods from solvency and leverage ratios. 372 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 5-Corporate Finance P1-5 Capital Project Q1-5 ★A large corporation accepts a project which generates no revenue and has a negative net present value. The project is most likely classified in which of the following categories? A. Replacement project B. New product or service C. Regulatory or environmental project Solution: C Regulatory, safety, and environmental projects are often mandated by governmental agencies. They may generate no revenue and might not be undertaken by a company maximizing its own private interests. For example, a corporation may be required to install equipment to meet a regulatory standard, and the cost of satisfying the standard is born by the corporation. In this case, the corporation selects the lowest cost alternative that meets the requirement, ., the alternative with the least negative net present value. R1-5 掌握以下几种Capital Projects：  Replacement decision to maintain the business: equipment breaks down or wears out.  Replacement decision for cost reduction purpose: purchase more efficient equipment instead of the old one  ★Expansion projects for existing product: increase the size of business  ★Expansion projects for new product or new services  Uncertainties的排序：replacement projec（t最小）< expansion project < new products (最大的不确定性)  Mandatory investment: regulatory, safety, and environmental project (NPV<0)  Other projects: such as CEO buying a new aircraft R2-5 ★The capital budgeting process involves five key principles: 1. Decisions are based on the incremental cash flows. 不包含Suck cost: costs that cannot be avoided even if the project is not undertaken, such as consulting fee. 不包含Financing costs / interest cost: financing costs are included in the project cost of capital or WACC 包含Externality: the effects of acceptance of a project may have on other firm CFs 2. CF are base on the opportunity costs. 3. The timing of the CF is important. 4. CFs are analyzed on an after-tax basis. 5. Financing costs are reflect in the project’s required rate of return P2-5 Opportunity Cost的理解 Q2-5 ★Which of the following is least likely classified as an opportunity cost? A. The cash flows generated by an old machine that is to be replaced B. The cash savings related to adopting a new production process 373 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. The market value of vacant land used for a distribution center Solution: B The cash savings related to adopting a new production process is an incremental cash flow, not an opportunity cost. R3-5 R1-5 Opportunity Cost掌握概念  概念：Opportunity costs are cash flows that a firm will lose by undertaking the project under analysis. It is actually the CFs that are generated by undertaking the second best alternative.  理解：Opportunity cost在做capital budgeting的时候被视为增量现金流 P3-5 Incremental Cash Flow的理解 Q3-5 With regard to capital budgeting, an appropriate estimate of the incremental cash flows from a project is least likely to include: A. Cannibalization. B. Interest costs. C. Opportunity costs. Solution: B Capital budgeting decisions are based on incremental after-tax cash flows discounted at the opportunity cost of funds and cannibalization. Financing costs are ignored because both the cost of debt and the cost of other capital are captured in the discount rate. R4-5 Incremental Cash Flow掌握概念及理解 1) 概念：cash flow应该是差额，该差额是由于不同decision造成的。 2) 理解:需要考虑在增量现金流时，需要考虑opportunity costs和externalit（y比如：negative externality: cannibalization）；不需要考虑的是sunk cost和finance cost（interest costs） P4-5 NPV, IRR, PI, DBP掌握计算及理解 Q4-5 An analyst determined the following cash flows for a capital project: Year 0 1 2 3 4 5 Cash flow (€) -100 35 30 40 30 20 The required rate of return for the project is 13%. The internal rate of return (IRR) and the discounted payback period for the project, respectively, are closest to: IRR period Discounted payback period A. % B. % C. % Solution: C Using a calculator, the IRR is %. The discounted payback period is the number of years (and fractional part of a year) that it takes to recover the initial investment in terms of 374 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 discounted future cash flows discounted at the project’s required rate of return. The discounted cash flows for the first four years are: €, €, €, and €. The cumulative sum through year three is €. The portion of year four required to recover the initial investment is € / € = . Therefore, the discounted payback period is years. Q5-5 Given the following cash flow for a capital project, calculate payback period and discounted payback period. The required rate of return is 8%. Year 0 1 2 3 4 5 Cash flow -50,000 15,000 15,000 20,000 10,000 5,000 The discounted payback period is:（原版书R36-2） A. years longer than the payback period. B. years longer than the payback period. C. years longer than the payback period. Solution: C As the table shows, the cumulative cash flow offsets the initial investment in exactly three years. The payback period is years. The discounted payback period is between four and five years. The discounted payback period is 4 years plus = of the fifth year cash flow, or = years. The discounted payback period is - = years longer than the payback period. Year 0 1 2 3 4 5 Cash flow -50,000 15,000 15,000 20,000 10,005,000 0 Cumulative cash -50,000 -35,000 -20,000 0 10,0015,000 flow 0 Discounted cash -50,000 13,,,,, 89 08 4 30 2 Cumulative DCF -50,000 -36,111 -23,251 -7, -24 Q6-5 ★★An investment has an outlay of 100 and after-tax cash flows of 40 annually for four years. A project enhancement increases the outlay by 15 and the annual after-tax cash flows by 5. As a result, the vertical intercept of the NPV profile of the enhanced project shifts: （原版书R36-11） A. up and the horizontal intercept shifts left. B. up and the horizontal intercept shifts right. C. down and the horizontal intercept shifts left. Solution:A The vertical intercept changes from 60 to 65 (NPV when cost of capital is 0%), and the horizontal intercept (IRR, when NPV equals zero) changes from percent to percent. 375 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q7-5 ★★Consider the two projects below. The cash flows as well as the NPV and IRR for the two projects are given. For both projects, the required rate of return is 10 percent. Cash Flow Year 0 1 2 3 4 NPV IRR (%) Project 1 —100 33336 6 Project 2 —6 6 100 0 0 0 5 What discount rate would result in the same NPV for both projects? （原版书R36-13） A. A rate between percent and percent. B. A rate between percent and percent. C. A rate between percent and percent. Solution:B For these projects, a discount rate of percent would yield the same NPV for both (an NPV of ). Q8-5 ★★Wilson Flannery is concerned that this project has multiple IRRs. Year 0 1 2 3 Cash flows —50 100 0—5 0 How many discount rates produce a zero NPV for this project? （原版书R36-14） A. One, a discount rate of 0 percent. B. Two, discount rates of 0 percent and 32 percent. C. Two, discount rates of 0 percent and 62 percent. Solution:C Discount rates of 0 percent and approximately percent both give a zero NPV. Rate 0% 20% 40% 60% % 80% 100% NPV — — Q9-5 ★Which of the following statements about the payback period method is least accurate? The payback period:（Notes P29） A. provides a rough measure of a project's liquidity. B. considers all cash flows throughout the entire life of a project. C. is the number of years it takes to recover the original cost of the investment. Solution:B The payback period ignores cash flows that go beyond the payback period. Q10-5 ★Which of the following statements is least accurate? The discounted payback period:（Notes P29） A. frequently ignores terminal values. 376 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. is generally shorter than the regular payback. C. is the time it takes for the present value of the project's cash inflows to equal the initial cost of the investment. Solution:B The discounted payback is longer than the regular payback because cash flows are discounted to their present value. R5-5 NPV, IRR, PI, DPB的计算  计算：NPV, IRR, PI, DPB的计算必须要掌握，PB的计算比较简单，但是也需要掌握，考到机率不比其它几个大。  NPV: sum of the present value of expected CFs  NPV nCF tt 0 ƒ(1 k)t NPV>0, increase the firm value, accept the project; NPV<0 decrease the firm value, do not accept the project.  IRR: the discount rate that makes NPV equal to zero.  IRR> the required rate of return, accept the project; IRR<the required rate of return, reject the project.  ★Payback period: the number of years it takes to recover the initial cost. (undiscounted cash flow), liquidity but not profitability.  Discounted payback period: use the discounted cash flow to calculate the payback period. It fails to consider the cash flows after the pay back period and ignores the profit.  To conventional cash flow（正常的现金流，第一个为负，后面都为正）, Discounted Pay-back period > pay-back period R6-5 Crossover rate An NPV profile plots a project's NPV as a function of the discount rate, and it intersects the horizontal axis (NPV = 0) at its IRR. If two NPV profiles intersect at some discount rate, that is the crossover rate, and different projects are preferred at discount rates higher and lower than the crossover rate. R7-5 Profitability Index (PI): of PI PV thCe Ffuture CFs 1 NCPFV00PI>1, accept the project; PI<1, reject the project.  WACC可以用于NPV计算的折现率，但是有2个假设条件。一般来说，公司的风险和项目的风险是肯定不一样的，如果没有这2个假设条件，就不能用WACC折现CF计算NPV。如果公司的风险小于项目的风险，就会使得NPV的结果被高估；反之，则低估。  ★重点理解：  NPV方法假设以折现率再投资，IRR方法假设以IRR再投资  NPV优点：体现project的规模；股东利益最大化；收益用currency amount的方式表现出来；NPV缺点：不反应收益率  IRR优点：体现收益率；IRR缺点：由于不正常的现金流分布（比如正负相间的现金流）， 377 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 会引起没有IRR和多个IRR；  ★NPV profile:  请大家熟记这张图里的IRR，crossover rate, 考试中有可能出现基于这张图的题目。 P5-5 NPV & IRR理解 Q11-5 ★★Two mutually exclusive projects have conventional cash flows, but one project has a larger NPV while the other has a higher IRR. Which of the following is least likely responsible for this conflict? A. Reinvestment rate assumption B. Size of the projects' initial investments C. Risk of the projects as reflected in the required rate of return Solution: C Conflicting decision rules based on the NPV and IRR methods are related to the reinvestment rate assumption, the timing of the cash flows, or the scale of the projects. Differing required rates of return are not related to conflicting NPV and IRR decisions. Q12-5 Erin Chou is reviewing a profitable investment project that has a conventional cash flow pattern. If the cash flows for the project, initial outlay, and future after-tax cash flows all double, Chou would predict that the IRR would A. increase and the NPV would increase. B. stay the same and the NPV would increase. C. stay the same and the NPV would stay the same. Solution：B. The IRR would stay the same because both the initial outlay and the after-tax cash flows double, so that the return on each dollar invested remains the same. All of the cash flows and their present values double. The difference between total present value of the future cash flows and the initial outlay (the NPV) also doubles. Q13-5 With regard to net present value (NPV) profiles, the point at which a profile crosses 378 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 the horizontal axis is best described as: A. the point at which two projects have the same NPV. B. the sum of the undiscounted cash flows from a project. C. a project’s internal rate of return when the project’s NPV is equal to zero. Solution C. The horizontal axis represents an NPV of zero. By definition, the project’s IRR equals an NW of zero. P6-5 Impact of NPV Rule and Stock Price Q14-5 Fullen Machinery is investing $400 million in new industrial equipment. The present value of the future after-tax cash flows resulting from the equipment is $700 million. Fullen currently has 200 million shares of common stock outstanding, with a current market price of $36 per share. Assuming that this project is new information and is independent of other expectations about the company, what is the theoretical effect of the new equipment on Fullen's stock price? The stock price will:（Notes P32） A. decrease to $ B. increase to $ C. increase to $ Solution B. The NPV of the new equipment is $700 million - $400 million = $300 million. The value of this project is added to Fullen's current market value. On a per-share basis, the addition is worth $300 million / 200 million shares, for a net addition to the share price of $. $ + $ = $ R8-5 NPV, IRR掌握两个指标的矛盾及理解：  理解：十分熟悉NPV, IRR的优缺点  NPV Advantage:  Shows the amount of gains as currency amount  The NPV of project increases the value of shareholders instead of creditors.  Realistic discount rate – opportunity cost of funds  NPV disadvantage:  Size effect ignored  IRR Advantage: Reflect the profitability of the project  IRR Disadvantage  Assume the reinvestment rate is IRR  No IRR & multiple IRR (unconventional CFs)  Conflicting ranking results of mutually exclusive projects with NPV R9-5 ★矛盾：出发点是IRR自身存在缺点  原因：1)different project’s size; 2)different timing of CF; 3)reinvestment rate assumption different;  决策：当IRR与NPV发生矛盾时，选用NPV 379 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Criteria preference: European countries prefer PB over NPV and IRR; larger public companies prefer NPV&IRR; managers with higher education level prefer NPV&IRR. P7-5 Evaluation of a Capital Project的理解 Q15-5 Howard Quarries has recently opened a limestone quarry at a location outside their traditional service area. As limestone is a major ingredient in concrete, if the quarry is successful, Howard plans to build a ready-mix concrete plant at the same location. The investment in the concrete plant is best described as: A. an externality B. project sequencing C. an example of investment synergy Solution: B Project sequencing occurs when the investment in one project creates the option to invest in future projects. R10-5 ★Evaluation of a Capital Project掌握一些概念的解释：  Independent Projects：Accepting or rejecting one project does not affect the decision of other projects.独立项目未必互斥  Mutually Exclusive: Only one of several potential projects can be chosen.互斥项目一定不独立  Project Sequencing: Some projects must be undertaken in a certain order, so that investing in a project today creates the opportunity to invest in other projects in the future.  Capital Rationing：Many firms have constraints on the amount of capital they can raise P8-5 WACC计算 Q16-5 An analyst gathered the following Information about the capital structure and before-tax component costs for a company. The company’s marginal tax rate is 40%. Capital component Book Value (000) Market Component Value(000) cost Debt $100 $80 8% Preferred $20 $20 10% stock Common $100 $200 12% stock The company’s weighted average cost of capital (WACC) is closest to: A. %. B. %. C. %. Solution: B As the target capital weights are not given, you can use market value weights to compute the WACC. The market value weights for debt, preferred stock and equity are , , and 380 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 respectively. WACC=Wd * rd (1 -t) + Wp * rp + Wce * rce = * 8%(1 - ) + * 10% + * 12% = % Q17-5 An analyst is estimating the cost of capital for her firm. She has estimated the before-tax costs of the current sources of capital to be 8% for debt and 9% for equity. If the firm’s marginal tax rate is 40%, the costs of debt and equity she should use in her calculation are closest to: A. % for debt and % for equity. B. % for debt and % for equity. C. % for debt and % for equity. Solution: B The cost of debt is adjusted to reflect the tax advantages debt possesses: % x (1 - ) = %. Equity does not have a tax advantage. Therefore, the cost of equity is not adjusted for taxes. Q18-5 ★★★Frank Merlo, a researcher analyst, gathered the following data in order to estimate the cost of capital of a drug company: Cost of 6-month T-bills % Cost of 10-year treasury bonds 4% Cost of 10-year corporate bonds % Beta Market risk premium 7% Bond risk premium % Target D/E ratio Marginal tax rate 34% The company’s cost of capital estimated closest to: A. %. B. %. C. %. Solution: B 63%, 1w1-63%37%,e k r b rp υ4% 7 %1 5υ.2% fWACC wk(1-t) w k6 3% ( υ)% (1-34% υ)37%1 5. 2%1 0υ.82% ddee★Notes: should use the risk-free rate with comparable period, that is, the maturity of riskfree rate equals to the duration of CF. Q19-5 Rhonaldinho Inc., a Brasil-based listed company with great reserve of nickel ores, is 381 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 declaring its target capital structure of 40% debt and 60% capital. However, as it has few financing sources, it is estimating that it cannot maintain this target by taking on more projects. The actual target structure is as follows: Carrying value Market value Before-tax cost Debt 48 million 78 million 8% Equity 72 million 52 million 15% As the company’s tax rate is 40%, the cost of capital of the company is closest to: A. 10%. B. 9%. C. 7%. Solution: B You should use the market value of debt and equity to calculate the percentage of debt and equity in the capital structure. And then use the WACC formula to calculate the WACC. Q20-5 An analyst gathered the following data about a company: Capital structure Required rate of return 30% debt 10% for debt 20% preferred stock 11% for preferred stock 50% common stock 18% for common stock Assuming a 40% tax rate, what after-tax rate of return must the company earn on its investments?（Notes P54） A. 13%. B. %. C. 18%. Solution:A WACC = WdKd (1-t) + WpsKps + WceKce = **() + *+* = 13% Q21-5 Trumpit Resorts Company currently has million common shares of stock outstanding and the stock has a beta of . It also has $10 million face value of bonds that have five years remaining to maturity and 8 percent coupon with semi-annual payments, and are priced to yield percent. If Trumpit issues up to $ million of new bonds, the bonds will be priced at par and have a yield of percent; if it issues bonds beyond $ million, the expected yield on the entire issuance will be 16 percent. Trumpit has learned that it can issue new common stock at $10 a share. The current risk-free rate of interest is 3 percent and the expected market return is 10 percent. Trumpit's marginal tax rate is 30 percent. If Trumpit raises $ million of new capital while maintaining the same debt-to-equity ratio, its weighted average cost of capital is closest to:（原版书Reading37-12） A. %. B. %. C. %. 382 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B Capital structure: Market value of debt: FV = $10,000,000, PMT = $400,000, N = 10, I/ YR = %. Solving for PV gives the answer $7,999,688. Market value of equity: million shares outstanding at $10 = $12,000,000 Market value of debt $7,999,688 40% Market value of equity 12,000,000 60% Total capital $19,999,688 100% To raise $ million of new capital while maintaining the same capital structure, the company would issue $ million X 40% = $ million in bonds, which results in a before-tax rate of 16 percent. rd (1-t) = () = % re=+()= % WACC = [()] + [()] =- + =% Q22-5 ★★Fran McClure of Alba Advisers is estimating the cost of capital of Frontier Corporation as part of her valuation analysis of Frontier. McClure will be using this estimate, along with projected cash flows from Frontier's new projects, to estimate the effect of these new projects on the value of Frontier. McClure has gathered the following information on Frontier Corporation: Current Forecasted for Year ($) Next Year ($) Book value of debt 50 50 Market value of debt 62 63 Book value of shareholders' equity 55 58 Market value of shareholders' equity 210 220 The weights that McClure should apply in estimating Frontier's cost of capital for debt and equity are, respectively: （原版书R37-9） A. wd = ; we = . B. wd = ; we = . C. wd =- ; we = . Solution:C wd = $63/($220 + 63) = we = $220/($220 + 63) = R11-5 WACC 1) 公式：WACC=Wd * rd (1 -t) + Wp * rp + Wce * rce 2) 要素一：税盾——Cost of Debt需要乘以(1 -t) 3) 要素二：Weighted  首选是用公司的target capital structure； 383 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  如果没有target structure，则选用market value（如上题）；  如果没有market value，就用公司管理层所提供的公司optimal capital structure trend  这些条件都不满足的时候，用同行业的平均capital structure作为参考 P9-5 Cost of Debt计算 Q23-5 ★Waynesboro Industries is considering issuing a 10-year, option-free, semiannual coupon bond with a 9% coupon rate. The bond is expected to sell at 95% of par value. If the company’s marginal tax rate is 30%, then the after-tax cost of debt is closest to: A. %. B. %. C. %. Solution: B Using a financial calculator: N = 20, PMT = 45, PV = - 950, FV = 1000; solve for %I/Y= %. The annual yield is twice the semiannual yield = % * 2 = %. The after-tax cost of debt = annual yield * (1 - t) = % * (1 - ) = %. P10-5 用YTM的方式计算Cost of Debt： Q24-5 ★★ has determined that it could issue $1,000 face value bonds with an 8 percent coupon paid semi-annually and a five-year maturity at $900 per bond. If 's marginal tax rate is 38 percent, its after-tax cost of debt is closest to: （原版书R37-4） A. percent. B. percent. C. percent. Solution:C FV = $1,000; PMT = $40; N = 10; PV = $900 Solve for i. The six-month yield, i, is % YTM = % x 2 = % rd (1 — t) = %(1 — ) = % Q25-5 A company has $5 million in debt outstanding with a coupon rate of 12%. Currently, the yield to maturity (YTM) on these bonds is 14%. If the firm's tax rate is 40%, what is the company's after-tax cost of deb?（Notes P54） A. percent. B. percent. C. 14 percent. Solution:B Kd (1-t) = *() = % Q26-5 The company has a target capital structure of 40% debt and 60% equity. Bonds with 384 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 face value of $1,000 pay a 10% coupon (semiannual), mature in 20 years, and sell for $ with a yield to maturity of 12%. The company stock beta is . Risk-free rate is lo%, and market risk premium is 5%. The company is a constant-growth firm that just paid a dividend of $2, sells for $27 per share, and has a growth rate of 8%. The company's marginal tax rate is 40%. The company's after-tax cost of debt is: （Notes P55） A. percent. B. percent. C. percent. Solution:A Kd (1-t) = *() = % R12-5 Cost of Debt 计算 一般出题的方式给定一个bond，让考生计算一个yield。  注意一：计算yield的时候，看清楚题目是如何分期的（一般是半年付息一次）。  注意二：PV和FV（PMT）现金流的方向相反，所以一定有一个在计算器上需要按“-”键。  注意三：如果承租人采用融资租赁，那么需要确认一部分负债，也需要考虑在cost of debt里面。 P11-5 ★计算Cost of Equity： Q27-5 An analyst gathered the following information about a manufacturing company: • Expected cash dividends one year from today $ • Expected growth rate 7% • Common stock (current market price) $ • Company tax rate 34% The company’s after-tax cost of retained earnings is closest to: A. % B. % C. % Solution: A kD1rePg 0$ %$ Q28-5 Which of the following is the least appropriate to discount cash flows of a project? A. Marginal cost B. Sunk cost C. Opportunity cost Solution: B 385 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Marginal cost and opportunity cost can be used as the discount rate of calculating a project’s NPV. Q29-5 ★★Using the dividend discount model, what is the cost of equity capital for Zeller Mining if the company will pay a dividend of C$ next year, has a payout ratio of 30 percent, a return on equity (ROE) of 15 percent, and a stock price of C$45? （原版书R37-3） A. percent. B. percent. C. percent. Solution:C First calculate the growth rate using the sustainable growth calculation, and then calculate the cost of equity using the rearranged dividend discount model: g = (1 —Dividend payout ratio) (Return on equity) = (1 —) (15%) = % re = (D1 / P0) + g = ($ / $45) + % = % Q30-5 ★★An analyst gathered the following information about a company and the market: Current market price per share of common stock Most recent dividend per share paid on common stock (D0) $ Expected dividend payout rate 40% Expected return on equity (ROE) 15% Beta for the common stock Expected rate of return on the market portfolio 13% Risk-free rate of return 4% Using the discounted cash flow (DCF) approach, the cost of retained earnings for the company is closest to: （原版书R37-24） A. %. B. %. C. %. Solution:C The expected return is the sum of the expected dividend yield plus expected growth. The expected growth is (1 - )15% = 9%. The expected dividend yield is 28 =%. The sum is %. Q31-5 A company intends to issue new common stock with flotation costs of % per share. The expected dividend next year is $, and the dividend growth rate is expected to be 10% in perpetuity. Assuming the shares are issued at a price of $, the cost (%) of external equity for the firm is closest to:（MOCK92-70） A. . B. . C. . 386 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution:B Using Equation 16: Dr1e() g P0(1 f) $() $(1 ) Q32-5 ★★The DuPont system allows us to break down the return on equity into: （原版书R41-8） A. return on assets and the financial leverage ratio. B. profit margin, the tax retention ratio, and inventory turnover. C. gross profit margin, total asset turnover, and the debt–to–equity ratio. Solution:A ReNet incomeRevenues♣υTotal asets turn on equity=Reυ•venue♦ sTotal asets♥Shareholders' equ÷ity≠ReuTotal asetsturn on equity=Retrn on assets υShareholders' equity Q33-5 A company that wants to determine its cost of equity gathers the following information: Rate of return on 3-month Treasury bills % Rate of return on 10-year Treasury bonds % Market risk premium % The company’s equity beta Dividend growth rate % Corporate tax rate 35% Using the capital asset pricing model (CAPM) approach, the cost of equity (%) for the company is closest to: (2014 Mock 99-75) A. %. B. %. C. %. Solution:A CAPM: Cost of equity = Risk free rate + Beta × Market risk premium = % + × (%) = % The 10-year risk free rate is appropriate based on the long-term duration of the cash flows from the project. R13-5 ★计算Cost of Equity： 计算Cost of Equity的方法有3种，分别是DDM (GGM）；CAPM和Bond yield plus risk 387 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 premium 1) DDM  注意一：dividend在题目中的表述，看清楚是current (D0)还是expected (D1)，公式是kre = D1/ P0 + g，所以题目表述的是D0，就需要用D0(1+g)先算出D1  注意二：这个公式有一个假设，即公司有stable dividend policy，并且without issuing additional common stock，这样g=(1-D/EPS)ROE  注意三：D1/ P0叫做forward annual dividend yield 2) Bond yield plus risk premium：这个premium指的是cost of equity与this company’s cost of debt之间的区别 3) 如果有flotation costs，在计算NPV时以CFA协会的观点认为应该作为initial CF，不需要在分母上进行调整。 P12-5 Cost of Preferred stock计算 Q34-5 ■A company is planning a new issue of $100 par preferred stock with a 12% dividend. The preferred stock can be sold for $95 per share and the company must pay flotation costs of 5% of the market price. Assuming a marginal tax rate of 40%, the after-tax cost of the preferred stock is closest to: A. %. B. %. C. %. Solution: C The component cost of preferred stock is calculated as: (100 × ) / ﹝95 × ()﹞= or %. Note that preferred stock is not tax advantaged. Q35-5 A company's $100, 8% preferred is currently selling for $85. What is the company's cost of preferred equity?（Notes P54） A. %. B. %. C. %. Solution: B Kps = Dps / Pps, Dps = $100 * 8% = $8, Kps = 8 / 85 = % Q36-5 Black Pearl Yachts is considering a project that requires a $180,000 cash outlay and is expected to produce cash flows of $50,000 per year for the next five years. Black Pearl's tax rate is 25%, and the before-tax cost of debt is 8%. The current share price for Black Pearl's stock is $56 and the expected dividend next year is $ per share. Black Pearl's expected growth rate is 5%. Assume that Black Pearl finances the project with 60% equity and 40% debt, and the flotation cost for equity is %. The appropriate discount rate is the weighted average cost of capital (WACC). Which of 388 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 the following choices is closest to the dollar amount of the flotation costs and the NPV for the project, assuming that flotation costs are accounted for properly?（Notes P57） Dollar amount of flotation costs NPV of proiect A. $4320 $17548 B. $4320 $13228 C. $7200 $17548 Solution: B Because the project is financed with 60% equity, the amount of equity capital raised is x $180,000 = $108,000. Flotation costs are %, which equates to a dollar cost of $108,000 x = $4,320. After-tax cost of debt = % ( 1 - ) = % Cost of equity = ( / 56) + = 10% WACC = () + () = % NPV$180,000$4,320$50,000$50,0002...$50,0005$1 13, R14-5 ★计算Cost of Equity： 1) 计算Cost of preferred stock比较简单，就等于D/P 2) ■如果有flotation costs，就需要在分母P上进行衡量，P需要乘以（1-flotation costs）; 但是，如果capital budgeting, Floatation cost should be considered as an initial outpayment 3) preferred stock 没有 tax advantaged. P13-5 非上市公司β的计算（用于CAPM模型）, pure play method Q37-5 ★★Jurgen Knudsen has been hired to provide industry expertise to Henrik Sandell, CFA, an analyst for a pension plan managing a global large-cap fund internally. Sandell is concerned about one of the fund’s larger holdings, auto parts manufacturer Kruspa AB Kruspa currently operates in 80 countries, with the previous year’s global revenues at € billion. Recently, Kruspa’s CFO announced plans for expansion into China. Sandell worries that this expansion will change the company’s risk profile and wonders if he should recommend a sale of the position. For the new project, D/E=80/20 Additional information: Equity risk premium, Sweden % Risk-free rate of interest, Sweden % Industry debt-to-equity ratio Market value of Krista’s debt €900 million 389 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Market value of Kruspa’s equity € billion Kruspa’s equity beta Kruspa’s before-tax cost of debt % China credit A2 country risk premium % Corporate tax rate % Sandell would like to use the asset beta of Kruspa as a base in his calculations. The China project’s weighted average cost of capital (WACC) calculated using the equity beta without and with the country risk premium is, respectively, A. 9% and 10% B. 10% and % C. % and % Solution: C Asset β = Un-levered β= = for prior to China project. Projectβ= { 1+ [(1 — ) (€80/€20)] = {} = for China project. Cost of equity without the country risk premium: re = + () = % Cost of equity with the country risk premium: re = + ( + ) = % Weighted average cost of capital without the country risk premium: WACC = [ () (1 — ) + [ ()] = + = % Weighted average cost of capital with the country risk premium: WACC = [ () (1 — ) + [ ()] = + = % Q38-5 The following information is available for a firm. Market Risk Premium % Risk-free Rate % Comparable Firm Return % Comparable Firm Debt-to-Equity Ratio Comparable Firm Tax Rate % The firm’s unlevered beta is closest to: A. . B. . C. . Solution: A Find the comparable firm’s beta: (% - %) ÷ % = . Un-lever the comparable firm’s beta: βLcomparable ÷ (1 + (1 – tax rate) x debt-to-equity ratio) = ÷ (1 + (1 – 40%) x ) =. Q39-5 ★★Jay Company has a debt-to-equity ratio of . Jay is evaluating the cost of equity for a project in the same line of business as Cass Company and will use the pure-play method with Cass as the comparable firm. Cass has a beta of and a debt-to-equity ratio of . The project beta most likely: A. Will be less than Jay’s beta . 390 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. Will be greater than Jay’s beta. C. Could be greater than or less than Jay’s beta. Solution: C The project beta calculated using the pure-play method is not necessarily related in a predictable way to the beta of the firm that is performing the project. Q40-5 Wang Securities had a long-term stable debt-to-equity ratio of . Recent bank borrowing for expansion into South America raised the ratio to . The increased leverage has what effect on the asset beta and equity beta of the company?（原版书Reading37-10） A. The asset beta and the equity beta will both rise. B. The asset beta will remain the same and the equity beta will rise. C. The asset beta will remain the same and the equity beta will decline. Solution: B Asset risk does not change with a higher debt-to-equity ratio. Equity risk rises with higher debt. Q41-5 Brandon Wiene is a financial analyst covering the beverage industry. He is evaluating the impact of DEF Beverage's new product line of flavored waters. DEF currently has a debt-to-equity ratio of . The new product line would be financed with $50 million of debt and $100 million of equity. In estimating the valuation impact of this new product line on DEF's value, Wiene has estimated the equity beta and asset beta of comparable companies. In calculating the equity beta for the product line, Wiene is intending to use DEF's existing capital structure when converting the asset beta into a project beta. Which of the following statements is correct? （原版书Reading37-11） A. Using DEF's debt-to-equity ratio of is appropriate in calculating the new product line's equity beta. B. Using DEF's debt-to-equity ratio of is not appropriate, but rather the debt-to-equity ratio of the new product, , is appropriate to use in calculating the new product line's equity beta. C. Wiene should use the new debt-to-equity ratio of DEF that would result from the additional $50 million debt and $100 million equity in calculating the new product line's equity beta. Solution: B The debt-to-equity ratio of the new product should be used when making the adjustment from the asset beta, derived from the comparables, to the equity beta of the new product. Q42-5 ★★An analyst gathered the following information about the capital markets in the . and in Paragon, a developing country. Selected Market Information (%) 391 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Yield on . 10-year Treasury bond Yield on Paragon 10-year government bond Annualized standard deviation of Paragon stock index Annualized standard deviation of Paragon dollar denominated government bond Based on the analyst's data, the estimated country equity premium for Paragon is closest to: （原版书R37-27） A. %. B. %. C. %. Solution:C The country equity premium can be estimated as the sovereign yield spread times the volatility of the country's stock market relative to its bond market. Paragon's equity premium is (% — %) X (35%/25%) =- 6% x = %. Q43-5 Derek Ramsey is an analyst with Bullseye Corporation, a major .-based discount retailer. Bullseye is considering opening new stores in Brazil and wants to estimate its cost of equity capital for this investment. Ramsey has found that:（Notes P56）  The yield on a Brazilian government 10-year . dollar-denominated bond is %.  A 10-year . Treasury bond has a yield of %.  The annualized standard deviation of the Sao Paulo Bovespa stock index in the most recent year is 24%.  The annualized standard deviation of Brazil's . dollar-denominated 10-year government bond over the last year was 18%.  The appropriate beta to use for the project is .  The market risk premium is 6%.  The risk-free interest rate is %. Which of the following choices is closest to the appropriate country risk premium for Brazil and the cost of equity that Ramsey should use in his analysis? Country risk premium for Brazil Cost of equity for project A. % % B. % % C. % % Solution:C 392 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 annualized standard deviation of equity index♣ •♦÷of developing countryCRP = sovereign yield spreadannualized standard deviation of sovereign bond ♦ ÷market in terms of the developed market currency♥≠金程教育 专业·领先·增值 ♣ •=()♦=,or ÷%♥≠k=R+ȕE R - R+CRP♠≡fmktf←…=+ 0>.06+ ≅=, or % R15-5 掌握β的概念及其计算： 1) project’s β is a measure of its systematic or market risk. 2) For nonpublic company, using pure-play method to find β. 3) ★步骤  在行业内找一家与此非上市公司(X)在经营风险上相似的上市公司(Y)，此公司equity β已知  用公式计算出上市公司(Y)的assetβ, 这是去公司杠杆化的过程。 ♦♣ ÷• Εa Ε ♦1 ÷sse tequity 1♦♦ ♥ D(1t)E ÷÷ ≠ 用计算出上市公司(Y)的assetβ，用被估值的非上市公司的的资本结构，重新杠杆化β。就得到非上市公司的β。 Εequity Εt υ 1♦♣♥ (1 t)DasseE ÷•≠ 注意以上两个公式的形式是相同的，，只是注意在不同公司的时候，用不同公司的D/E ratio；如去杠杆化上市公司(Y)就用Y公司的D/E ratio。 4) 最后通过CAPM模型来估算非上市公司的cost of equity. 5) ★Country risk premium (CRP):  It is used to estimate the cost of equity in developing countries.  kce Rf [ΕE (RMKT)-RF CRP]Annualized standard deviation of equity index of  C RPSovdeveloping countryereign yield spread(υ) Annualized standard deviation of sovereign bond market in terms of the developed market currencySovereign spread= difference between the yields of government bonds in the developing country and Treasury bonds of similar maturities.、 P14-5 MCC的理解 Q44-5 ★Which of the following statements regarding the weighted average cost of capital 393 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 and the marginal cost of capital is TRUE? A. The marginal cost of capital is likely to fall as the company raises additional capital due to economies of scale in financing B. The breakeven point where a firm runs out of retained earnings and must raise outside equity capital typically results in a decrease in the marginal cost of capital schedule C. The optimal capital budget occurs when the weighted average cost of capital is equal to the marginal cost of capital Solution: C When the WACC is greater (or lower) than the marginal cost of capital, the company should increase (decrease) the investing capital. Q45-5 ★A company’s optimal capital budget is best described as the amount of new capital required to undertake all projects with an internal rate of return greater than the: A. Marginal cost of capital. B. Cost of new debt capital. C. Weighted average cost of capital. Solution: A The optimal capital budget is the amount of new capital required to undertake all investment projects with an IRR greater than the marginal cost of capital. Q46-5 A company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax required return on debt is 9% and 14% for equity. If the company is in the 40% tax bracket, the company's marginal cost of capital is closest to: （Notes P54） A. %. B. %. C. 12%. Solution: B Wd = 20 / (20+30) = ，Wce = 30 / (20+30) = WACC = WdKd (1-t) + WceKce = *9*() + *14 = % = MCC R16-5 MCC，WACC和optimal capital structure，optimal capital budgeting：  首先当公司R/E不够用于发展的时候，有两种方式增加capital，一个是debt，一个是equity。我们都知道发债具有税盾作用，所以公司一开始都采用发债，rd和re都是增加的，但是由于借债的成本低且有税盾作用，所以MCC先下降后上升，下降的原因是debt和equity的trade-off，也就是balance。（不是由于economies of scale）  ★optimal capital structure：首先WACC是最小，而且此刻MCC=WACC，就会达到最优资本结构 394 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Cost Cost MCC MCC IOS WACC Optimal capital Optimal capital Structure Budget New capital New capital raise raise  ★IOS是资金的需求曲线，是企业将所有的投资项目按IRR从大向小排，就形成了需求；而MCC是资金的供给曲线，一般来讲，融资越多，成本越高。企业在选择时，肯定时选IRR>MCC的项目，最后当MCC和investment opportunity schedule的交点，就形成了optimal capital budgeting。 Q47-5 ★An analyst gathered the following information about a company: Target (optimal)capital structure: Long-term debt 50% Preferred stock 10% Common equity 40% After-tax component costs: Long-term debt 6% Preferred stock 10% Retained earnings 14% New common stock 15% Expected total earnings (net income) for the year in millions $120 Target dividend payout ratio 70% If the company raises $100 million in new capital, the company’s marginal cost of capital is closest to: A. % B. % C. % Solution: B %+%+%=10%. We should first decide whether or not new issue of common stock is required when the retention of R/E is less than the common stock computed according to the target capital structure. If new issue, we use the cost of capital of new issue; if not, we the cost of capital of Retained earnings. Q48-5 ★An analyst gathered the following information about a company: Target (optimal)capital structure: Long-term debt 50% Preferred stock 10% Common equity 40% 395 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 After-tax component costs: Long-term debt 6% Preferred stock 10% Retained earnings 14% New common stock 15% Expected total earnings (net income) for the year in millions $120 Target dividend payout ratio 45% If the company raises $150 million in new capital, the company marginal cost of capital is closest to: A. % B. % C. % Solution: A Given the company dividend payout ratio, the amount of the expected addition to retained earning is $120m×(1-45%) = $66 million; the amount of new capital that could be raised without issuing new common stock is $66 / = $165 million. But $150 million is less than the break point for retained earnings, the component cost of equity is the cost of retained earnings. The marginal cost of capital for the company is percent: (×6%) + (×10%) + (×14%) Notes: from another point of view, we only have to compare the R/E with new capital from Equity. Q49-5 Freitag Company currently has assets on its balance sheet that are financed with 60% equity and 40% debt. The company can issue debt at the yield of 8% when the value of the debt doesn’t exceed 1 million. If larger amounts of debt are issued by the company, the yield of the debt will be 9%.Calculate the break points for the company. A. 1 million B. million C. million Solution: C When the value of the debt exceeds 1 million, the yield of the bonds issued changed. So the break point for the company occurs when 40% of the whole capital exceeds 1 million. Break point = 1million/40% = . Q50-5 Manigault Industries currently has assets on its balance sheet of $200 million that are financed with 70% equity and 30% debt. The executive management team at Manigault is considering a major expansion that would require raising additional capital. Rosannna Stallworth, the CFO of Manigault, has put together the following 396 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 schedule for the costs of debt and equity:（Notes P56） Amount of New Afer-tax Cost Of Amount of New Cost of Equity Debt (in millions) Debt Equity (in millions) $0 to $49 % $0 to $99 % $50 to $99 % $100 to $199 % $100 to $149 % $200 to $299 % In a presentation to Manigault's Board of Directors, Stallworth makes the following statements: Statement 1: If we maintain our target capital structure of 70% equity and 30% debt, the break point at which our cost of equity will increase to % is $185 million in new capital. Statement 2: If we want to finance total assets of $450 million, our marginal cost of capital will increase to %. Are Stallworth's Statements 1 and 2 most likely correct or incorrect? Statement 1 Statement 2 A. Correct Correct B. Incorrect Correct C. Incorrect Incorrect Solution: C Statement 1 is incorrect. The break point at which the cost of equity changes to % is: bamount of capital at which the component's cost of capital changesreak point = weight of the component in the WACC$100 million= $ 2 is also incorrect. If Manigault wants to finance $450 million of total assets, that means that the firm will need to raise $450 - $200 = $250 million in additional capital. Using the target capital structure of 70% equity, 30% debt, the firm will need to raise x $250 = $175 million in new equity and x $250 = $75 in new debt. Looking at the capital schedule, the cost associated with $75 million in new debt is %, and the cost associated with $175 million in new equity is %. The marginal cost of capital at that point will be ( x %) + ( x %) = %. Q51-5 Which of the following situations is the least likely reason why the marginal cost of capital schedule for a company rises as additional funds are raised? A. The company deviates from its target capital structure because of the economies of scale associated with flotation costs and market conditions. B. The company seeks to issue less senior debt because it violates the debt incurrence test of an existing debt covenant. C. The cost of additional funds from various sources rises as higher levels of financing are achieved. 397 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C The WACC does not necessarily increase as more funds are being raised. Higher amounts of funding would not change the WACC if everything were in proportion to the old target capital structure - it is the changes in relative proportions of sources of funding that could make a difference because of interest deductibility and financial risk. R17-5 MCC的概念，公式及和cost之间的关系：  概念：MCC is the cost of the last new dollar of capital a firm raises.  Q45和Q46两道题非常相似，但是实际里面的条件改变后，会使得答案完全不同。  一道题目是公司的R/E不足以支持公司投资规模的扩大，所以要issue common stock；  但是第二题是说公司的R/E可以支持公司投资规模的扩大，所以只需要用R/E的cost就可以。  Break point=amount ofw capital at which the component's cost of capital changeseight of the component in th capital structure P15-5 Operating Leverage & Financial Leverage Q52-5 Degree of operating leverage is best described as a measure of the sensitivity of: A. net earnings to changes in sales. B. fixed operating costs to changes in variable costs. C. operating earnings to changes in the number of units produced and sold. Solution: C. The degree of operating leverage is the elasticity of operating earnings with respect to the number of units produced and sold. As an elasticity, the degree of operating leverage measures the sensitivity of operating earnings to a change in the number of units produced and sold. Q53-5 ★Consider two companies that operate in the same line of business and have the same degree of operating leverage: the Basic Company and the Grundlegend Company. The Basic Company and the Grundlegend Company have, respectively, no debt and 50 percent debt in their capital structure. Which of the following statements is most accurate? Compared to the Basic Company, the Grundlegend Company has: A. a lower sensitivity of net income to changes in unit sales. B. the same sensitivity of operating income to changes in unit sales. C. the same sensitivity of net income to changes in operating income. Solution: B Grundlegend's degree of operating leverage is the same as Basic Company's, whereas Grundlegend's degree of total leverage and degree of financial leverage are higher. Q54-5 Which of the following is a key determinant of operating leverage?（Notes P71） A. Level and cost of debt. 398 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. The competitive nature of the business. C. The trade-off between fixed and variable costs. Solution: C The extent to which costs are fixed determines operating leverage. Q55-5 If Jayco's sales increase by 10%, Jayco's EBIT increases by 15%. If Jayco's EBIT increases by 10%, Jayco's EPS increases by 12%. Jayco's degree of total leverage (DTL) are closest to: （Notes P71） A. . B. . C. . Solution: C DOL15% 10%% FL10% DOL D υFL1. 8 P16-5 Breakeven Points Q56-5 ★Alavanca is evaluating the risk of two companies in the machinery industry: The Gearing Company and Hebelkraft, Inc. Alavanca used the latest fiscal year's financial statements and interviews with managers of the respective companies to gather the following information: The Gearing Company Hebelkraft, Inc. Number of units produced and sold 1 million 1. 5 million Sales price per unit $200 $200 Variable cost per unit $120 $100 Fixed operating cost $40 million $90 million Fixed financing expense $20 million $20 million Based on this information, the breakeven points for The Gearing Company and Hebelkraft, Inc. are: A. million and million units, respectively. B. 1 million and million units, respectively. C. million and million units, respectively. For The Gearing CompanySolution: A FC$40million$20millionQBE750,000P-V$200-$120ForHebelkraft,Inc.,FC$90million$20millionQBE1,100,000P-V $200-$100 399 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q57-5 ★★Myundia Motors now sells 1 million units at Y3,529 per unit. Fixed operating costs are Y1,290 million and variable operating costs are Y1,500 per unit. If the company pays Y410 million in interest, the levels of sales at the operating breakeven and breakeven points are, respectively: （原版书R38-6） A. ￥1,500,000,000 and ￥2,257,612,900. B. ￥2,243,671,760 and ￥2,956,776,737. C. ￥2,975,148,800 and ￥3,529,000,000. ￥1290 million Operating breakeven units =Solution:B ￥，￥=635, units(3529-1,500) Operating breakewn sales =￥3，529 υ635, units=￥2 ,243,671,760 ￥1290 million+￥410 millionTotal breakeven=￥，￥ 837, units3529-1,500Breakeven sales=￥3，529 υ837, units=￥2,956,776,737 Q58-5 Jayco, Inc., sells blue ink for $4 a bottle. The ink's variable cost per bottle is $2. Ink has fixed operating costs of $4,000 and fixed financing costs of $6,000. What is Jayco's breakeven quantity of sales, in units? （Notes P71） A. 2,000. B. 3,000. C. 5,000. Solution: C Q$4 BE,0$040$$62,0005,000 Q59-5 According to the previous example, what is Jayco's operating breakeven quantity of sales, in units? A. 2,000. B. 3,000. C. 5,000. Solution: A Q$ OBE$44,0$0202,000 R18-5 Business Rrisk & Financial Risk  Sales risk: uncertainty with respect to the price and quantity of goods and services; Operating risk is attributed to the use of fixed costs in operations; Financial risk is associated with the use of debt. R19-5 ★Leverage 400 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Leverage is associated with the use of fixed costs.注意：financial expenses也包括在fixed costs里，要区分operating和financial。  Degree of operating leverage: Δ% EBIT / Δ% units sold。代表Operating income变化1％，净利润变化的百分比 DOLQ QP( PV V )F  Degree of financial leverage: Δ% net income / Δ% EBIT DFQ(P L QP V V) F F I Degree of total leverage: Δ% net income / Δ% units sold DTL DOLD υFLQ PQ ( VP VF)() I R20-5 ★Breakeven point & Operating breakeven point  Breakeven point: point at which revenue equals costs; Operating breakeven point: point at which revenue equals operating costs QBE F (break-point) ixed operating coPst + VFixed financial costQ(operating break-point) OBE Fixed opPe ra Vting cost P17-5 Cash Dividends & Stock Dividends Q60-5 The payment of a 10 percent stock dividend by a company will result in an increase in that company's: A. current ratio. B. financial leverage. C. contributed capital. Solution: C A stock dividend is accounted for as a transfer of retained earnings to contributed capital. Q61-5 Which of the following is equivalent to cash dividend? A. Stock dividends B. Stock splits C. share repurchase Solution: C Because shares are repurchased using a company’s own cash, a share repurchase can be considered an alternative to a cash dividend as a way of distributing earning to shareholder. P18-5 Stock Split Q62-5 In a recent presentation, Doug Pearce made two statements about dividends: Statement 1: "A stock dividend will increase share price, all other things being equal." 401 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Statement 2: "One practical concern with a stock split is that it will reduce the company's price-to-earnings ratio." Are Pearce's two statements about the effects of the stock dividend and stock split correct? A. No for both statements. B. Yes for Statement 1 and no for Statement 2. C. No for Statement 1 and yes for Statement 2. Solution: A. Both statements are incorrect. A stock dividend will decrease the price per share, all other things being equal. A stock split will reduce the price and earnings per share proportionately, leaving the price-to-earnings ratio the same. P19-5 Payment Chronology Q63-5 ★Mary Young intends to take a position in Megasoft Industries once Megasoft begins paying dividends. A dividend of C$4 is payable by Megasoft on 2 December The ex-dividend date for the dividend is 10 November, and the holder-of-record date is 12 November. What is the last possible date for Young to purchase her shares if she wants to receive the dividend? A. 9 November. B. 10 November. C. 12 November. Solution: A To receive the dividend, one must purchase before the ex-dividend date. Q64-5 Studdard Controls recently declared a quarterly dividend of $ payable on Thursday April 25, to holders of record on Friday, April 12. What is the last day an investor could purchase Studdard stock and still receive the quarterly dividend?（Notes P85） A. April 9. B. April 10. C. April 12. Solution: A If an investor purchases shares of stock on or after the ex-dividend date, she will NOT receive the dividend. Therefore, to receive the dividend, the investor must purchase stock the day before the ex-dividend date. The ex-dividend day is always two business days before the holder-of-record date. Two days before April 12 is April 10; therefore, the last day the investor can purchase shares and still receive the dividend is April 9. Q65-5 ★Which date in the chronology of a dividend payment is most likely determined by a security exchange? The:（mock 85） A. declaration date. B. ex-dividend date. 402 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. holder-of-record date. Solution:B The ex-dividend date is normally determined by the security exchange on which the shares are listed. The corporation determines the holder-of-record date and declaration date. P20-5 Share Repurchase Q66-5 ★★A company has 1 million shares outstanding and earnings are £2 million. The company decides to use £10 million in idle cash to repurchase shares in the open market. The company's shares are trading at £50 per share. If the company uses the entire £10 million of idle cash to repurchase shares at the market price, the company's earnings per share will be closest to: A. £. B. £. C. £. Solution: C At the current market price, the company can repurchase 200,000 shares (10 million/150 = 200,000 shares). The company would have 800,000 shares outstanding after the repurchase (1 million shares —200,000 shares = 800,000 shares). EPS before the buyback is £ (2 million/1 million shares = £). Total earnings after the buyback are the same because the company uses idle (nonearning) cash to purchase the shares, but the number of shares outstanding is reduced to 800,000. EPS increases to £ (£2 million/800,000 shares = £). Q67-5 ★★Crozet Corporation plans to borrow just enough money to repurchase 100,000 shares. The following information relates to the share repurchase: Shares outstanding before buyback million Earnings per share before buyback $ Share price at time of buyback $50 After-tax cost of borrowing 6% Crozet's earnings per share after the buyback will be closest to: （原版书R39-11） A. $. B. $. C. $. Solution:A Total earnings before buyback: X 3,100,000 shares = $12,400,000 Total amount of borrowing: $50 X 100,000 shares = $5,000,000 After-tax cost of borrowing the amount of funds needed: $5,000,000 X = $300,000 Number of shares outstanding after buyback: 3,100,000 — 100,000 = 3,000,000 EPS after buyback: ($12,400,000 — $300,000)/3,000,000 shares = $ The P/E before the buyback is $50/$4 = ; thus, the E/P is 8 percent. The after-tax cost of debt is 6 percent; therefore, EPS will increase. 403 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q68-5 ★★An analyst gathered the following information about a company: Number of shares outstanding 10 million Earnings per share $ P/E 20 Book value per share $30 If the company repurchases 1 million shares at the prevailing market price, the resulting book value per share will he closest to: （原版书R39-13） A. 26. B. 27. C. 29. Solution:C The prevailing market price is $(20) =$ per share; thus, the buyback would reduce equity by S40 million. Book value of equity before the buyback is $300 million. Book value of equity after the buyback would be $300 million — $40 million = $260 million. The number of shares outstanding after the buyback would be 9 million. Thus, book value per share after the buyback would be $260 million/9 million = $. Q69-5 ★A share repurchase that begins with a company communicating to shareholders a specific number of shares and a range of acceptable prices is most likely to be a (n) :（Notes P85） A. open market repurchase. B. fixed price tender offer. C. Dutch auction. Solution:C Dutch auctions begin with the company communicating to shareholders a specific number of shares and a range of acceptable prices. When companies repurchase shares in the open market, they buy at market prices and in quantities as conditions warrant. In a fixed price tender offer, the company announces a fixed number of shares to be repurchased and a fixed price. Q70-5 A firm has an after-tax cost of debt of 5%, a cost of equity of 9%, and earns 1% on its surplus cash. A share repurchase will increase the company's earnings per share when the repurchase is funded with:（Notes P129） A. debt, and the earnings yield is less than 5%. B. debt, and the company's earnings yield is greater than 5%. C. surplus cash, and the repurchase price is greater than the company's book value per share. Solution:B Using the company's cash to repurchase shares will increase earnings per share because it reduces the number of shares outstanding, and the yield on the surplus cash is less than the firm's cost of capital. A repurchase funded by debt will increase EPS only if the cost of debt is 404 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 less than the company's earnings yield (EPS / share price). Q71-5 ★Which of the following share repurchase methods will most likely take the longest amount of time to execute? A. Dutch auction. B. fixed price tender offer. C. open market repurchase. Solution:C Of the methods listed, open market repurchases take the longest time to execute. Q72-5 ★The market price of a company's share is $22 per share with a price-to-book value of . It has 40 million shares outstanding and announces a buyback of 10% of its shares. If the buyback is done at $22 per share, the post-buyback book value per share is closest to:（2014 Mock98-73） A. $. B. $. C. $. Solution: C The pre-buyback book value per share (BVPS) is $22/ = $. Because the market price per share is less than BVPS, its BVPS should increase after the share buyback. Pre-buyback book value of equity 40 million × $ = $1,100 million Post-buyback book value of equity $1,100 million – (4 million × $22) = $1,012 million Post-buyback shares outstanding: 36 million shares outstanding (10% less) Post-buyback BVPS = $1,012 million/36 million shares = $ As per the calculation, the post-buyback BVPS is $. Q73-5 A company is deciding to repurchase 5 million shares of stock that has a current price of $. Below is the forecasted information of shares available for purchase. Which of the following repurchase methods will most likely result in the average repurchased cost being $? (2014 Mock 99-72) Number of Shares Available for Purchase Price (in millions) $ $ $ $ $ $ A. Open market repurchase 405 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. Dutch auction C. Fixed-price tender offer Solution: B A Dutch auction uncovers the minimum price at which the company can buy back the desired number of shares with the company paying that price to all qualifying bids. Here the qualifying bids are from $ to $ to satisfy the required 5 million share requirement. Under a Dutch auction, 5 million shares can be purchased for $ because at that price point, sufficient volume is available in the shares. The fixed-price tender offer cannot be completed at the $ price because there is insufficient volume available at that price. Using an open market share repurchase process, shares are bought at prices that vary between $ and $. The open market share repurchase will result in the average cost per share of $. Price Volume Price × Volume $ 3,000,000 $149,400,000 $ 1,000,000 $49,700,000 $ 500,000 $24,800,000 $ 500,000 $24,750,000 Total Cost $248,650,000 Average repurchased cost per share $ R21-5 Cash Dividend ξDividend Payout Ratio=Co NmmmonShareCashDividendetIncoeAvailabletoCommonShares 关于Stock Dividends，记住重要结论，P/E不变，market value of shareholders’wealth 不变  Stock Dividends改变Equity的构成关系，Stock Split不改变Equity各部分的值，但等比例改变每股值。Equity在两种情况下都不变。  ★Chronology Declaration Ex-Dividend 2工作日Holder-of-Payment Date Date Record Date Date Ex-Dividend date is usually two business days before Holder-of-Record Date. R22-5 A share repurchase may  Increase EPS a) With cash: Earnings yield (E/P) > after tax cost of fund b) With debt: Earnings yield (E/P) > after tax cost of debt  Decrease EPS a) With cash: Earnings yield (E/P) < after tax cost of fund 406 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 b) With debt: Earnings yield (E/P) < after tax cost of debt  Constant EPS a) With cash: Earnings yield (E/P) = after tax cost of fund b) With debt: Earnings yield (E/P) = after tax cost of debt  Increase BVPS  Market price (repurchase price) < original BVPS  Constant BVPS  Market price (repurchase price) = original BVPS  Decrease BVPS  Market price (repurchase price) > original BVPS P21-5 Money Market Yield的计算 Q74-5 The cash manager for Wicker Enterprises is investigating the purchase of a banker’s acceptance (BA). The $1,000,000 face value BA has 150 days to maturity and is quoted at % on a discount-basis yield. If Wicker’s marginal tax rate is 25%, then the money market yield on the BA is closest to: A. %. B. %. C. %. Solution: C Discount-Basis Yield=(F-P)/F (360/t), and we known F and t, so we can calculate the purchase price. Purchase price = face value - [face value *discount-basis yield * (days to maturity / 360)] = $1,000,000 - [$1,000,000 * * (150 / 360)] = $983,125 Money market yield =(F-P)/P (360/t)= % Q75-5 The original cost of purchasing trading securities should be reported as: A. CFO. B. CFI. C. CFF. Solution: A Purchasing trading security are reported as cash flow from operating activity. R23-5 Money market yield及Discount basis yield，Bond equivalent yield掌握公式： discount basis yield (F - P)(36t0)R mm (FP-P)(36B0E)Y H P (RF - (P360 P )υ()365) H PR (3 6υ5)ttttR24-5 ★补充：如何知道短期是cash surplus，可以投资还是shortage the cash，需要融资，那就要做现金流的管理和预测。 Short-term Medium-term Long-term 407 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Da ta req ency Daily/weekly for Montyly for one Annually for 4-6 weeks year 3-5years Format Receipt and Receipts and Projected disbu seme ts disbursements financial statements Techniques Simple projections Pro ection models Statistical models and averages Accuracy Very high Moderate Lowest Reliability Very high Fairly high Not as high Uses Daily cash Planning financial Long-range management transactions financial position P22-5 Trade Discounts Q76-5 ★A company is offered trade credit terms of 2/10, net 45. The implicit cost of failing to take the discount and instead paying the account in 45 days is closest to: A. %. B. %. C. %. Solution: C The cost of trade credit if paid on day (365 1 2 / 98)/35 - 1 23 . 45%. Q77-5 ★★A company increasing its credit terms for customers from 1/10, net 30 to 1/10, net 60 will most likely experience: （原版书R40-5） A. an increase in cash on hand. B. a higher level of uncollectible accounts. C. an increase in the average collection period. Solution:C A higher level of uncollectible accounts may occur, but a longer average collection period will certainly occur. R25-5 Trade discounts cost计算： 实际上表现的Effective annualized return的概念。比如：2/20 net 60，在第二十天时候的成本是多少？ υ(1 E AR ) 346 05 1 365 12%401-1-2%♣♦EA R •♥÷≠ P23-5 Computing the Effective Costs of ST Borrowing Q78-5 ★You are asked to select one of the following choices as the best offer for borrowing $5,000,000 for one month: 408 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Drawing down on a line of credit at percent with a 1/2 percent commitment fee on the full amount. Notes: One-twelfth of the cost of the commitment fee (which gives an option to borrow any time during the year) is allocated to the first month.  A banker’s acceptance at percent, an all-inclusive rate.（注：是折扣率）  Commercial paper at % （注：这是折扣率）with a dealer’s commission of 1/8 percent and a backup line cost of 1/4 percent, both of which would be assessed on the $5 million of commercial paper issued.（后两个费用的收取是根据最后的面值来确定） Which is the best offer for borrowing for on month? A. Line of credit B. Banker’s acceptance C. Commercial paper Solution: C Line of credit cost： Lininterest commitment feee cost12 υ usable loan amount ( υ$5,000,0001 /υ12)(0 .0 05$5, 0υ00,0001/12 )υ1 2υ0 .0 7$5,000,000 Banker’s acceptance cost: BAinterest cost12net proceeds $5,000,000υ1/12 1 2υ0 .0 υ679$5,000,000-( $5,000,000υ1/12)υ Commercial paper cost (quoted as nominal rate at a discount): CPinterestdealer's commissionsback-up costs cost12 υnet proceeds( υ$5,000,0001 /υ12)(( 1 /8)%$5, 0υ00,0001/12 )υ((1/4) % $5,000, 0υ001/12) υ 12 υ$5,000,000-($5,000,0001/12)υ 公式是这样的：  如果是line of credit，这个成本就是 C ostinterest commitment fee12 υloan aount 如果是banker’s acceptance，这个成本就是 Costinterestne12t proceeds υ 如果commercial paper有dealer’s fee和有backup fee，这个成本就是 C ostinterestdeaLler's commissionsback-up costs oan amount -12 interesυt 其中total amount of loan you received叫做net proceeds 409 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 注：所有的计算方法中，分子上是费用（利息费用，交易费用，Back-up费用），分母是融资总金额（借到钱）。这个内容在2010年12月考试中出现过，请大家注意。 Q79-5 PAC Inc., an automobile manufacturer, is planning to be financed by 1 million euro for 1 year. A consultant recommended the following three means of short-term financing: - A credit line with an interest rate of 3% and a commitment fee of a quarter percent - A banker’s acceptance with an interest rate of % all inclusive - Commercial paper with an interest rate of 3% and a dealer’s commission of 1/4 percent Which of the means will the company choose because of the low cost? A. Credit line B. Banker’s acceptance C. Commercial paper Solution: A Cost of credit line = (Interest + Commitment fee) / Principal = (3 + )% 1000000 / 1000000 = % Cost of bankers acceptance = Discount / (Princiapal - Discount) = % 1000000 / (1000000 - % 1000000) = % Cost of commercial paper = (Interest + Commission fees) / (Principal-Interest) = (3 + )% 1000000 / (1000000 -3% 1000000) = % Q80-5 ★★Based on a need to borrow $2 million for one month, which of the following alternatives has the least expensive effective annual cost? A. A banker's acceptance with an all-inclusive annual rate of % B. A credit line at % annually with a % annual commitment fee C. Commercial paper at % annually with a dealer's commission of $3,000 (or %) and a backup line cost of $4,000 (or %) Solution: A BA: [(% /12) /(%/12)]12=% Credit Line: % CP: (% /12+% /12+% /12) /(%/12)]12=% Q81-5 The effective annualized cost (%) of a banker’s acceptance that has an all-inclusive annual rate of % for a one-month loan of $2,000,000 is closest to:（2013 mock morning session） A. B. C. Solution: A 410 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 interes tυ 2,00 υ ne120,0000. 0 5251/1 2υ12 υ 7 %t proceeds υ υ2,00,0( Q82-5 An example of a primary source of liquidity is:（Notes P102） A. liquidating assets B. negotiating debt contracts C. short-term investment portfolios Solution: C Primary sources of liquidity include ready cash balances, short-term funds (., short-term investment portfolios), and cash flow management. Secondary sources of liquidity include negotiating debt contracts, liquidating assets, and filing for bankruptcy protection and reorganization. Q83-5 ★★Which is most likely considered a “pull” on liquidity? A. Obsolete inventory. B. Reduction in a line of credit. C. Increased difficulty in collecting receivables. Solution: B A “pull” on liquidity occurs when disbursements are made too quickly (., current liabilities are paid instead of being held or when credit availability is reduced or limited). A “drag’ on liquidity occurs when receipts lag (., non-cash current assets do not convert to cash quickly). Consequently, a reduction in a credit line is a “pull” on liquidity. Q84-5 ★★Boyle, Inc., just purchased a banker's acceptance for $25,400. It will mature in 80 days for $26,500. The discount-basis yield and the bond equivalent yield for this security are closest to:（Notes P102） Discount-basis Bond equivalent A. % % B. % % C. % % Solution: B The actual discount on the acceptance is (26,500 - 25,400) / 26,500 = %. The annualized discount, or discount-basis yield, is (360 / 80) = %. The holding period yield is (26,500 - 25,400) / 25,400 = %. The bond equivalent yield is (365 / 80) = %. Q85-5 Which of the following is most likely a secondary source of liquidity?（MOCK92-76） A. Trade credit B. Bank line of credit C. Inventory liquidation 411 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C Trade credit and a bank line of credit are considered primary sources of liquidity. Liquidating inventory is a secondary source of liquidity. P24-5 Short-term Investment Strategies Q86-5 As part of working capital management, the short-term investment strategy that has the highest degree of risk for an entity and requires very accurate and reliable forecasts of cash flows is: A. a matching strategy. B. a laddering strategy. C. a mismatching strategy. Solution: C A mismatching strategy is the riskiest strategy and requires accurate and reliable cash forecasts. A matching strategy is the more conservative active strategy (in comparison to a mismatching strategy). A laddering strategy falls somewhere between a matching strategy and a passive strategy. Q87-5 ★Other factors held constant, the reduction of a company’s average accounts payables due to suppliers offering less trade credit will most likely: A. reduce the operating cycle. B. increase the operating cycle. C. not affect the operating cycle. Solution: C Payables are not part of the operating cycle calculation. Operating cash cycle includes inventory and accounts receivable. Q88-5 ★★Given the following financial statement data, calculate the net operating cycle for this company. In Millions ($) Credit sales 40,000 Cost of goods sold 30,000 Accounts receivable 3,000 Inventory–Beginning balance 1,500 Inventory–Ending balance 2,000 Accounts payable 4,000 The net operating cycle of this company is closest to: （原版书R40-3） A. days. B. days. C. days. 412 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution:A Number of days of inventory = $2,000/ ($30,000/365) = days Number of days of receivables = $3,000/(S40,000/365) = days Operating cycle = + days = days Purchases = $30,000 + $2,000–$1,500 = $30,500 Number of days of payables = $4,000/ ($30,500/365) = days The net operating cycle is – = days Q89-5 ★★Assuming a 365-day year and the following information for a company: Current Year Previous Year Sales $12,000 $10,000 Cost of goods sold $6,000 $5,000 Inventory $1,200 $1,000 Accounts payable $600 $500 The firm’s days in payables for the current year is closest to: A. . B. . C. . Solution: B ThAccounts payableAccounts payablee days in payables ==Purchases365(Change in inventory + Cost of goods sold)ψ365 ψ=$600 ψ=($1200-$1000 + $6000)365 Q90-5 ★★William Jones is evaluating three possible means of borrowing $1 million for one month: ▶ Drawing down on a line of credit at percent with a 1/2 percent commitment fee on the full amount with no compensating balances. ▶ A banker's acceptance at percent, an all–inclusive rate. ▶ Commercial paper at percent with a dealer's commission of 1/4 percent and a backup line cost of 1/3 percent, both of which would be assessed on the $1 million of commercial paper issued. Which of these forms of borrowing results in the lowest cost of credit? （原版书R40-7） A. Line of credit. B. Banker's acceptance. C. Commercial paper. Solution:B 413 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 Interest + Commitment feeLine cost= 1υ2Net Proceeds( υ$1,000,0001 /υ12) + ($1 ,υ000,0001/1 2)υ 12 υ$1,000,000$6,000 =$1,000,000Interest金程教B育anker's acceptance cost= 1υ 专业·领先·增值 Net $1,000,000υ1/12 υ 1υ2 $1,000,000-( $1,000,000υ1/12) υ$5,916,67interest+Dealer's commission +Backup costsCommercial paper cost 1 2υ0 .0 714 υ ȃet proceed$994, $ 1 ,0 0 0 , 00υ0 υ $ 1 , 00 0 , 0 0 0 υ$1,000,000 υ υ υ υ$1,000,000 ( $1υ,000,000 υ 5,750 υ 0 .0 7 % 1,000,000 5,750 R26-5 了解Working Capital的管理采用哪个策略比较保守，哪个策略比较激进  ★Passive strategy is characterized by one or two decision rule for making daily investment; place top priority on safety and liquidity; less aggresive  Active strategy:  matching: more conservative than mismatching strategy; 常常和passive strategy一起使用  mismatching: riskier than matching strategy  laddering strategies: entails scheduling maturities on a systematic basis within the investment portfolio such that investments are spread out equally over the term of the ladder; 介于matching strategy和passive strategy之间  Short-term IPS: 投资品种一般包含信用等级比较高的或者是国债  Cash flow transactions—that is, cash receipts and disbursements—have significant effects on a company's liquidity position. We refer to these effects as drags and pulls on liquidity.  A drag on liquidity is when receipts lag, creating pressure from the decreased available funds;  a pull on liquidity is when disbursements are paid too quickly or trade credit availability is limited, requiring companies to expend funds before they receive funds from sales that could cover the liability. 414 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P25-5 Corporate Governance Q91-5 An investment fund, AFC Investments (AFC), owns 8% of the outstanding voting shares of a public company. There are several larger voting blocks of shares such that AFC is not assured of being able to elect representation on the Board of directors. The shareholder voting right that would be most beneficial in allowing AFC to ensure their interests are represented on the Board is: A. Proxy voting. B. Cumulative voting. C. Confidential voting. Solution: B Cumulative voting allows shareholders to cast the cumulative number of votes allotted to their shares for one or a limited number of Board nominees, thus increasing the likelihood that their interests are represented on the Board. Q92-5 ★Which of the following conditions represents the best practice of corporate governance? A. The company prevents shareholder to trade the company’s shares prior to the annual meetings. B. The company requires shareholders’ attendance to cast votes. C. The company permits confidential and cumulative voting. Solution: C Requirement of shareholders’ attendance to cast votes is a mechanism to prevent proxy voting. Prevention of proxy will weaken shareholder’s rights. Preventions of shareholders to trade the company’s shares prior to the annual meetings, is called share blocking, which can also weaken shareholder’s rights. Q93-5 Which of the standard of behaviors is least likely to represent shareholder’s interest? A. All board members serving on the audit committee are independent from management. B. The conflicts between the external auditor and the firm should be resolved in a manner to favor the internal management efficiency. C. The audit committee has authority to reject any proposed non-audit engagement with the external audit firm. Solution: B The conflicts between the external auditor and the firm should be resolved in a manner to favor the shareholders’ interest. Q94-5 ★Cummulative voting is best described as: mechanism for suppressing hostile takeovers. means of offsetting the negative consequences of super-voting rights shares. the likelihood that shareowners' interests are represented on the Board. 415 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C Cumulative voting enhances the likelihood that shareowner interests are represented on the Board. Q95-5 Regarding corporate governance, which of the following most likely would be a reason for concern when evaluating a board member's qualifications? The board member: A. has served on the board for 14 years. B. is a college professor and a certified public accountant. C. has formerly served on the boards of several successful companies. Solution: A Members who serve on the board for a long time (more than ten years) may become too closely aligned with management to be considered independent. Q96-5 Which of the following is least likely classified as a takeover defense? A. Greenmail B. Cumulative voting C. Golden parachutes Solution: B The ability to use cumulative voting enables shareowners to vote in a manner that enhances the likelihood that their interests are represented on the board. It is a valuable shareowner right. Q97-5 Which of the following would most likely be considered a negative factor in assessing the suitability of a board member? The board member: A. has served for ten years B. has served on other boards C. is a former CEO of another firm Solution: A While experience may be a good thing, a board member with long tenure may be too closely aligned with management to be considered an independent member. Q98-5 Which of the following would least likely be an indication of poor corporate governance? A. A board member leases office space to the company in a building he owns B. There are board members who do not have previous experience in the industry in which the firm operates C. A board member has a consulting contract with the firm to provide strategic vision for the technology research and development effort Solution: B Lack of previous experience in the firm's industry is not necessarily a negative and can be 416 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 consistent with an independent board member who acts in shareholders' long-term interests. Examples might be board members with specialized knowledge of finance, marketing, management, accounting, or auditing. The other answers indicate possible conflicts of interest. Q99-5 Which of the following would most likely be considered a poor corporate practice in terms of promoting shareholder interests? A. The firm can use "share blocking." B. The firm uses a third party to tabulate shareholder votes. C. Voting for board members does not allow cumulative voting by shareholders of all votes allotted to their shares. Solution: A Share blocking prevents shareholders from trading their shares over a period prior to the annual meeting and is considered a restriction on the ability of shareholders to express their opinions and act in their own interests. Cumulative voting can allow a minority group, such as a founding family, to serve its own interests. Third party tabulation of shareowner votes is considered a good corporate governance practice. Q100-5 Two analysts are discussing shareholder defenses against hostile takeovers. Alice states, "It is positive for shareholders that the board has shown a willingness to buy back shares from holders who may be in a position to effect a hostile takeover of the firm at less than its long-term value to shareholders." Bradley states, "Firms that are likely takeover targets should offer valuable exit packages in the event of a hostile takeover because they are necessary to recruit highly talented top executives, such as the CEO." From the perspective of good corporate governance, are these statements correct? A. Both statements are correct. B. Neither statement is correct. C. Only one of the statements is correct. Solution: B Defenses against hostile takeovers such as greenmail (Alice) or golden parachutes (Bradley) tend to protect entrenched or poorly performing managements and typically decrease share values. Shareholders as a group always have the choice not to sell when a takeover offer is not in their long-term interests. R27-5 Corporate Governance掌握概念：  如何定义有效的board：独立董事独立，独立董事懂事（最主要明白独立的概念）  3个委员会分别的责任  审计委员会特别注意：与内审部门要无缝沟通  薪酬委员会不要忘记除了正常的薪酬之外，还考虑stock compensation  提名委员会除了提名以外，还对board和management的performance定期评估 417 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  了解frequency of board elections: annual elections & staggered multiple-year terms的特点  board --- independence  A majority of the board of directors is comprised of independent members;  The board meets regularly outside the presence of management;  Board members are not closely aligned with a firm supplier, customer, share-option plan or pension adviser;  board --- qualification  Regularly attend meetings;  Are committed to shareholders;  Have other board experience;  Have served on board for more than 10 years;  Voting rules  Confidential Voting：保密，can encourage unbiased voting  Cumulative Voting:是一个好的公司治理  Voting for other corporate Changes: 公司发生重大事件后，shareholders需要进行投票  Vote blocking：to prevents investors who wish to vote their shares from trading their shares during prior to the annual meeting，不是一个好的公司治理。 R28-5 Notes：  一般题目是给定场景，让考生分析，不会纯考概念。类似于ethics  注意几个关键词：independence，experience，compensation，resources（有几个专业的committee）external consultants。  Corporate governance 部分内容繁琐，但是必考，要认真看。 Takeover Defenses: include golden parachutes ( rich severance packages for top mangers who lose their jobs as a result of a takeover), poison pills (对现有股东低价发行股票，稀释恶意收购）， and greenmail（允许被收购公司过一定时间高价买回股票） 418 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 6-Equity P1-6 Function of financial system Q1-6 ★The government of a country whose financial markets are in an early stage of development has hired you as a consultant on financial market regulation. Your first task is to prepare a list of the objectives of market regulation. Which of the following is least likely to be included in this list of objectives? （原版书R47-28） A. Minimize agency problems in the financial markets. B. Ensure that financial markets are fair and orderly. C. Ensure that investors in the stock market achieve a rate of return that is at least equal to the risk-free rate of return. Solution: C Ensure that investors in the stock market achieve a rate of return that is at least equal to the risk-free rate of return is least likely to be included as an objective of market regulation. Stocks are risky investments and there would be occasions when a stock market investment would not only have a return less than the risk-free rate but also a negative return. Minimizing agency costs and ensuring that financial markets are fair and orderly are objectives of market regulation. R1-6 ★金融市场的三种主要功能：  Fulfill different entities’ requirements  Determine the returns (. interest rates)  Allocate capital to its most efficient uses R2-6 ★Achievement of Purposes in the Financial System  Saving  Borrowing  Issuing equity  Risk management  Exchanging assets  Utilizing information R3-6 Market Regulation: Problems when there are no regulations  Fraud and theft  Insider trading  Costly information  Defaults When they fail to address the problems mentioned above, financial markets do not function well.  Liquidity declines  Firms avoid risky projects  New ideas go unfunded  Economic growth slows Q2-6 ★Akihiko Takabe has designed a sophisticated forecasting model, which predicts the 419 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 movements in the overall stock market, in the hope of earning a return in excess of a fair return for the risk involved. He uses the predictions of the model to decide whether to buy, hold, or sell the shares of an index fund that aims to replicate the movements of the stock market. Takabe would best be characterized as a(n): A. hedger. B. investor. C. information-motivated trader. Solution: C Takabe is best characterized as an information-motivated trader. Takabe believes that his model provides him superior information about the movements in the stock market and his motive for trading is to profit from this information. Q3-6 A hedge fund holds its excess cash in 90-day commercial paper and negotiable certificates of deposit. The cash management policy of the hedge fund is best described as using: A. capital market instruments. B. money market instruments. C. intermediate-term debt instruments. Solution: B The 90-day commercial paper and negotiable certificates of deposit are money market instruments. Q4-6 ★An investor primarily invests in stocks of publicly traded companies. The investor wants to increase the diversification of his portfolio. A friend has recommended investing in real estate properties. The purchase of real estate would best be characterized as a transaction in the: （原版书R47-5） A. derivative investment market. B. traditional investment market. C. alternative investment market. Solution: C The purchase of real estate properties is a transaction in the alternative investment market. Q5-6 ★The Standard & Poor's Depositary Receipts (SPDRs) is an investment that tracks the S&P 500 stock market index. Purchases and sales of SPDRs during an average trading day are best described as:（原版书R47-14） A. primary market transactions in a pooled investment. B. secondary market transactions in a pooled investment. C. secondary market transactions in an actively managed investment. Solution: B SPDRs trade in the secondary market and are a pooled investment vehicle. 420 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R4-6 Classification of assets  Financial Assets ： i. Security: Debt securities, equity securities , public securities, private securities ii. Derivative contracts：Finance derivative contracts, physical derivative contracts iii. Currency  Real Assets : i. Commodity ii. Real Estate  Securities  Fixed income securities: typically refer to debt securities that are promises to repay borrowed money in the future.  ★Equity securities i. Common stock：callable, putable ii. Preferred stock iii. Warrants  ★Pooled investment vehicles i. Mutual funds: can purchase shares, either from the fund or in the secondary market. ii. Exchange-traded funds and exchange-traded notes: iii. Asset-backed securities iv. Hedge fund: organized as limited partnership, often use leverage  ★Real assets  Are real estate, equipment, and machinery.  Often provides income, tax advantages, and diversification benefits. However, they often entail substantial management costs, they usually require the investor to do substantial due diligence before investing. They are illiquid because their specialization may result in a limited pool of investors for a particular real asset.  Rather than buying real assets directly, an investor may choose to buy them indirectly through an investment such as a real estate investment trust (REIT) or master limited partnership (MLP). R5-6 Classification of market  Money markets: markets for debt securities with maturities of one year or less.  Capital markets: markets for long-term debt securities and equity securities without specific maturity date.  Primary market: for newly issued securities  Secondary market: subsequent sales of securities.  Traditional investment markets: for to those for debt and equity  Alternative markets: for hedge funds, commodities, real estate, collectibles, gemstones, leases and equipment. Q6-6 Jason Schmidt works for a hedge fund and he specializes in finding profit opportunities that are the result of inefficiencies in the market for convertible bonds—bonds that can be converted into a predetermined amount of a company's common stock. Schmidt 421 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 tries to find convertibles that are priced inefficiently relative to the underlying stock. The trading strategy involves the simultaneous purchase of the convertible bond and the short sale of the underlying common stock. The above process could best be described as: A. hedging. B. arbitrage. C. securitization. Solution: B The process can best be described as arbitrage because it involves buying and selling instruments, whose values are closely related, at different prices in different markets. Q7-6 If a trader buy and sell identical or essentially similar instruments at different price in different market, which type will the trader most likely be?（2012年12月真题） A. Information motivator B. Arbitrageurs C. Securitizers Solution: B Arbitrageurs trade when they can identify opportunities to buy and sell identical or essentially similar instruments at different prices in different markets. They profit when they can buy in one market for less than they sell in another market. R6-6 ★Brokers and Dealers, Exchanges  Brokers: Help their clients buy and sell securities by finding counterparties to trade in a cost efficient manner.  Dealers: Facilitate trading by buying for or selling from their own inventory. Dealers provide liquidity in the market and profit primarily from the spread (difference) between the price at which they will buy (bid price) and the price at which they will sell (ask price) the security or other asset.  Exchanges: provide a venue where trades can meet and sometimes act as brokers by providing electronic order matching.  Alternative trading systems: serve the same trading function as exchanges but have no regulatory function.  Investment banks: help corporations sell securities to investors.  ★Information-motivated traders：  Those trade to profit from using the information from model R7-6 ★Securitizers  Pool large amounts of securities or other assets and then sell interests in the pool to other investors.  A firm may set up a special purpose vehicle (SPV) or special purpose entity (SPE) to buy firm assets, which removes them from the firm's balance sheet and may increase their value by removing the risk that financial trouble at the firm will give other investors a claim to 422 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 the assets' cash flows. R8-6 ★Arbitrageurs  In its pure (riskless) form, arbitrage refers to buying an asset in one market and reselling it in another at a higher price.  In markets with good information, pure arbitrage is rare because traders will favor the markets with the best prices.  Creating similar positions using different assets is referred to as replication.  Hedgers: use short position in one asset to hedge an existing risk from a long position in another asset that has returns that are strongly correlated with the returns of the asset shorted. R9-6 ★Clearinghouses and Custodians  Clearinghouses act as intermediaries between buyers and sellers in financial markets and provide: ξEscrow services (transferring cash and assets to the respective parties). ξGuarantees of contract completion. ξAssurance that margin traders have adequate capital. ξLimits on the aggregate net order quantity (buy orders minus sell orders) of members. Q8-6 ★You have placed a sell market-on-open order—a market order that would automatically be submitted at the market's open tomorrow and would fill at the market price. Your instruction, to sell the shares at the market open, is a(n): A. execution instruction B. validity instruction C. clearing instruction Solution: B Execution instructions specify how to trade; Validity instructions specify when the order can be filled; Clearing instructions specify how to settle the trade. Q9-6 Which of the following orders are validity instructions? （2012年12月真题) A. Kill or fill orders B. Iceberg orders C. All or nothing orders Solution: A Kill or fill orders also known as immediate or cancel orders are good only upon receipt by the broker or exchange. If they cannot be filled in part or in whole, they cancel immediately. They are one of the validity instructions. Q10-6 ★A market has the following limit orders standing on its book for a particular stock: Bid Size Limit Price Offer Size Limit Price Buyer Seller (# of shares) ($) (# of shares) ($) 423 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 1 500 1 200 2 300 2 300 3 400 3 400 4 200 4 100 5 100 5 200 If a trader submits an immediate-or-cancel limit buy order for 700 shares at a price of $, the most likely average price the trader would pay is: A. $. B. $. C. $. Solution: A The limit buy order will be filled first with the most aggressively priced limit sell order and will be followed by filling with the higher priced limit sell orders that are needed up to and including the limit buy price until the order is filled. Average price = [(200 x $) + (300 x $) + (200 x $)] / 700 = $ Q11-6 ★A market has the following limit orders standing on its book for a particular stock. The bid and ask sizes are number of shares in hundreds. Bid Size Limit Price (€) Offer Size 5 12 4 6 5 12 8 What is the market? A. bid, offered at . B. bid, offered at . C. bid, offered at . Solution: C Simply find the information in the panel. Q12-6 ★★Jim White has sold short 100 shares of Super Stores at a price of $42 per share. He has also simultaneously placed a "good-till-cancelled, stop 50, limit 55 buy" order. Assume that if the stop condition specified by White is satisfied and the order becomes valid, it will get executed. Excluding transaction costs, what is the maximum possible loss that White can have? （原版书R47-28） A. $800. B. $1,300. C. Unlimited. 424 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B If the stock price crosses $50, the stop buy order will be triggered and will get executed at a maximum limit price of $55. The maximum loss per share is $13 = $55 -$42, or $1,300 for 100 shares. Q13-6 ★★You own shares of a company that are currently trading at $30 a share. Your technical analysis of the shares indicates a support level of $. That is, if the price of the shares is going down, it is more likely to stay above this level rather than fall below it. If the price does fall below this level, however, you believe that the price may continue to decline. You have no immediate intent to sell the shares but are concerned about the possibility of a huge loss if the share price declines below the support level. Which of the following types of orders could von place to most appropriately address your concern? （原版书R47-29） A. Short sell order. B. Good-till-cancelled stop sell order. C. Good-till-cancelled stop buy order. Solution: B The most appropriate order is a good-till-cancelled stop sell order. This order will be acted on if the stock price declines below a specified price (in this case, $). This order is sometimes referred to as a good-till-cancelled stop loss sell order. You are generally bullish about the stock, as indicated by no immediate intent to sell, and would expect a loss on short selling the stock. A stop buy order is placed to buy a stock when the stock is going up. Q14-6 ★★Consider an order-driven system that allows hidden orders. The following four sell orders on a particular stock are currently in the system's limit order book. Based on the commonly used order precedence hierarchy, which of these orders will have precedence over others? Time of Arrival Special Instruction Order (HH:MM:SS) Limit Price (€) (If Any) I 9:52:01 II 9:52:08 Hidden order III 9:53:04 IV 9:53:49 A. Order I (time of arrival of 9:52:01). B. Order II (time of arrival of 9:52:08). C. Order III (time of arrival of 9:53:04). Solution: C Order III (time of arrival of 9:53:04) has precedence. In the order precedence hierarchy, the first rule is price priority. Based on this rule, sell orders II, III, and IV get precedence over order I. The next rule is display precedence at a given price. Because order II is a hidden order, 425 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 orders III and IV get precedence. Finally, order III gets precedence over order IV based on time priority at same price and same display status. Q15-6 ★★A stop-buy order is most likely placed when a trader: （Mock83-79） A. thinks that the stock is overvalued. B. wants to limit the loss on a long position. C. wants to limit the loss on a short position. Solution: C Investors who have entered into a short sale will incur losses if the stock begins to increase in value. A stop-buy order helps limit the loss on a short position because it becomes valid when the stock price rises above the specified stop price. Q16-6 If an investor estimates that the market is declining and wants to purchase a stock at a price below 70 dollars. The current price is 74 dollars. Which order should he place? A. Market order B. Limit order C. Stop order Solution: B The investor should execute a limit buy order. A limit buy typically has a limit below the current price. In this case, the limit is 70 dollars, which is below the current price of 74 dollars. Q17-6 A stock now available in the market is quoted $14, a trader place a stop-buy order at 15, a limit order at $20. Which interval the stock price will be if the both two orders are not get satisfied. A. Below 15 B. Between 15 to 20 C. Above 20 Solution: A A stop-buy order becomes valid only after a price rises above the specified stop price, and both orders are not satisfied, thus, the price must be below 15. Q18-6 A trader who owns shares of a stock currently trading at $100/share places a “GTC, stop 90, limit 85 sell” order (GTC = Good till cancelled). Assuming the specified stop condition is satisfied and the order becomes executed, which of the following statements is the most accurate?(MOCK92-79) A. The trader faces a maximum loss of 15. B. The order will be executed at the exact price, either 90 or 85. C. The order becomes a market order when the price falls below 85 and remains valid for execution. Solution: A 426 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The order becomes valid when the price falls to or below 90. But, the “limit 85” makes the order invalid if the price falls below 85. Thus, the trader faces a maximum loss of 15. Q19-6 ★★A trader who has bought a stock at $30 is concerned about a downside movement in the stock and would like to place an order that guarantees selling it at $25. Which of the following will most likely help the trader achieve her objective? (GTC = Good-till-cancelled) (Mock83-85) A. “GTC, stop 25, market sell” order B. “GTC, stop 25, limit 25 sell” order C. “put option buy” market order with a strike price of 25 Solution: C Option contracts can be viewed as limit orders for which execution is guaranteed at the strike price. Therefore, a “put buy” order at a strike price of 25 will guarantee selling the stock at 25. Q20-6 ★★Adams owns 100 shares of Brikley stock, which is trading at $86 per share, and Brown is short 200 shares of Brikley. Adams wants to buy 100 more shares if the price rises to $90, and Brown wants to cover his short position and take profits if it falls to $75. The orders Adams and Brown should enter to accomplish their stated objectives are: (Notes P328-2) Adams Brown A. Limit buy @ 90 Limit buy @ 75 B. Limit buy @ 90 Stop buy @75 C. Stop buy @90 Limit buy @ 75 Solution: C Adams should enter a stop buy at 90, which will be executed only if the stock price rises to 90. Brown should enter a buy order with a limit at 75 because he wants to buy stock to close out his short position if he can purchase it at 75 (or less). Q21-6 Which of the following is least likely to be associated with long position in stock? A. market order B. stop loss buy C. stop loss sell Solution: B Stop loss buy order contains a specific usually occurs in short a long position in stock, If the stock price drops to this level, your broker will place a sell market order. Q22-6 ★★Zhenhu Li has submitted an immediate-or-cancel buy order for 500 shares of a company at a limit price of CNY . There are two sell limit orders standing in that stock's order book at that time. One is for 300 shares at a limit price of CNY and the other is for 400 shares at a limit price of CNY . How many shares in Li's order 427 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 would get cancelled? （原版书R47-34） A. None (the order would remain open but unfilled). B. 200 (300 shares would get filled). C. 500 (there would he no fill). Solution: C The order for 500 shares would get cancelled; there would be no fill. Li is willing to buy at CNY or less but the minimum offer price in the book is CNY ; therefore, no part of the order would be filled. Because Li's order is immediate-or-cancel, it would be cancelled. Q23-6 ★★A market has the following limit orders standing on its book for a particular stock: Buyer Bid Size Limit Price Offer Size (Number of Shares) (f) (Number of Shares) Seller Keith 1,000 Paul 200 Ann 400 Mary 300 800 Jack 1,100 Margaret 400 Jeff Ian submits a day order to sell 1,000 shares, limit £. Assuming that no more buy orders are submitted on that day after Ian submits his order, what would be Ian's average trade price? （原版书R47-35） A. £. B. £. C. £. Solution: B Ian's average trade price is: 19300 υ20 .02 + 4001 9υ.89 + 20019 .8υ=300 + 400 + 200Ian's sell order first fills with the most aggressively priced buy order, which is Mary's order for 300 shares at £. Ian still has 700 shares for sale. The next most aggressively priced buy order is Ann's order for 400 shares at £. This order is filled. Ian still has 300 shares for sale. The next most aggressively priced buy order is Paul's order for 200 shares at £. A third trade takes place. Ian still has 100 shares for sale. The next buy order is Keith's order for 1,000 shares at £. However, this price is below Ian's limit price of £. Therefore, no more trade is possible. Q24-6 Consider the following limit order book for a stock. The bid and ask sizes are number of shares in hundreds. 428 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Bid Size Limit Price (¥) Offer Size 3 8 4 7 6 7 A new buy limit order is placed for 300 shares at ¥. This limit order is said to: A. Take the market. B. Make the market. C. Make a new market. Solution: C This order is said to make a new market. The new buy order is at ¥, which is better than the current best bid of ¥. Therefore, the buy order is making a new market. Had the new order been at ¥, it would be said to make the market. Because the new buy limit order is at a price less than the best offer of ¥, it will not immediately execute and is not taking the market. R10-6 ★Leveraged Positions  The use of borrowed funds to purchase an asset results in a leveraged position and the investor is said to be using leverage.  The interest rate paid on the funds is the call money rate, which is generally higher than the government bill rate. The call money rate is lower for larger investors with better collateral.  Lower risk in an investor's portfolio will often result in the broker lending more funds.  The additional risk from the use of borrowed funds is referred to as risk from financial leverage.  Initial margin: the percentage of funds that is required by regulations to be provide in the trade.  Maintenance margin: the investor's required minimum equity position in the account, below which the investor will be required to liquidate the position or bring the account back to its maintenance margin.(注意，期货要求注入至initial margin） R11-6 The leverage ratio: The value of the asset divided by the value of the equity position. R12-6 ★Bid-ask price  The bid price is the price at which a dealer will buy a security. The highest price is the best. The ask or offer price is the price at which a dealer will sell a security. The lowest price is the best.  The difference between the bid and ask prices is referred to as the bid-ask spread and is the source of a dealer's compensation.  More liquid securities have market quotations with bid-ask spreads that are lower R13-6 Take the market and make the market：  Traders who post bids and offers are said to make a market, while those who trade with 429 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 them at posted prices are said to take the market. R14-6 ★Three kinds of orders  Execution instructions that specify how to trade  Validity instructions that specify when the order can be filled,  Clearing instructions that specify how to settle the trade. R15-6 ★Execution Instructions  A market order instructs the broker to execute the trade immediately at the best possible price.  A limit order places a minimum execution price on sell orders and a maximum execution price on buy orders.  A limit buy order above the best ask, or a limit sell order below the best bid, is said to be marketable or aggressively priced. If the limit price is between the best bid and the best ask, a limit order is said to be making a new market or inside the market. Limit orders waiting to execute are called standing limit orders.  A buy order with a limit price below the best bid, or a sell order with a limit price above the best ask, is said to be behind the market.  A limit buy order with a price considerably lower than the best bid, or a limit sell order with a price significantly higher than the best ask, is said to be far from the market.  All-or-nothing orders execute only if the whole order can be filled.  Hidden orders are those for which only the broker or exchange knows the trade size. Traders can also specify display size, where some of the trade is visible to the market, but the rest is not. These are also referred to as iceberg orders because part of most of the order is hidden from view. R16-6 ★Validity Instructions  Immediate or cancel orders are cancelled unless they can be filled immediately. They are also known as fill or kill orders. Good-on-close orders are only filled at the end of the trading day. If they are market orders, they are referred to as market-on-close orders. These are often used by mutual funds because their portfolios are valued using closing prices. There are also good-on-open orders. R17-6 Stop orders  Stop orders are those that are not executed unless the stop price has been met.  ★A stop-buy is entered with at stop (trigger) above the current market price.  A trader with a short position could attempt to limit losses from an increasing stock price with a stop-buy order.  It is often said that "you don't get paid for being right until the market agrees with you." With this in mind, an investor who believes a stock is undervalued, but does not wish to own it until there are signs that market participants are being convinced.  Note that stop orders reinforce market momentum. R18-6 ★Clearing instructions  Retail trades are typically cleared and settled by the broker, whereas institutional trades may be settled by a custodian or another broker.  In a short sale, the broker must confirm that the security can be borrowed and in the latter, 430 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 that the security can be delivered. Q25-6 A British company listed on the Alternative Investment Market of the London Stock Exchange, announced the sale of 6,686,665 shares to a small group of qualified investors at £ per share. Which of the following best describes this sale? A. Shelf registration. B. Private placement. C. Initial public offering. Solution: B This sale is a private placement. As the company is already publicly traded, the share sale is clearly not an initial public offering. The sale also does not involve a shelf registration because the company is not selling shares to the public on a piecemeal basis. Q26-6 ★★A trader seeking to sell a very large block of stock, or a piece of urban real estate property, for her client will most likely execute the trade in a(n): (Mock84-85) A. brokered market. B. order-driven market. C. quote-driven market. Solution: A Instruments that are infrequently traded and expensive to carry as inventory (., very large blocks of stock, real estate properties, fine art masterpieces, and liquor licenses) are executed in brokered markets. Organizing order-driven markets for such instruments is not sensible because too few traders would submit orders to them. Q27-6 If traders can hardly find the buyer and seller in a market, the market is mostly like a(n) （2012年12月真题） A. Brokered market B. Order-driven market C. Quote-driven market. Solution: A In a market which traders can hardly find the counterparty, they need brokers to provide liquidity, and the other two market can functions well in such a situation. R19-6 ★Characteristics of a good market:  Timely and accurate information  Liquidity( marketability, price continuity, depth )  Internal efficiency (low transaction cost)  Informational efficiency. R20-6 Primary capital markets：Refer to the sale of newly issued of securities. R21-6 Secondary financial markets：where securities trade after their initial issuance. 431 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R22-6 Public offering  underwritten offering：the investment bank agrees to purchase the entire issue at a price that is negotiated between the issuer and bank. 包销  best efforts：the bank is not obligated to buy the unsold portion. 承销  ★conflict of interest for investment bank：they should set the price high to raise the most funds for the issuer. But, as underwriters, they would prefer that the price be set low enough that the whole issue sells. R23-6 Primary Market  Price placement  Shelf registration  A dividend reinvestment  Rights offering R24-6 Importance of the secondary market  They provide liquidity and price/value information.  Liquid markets are those in which a security can be sold quickly without incurring a discount from the current price. R25-6 ★Call markets and continuous market  In call markets, the stock is only traded at specific times. All trades, bids, and asks are declared, and then one negotiated price is set that clear the market for the stock.  In continuous markets, trades occur at any time the market is open. The price is set by either auction process or by dealer bid-ask quotes. R26-6 Quote-Driven Markets：Traders transact with dealers (market makers) who post bid and ask prices. R27-6 Order-Driven Markets：In order-driven markets, orders are executed using trading rules R28-6 Brokered Markets：Brokers find the counterparty in order to execute a trade. R29-6 Order Matching Rules: Pricie priority—>non-hiden orders first—>first come, first serve R30-6 ★spot commodity 是 order-driven, quote-driven还是brokered？ Almost all bonds, currencies and most spot commodities are quote-driven. Also called as OTC, price-driven, or dealer Almost all exchanges use Order-driven, and every automated trading system use order-driven. R31-6 Market information：  pre-trade transparent: Investors can obtain pre-trade information regarding quotes and orders.  post-trade transparent: Investors can obtain post-trade information regarding completed trade prices and sizes. P2-6 Short Sale Q28-6 ★Which of the following is the least accurate statement about the short sale of stocks? A. The short seller must pay all dividends or interest to the lender of shares. B. Short sales involve time limits for returning the shares borrowed to the lender. C. A short sale can be made only on an uptick or a zero uptick trade if the previous trade was an uptick trade. 432 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B Short sales have no time limits. However, if the lender of shares decides to sell them, the broker must find another investor willing to lend the shares. Q29-6 ★You decide to sell short 100 shares of Charlotte Horse Farms when it is selling at its yearly high of 56. Your broker tells you that your margin requirement is 45% and that the commission on the purchase is $155. While you are short the stock, Charlotte pays a $ per share dividend. At the end of one year, you buy 100 shares of Charlotte at 45 to close out your position and are charged a commission of $145. What is your rate of return on the investment? A. % B. % C. % Solution A Profit on a short sale = Begin value — Ending value — Dividends( Interest)— Trans. costs  Beginning value of investment = $ x 100 =$5,600 (Sold under a short sale arrangement)  Ending value of investment = $ x 100=$4,500  Transaction costs= $155 + $145 =$  Dividends = $ x 100 shares =$  Profit= $5,600 — $4,500 — $250 — $300= $  Initial investment = Margin requirement + Commission = ( x $5,600) + $155= $2,520 + $155= $2,675  The rate of return on your investment is %=$ / $2,675 Q30-6 ★★★Jason Williams purchased 500 shares of a company at $32 per share. The stock was bought on 75 percent margin. One month later, Williams had to pay interest on the amount borrowed at a rate of 2 percent per month. At that time, Williams received a dividend of $ per share. Immediately after that he sold the shares at $28 per share. He paid commissions of $10 on the purchase and $10 on the sale of the stock. What was the rate of return on this investment for the one-month period? （原版书R47-21） A. – percent. B. – percent. C. – percent. Solution: B Total cost of the purchase = $16,000 = 500 X $32 Equity invested = $12,000 = X $16,000 Amount borrowed = $4,000 = $16,000 - $12,000 Interest paid at month end = $80 = X $4,000 Dividend received at month end = $250 = 500 X $ Proceeds on stock sale = $14,000 = 500 X 28 Total commissions paid = $20 = $10 + $10 433 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Net gain/loss = -$1,850 = -16,000 - 80 + 250 + 14,000- 20 Initial investment including commission on purchase = $12,010 Return = - % =-$1,850 / $12,010 Short Sale掌握概念及过程： R32-6 Short sale的作用，掌握过程. 1) Simultaneously borrows and sells securities through a broker 2) Must return the securities at the request of the lender or when the short sale is closed out 3) Must keep a portion of the proceeds of the short sale on deposit with the broker 4) Must pay all dividends or interest to the lender R33-6 计算short sale的收益率 P3-6 Margin Transaction Q31-6 An investor opens a margin account with an initial deposit of $5,000. He then purchases 200 shares of PRK stock at $46 in his margin account, which has a margin maintenance requirement of 25 percent, Ignoring commissions and interest, the minimum price that PRK stock can fall to before the investor receives a margin call is closest to: A. $. B. $. C. $. Solution: B Determine the price (P) that is equal to 25%: Trigger price Pm1-iitial margin1-0(1-aenance) 4 6(%)-25% min Q32-6 ★An investor purchased 5,000 stocks at 57 dollars on margin. The initial margin he deposited to his broker is 40%. The broker will make a margin call when the margin account is less than 25%. The price that will cause a margin call is closest to: (2012年12月真题) A. B. C. Solution: B Trigger price Pm1-iitial main0(rg1-40%1-aenance mrg)5 7(-25)4 5. 6intain Q33-6 ★Caroline Rogers believes the price of Gamma Corp. stock will go down in the near future. She has decided to sell short 200 shares of Gamma Corp. at the current market price of €47. The initial margin requirement is 40%. Which of the following is an appropriate statement regarding the margin requirement that Rogers is subject to on this short sale? 434 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. She will need to contribute €3,760 as margin. B. She will need to contribute €5,640 as margin. C. She will only need to leave the proceeds from the short sale as deposit and does not need to contribute any additional funds. Solution: A She will need to contribute €3,760 as margin. Initial margin is the money that must be deposited in a futures account before any trading takes place. Before trading, She must deposit €3,760 = 40% of €9,400 (€9,400 = 200 X €47) as the initial margin. Q34-6 ★★An online brokerage firm has set the minimum margin requirement at 55 percent. What is the maximum leverage ratio associated with a position financed by this minimum margin requirement? （原版书R47-19） A. . B. . C. . Solution: B The maximum leverage ratio is =1 /55%. The maximum leverage ratio associated with a position financed by the minimum margin requirement is one divided by the minimum margin requirement. Q35-6 ★★A trader has purchased 200 shares of a non-dividend-paying firm on margin at a price of $50 per share. The leverage ratio is . Six months later, the trader sells these shares at $60 per share. Ignoring the interest paid on the borrowed amount and the transaction costs, what was the return to the trader during the six-month period? （原版书R47-20） A. 20 percent. B. percent. C. 50 percent. Solution: C The return is 50 percent. If the position had been unleveraged, the return would be 20% = ($60 −$ 50)/ $50. Because of leverage, the return is 50% = X 20%. From another way to think about it: The minimum margin requirement is 40%=1/, so he contribute $4000=40% X (200shares X $50) to the margin. Six month later, the amount in the margin is $6000= $4000+($60−$50)X200shares. Hence, the return is 50% = ($6000−$4000)/$4000 Q36-6 ★★A trader buys 500 shares of a stock on margin at $36 a share using an initial leverage ratio of . The maintenance margin requirement the position is 30%. The stock price at which the margin call occurs is closest to: A. $. B. $. 435 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. $. Solution: A Initial equity (%) in the margin transaction = 1/ Leverage ratio = 1 / = ; Initial equity per share at the time of purchase = $36× = $; Price at which margin call occurs. Equity per share / Price per share = Maintenance margin % = ($ + P - $36) / P = ; = $; P = $. OR Trigger price Pm1initial min0(-arg1-a)intenance margin Q37-6 If the leverage ratio is , what’s the initial margin level? （2012年真题） A. 57% B. 75% C. 25% Solution: A The initial margin level equal to the 1/leverage ratio. Q38-6 ★The current price of a stock is $25 per share. You have $10,000 to invest. You borrow an additional $10,000 from your broker and invest $20,000 in the stock. If the maintenance margin is 30 percent, at what price will a margin call first occur?（原版书R47-23） A. $. B. $. C. $. Solution: B 1. A margin call will first occur at a price of $. Because you have contributed half and borrowed the remaining half, your initial equity is 50 percent of the initial stock price, or $ = X 25. If P is the subsequent price, your equity would change by an amount equal to the change in price. So, your equity per share would be + (P — 25). A margin call will occur when the percentage margin drops to 30 percent. So, the price at which a margin call will occur is the solution to the following equation. Equity per Share +(P-25) = = 30% Price per Share P The solution is P = $. 2. According to the formula: Triggerprice Pm1-initial margin 01aenance)-int marginWhere, initial margin=50%, maintenance margin=30%, so P=$ Q39-6 ★An investor buys 1000 shares of a stock on margin at a price of $50 per share. The 436 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 initial margin requirement is 40% and the margin lending rate is 3%. The investor’s broker charges a commission of $ per share on purchases and sales. The stock pays an annual dividend of $ per share. One year later, the investor sells the 1000 shares at a price of $56 per share. The investors’s rate of return is cloest to:(Notes P231-4) A. 12%. B. 27%. C. 36%. Solution:B Profit = Ending value — Begin value — Margin Lending Interest— Trans. Costs + Dividends a) Begin value= 1000 X $50 =$50000 b) Ending Value=$56X1000=$56000 c) Margin Lending Interest = 3% X [$50000X(1-40%)]=$900 d) =2 X ($)=$20 e) Dividend=$= $300 So, profit=$5380 Initial investment =Initial Margin+ Purchase = 40% X(1000 X $50)+=$20010 Rate of Return is profit/initial investment=27% Q40-6 ★The following data pertains to a margin purchase of a stock by an investor. Stock's purchase price $50/share Sale price $55/share Shares purchased 500 Margin 45% Call money rate 6% Dividend $ Transaction commission on purchase $ Transaction commission on sale $ If the stock is sold exactly one year after the purchase, the total return on the investor's investment is closest to: A. 14% B. 19% C. 22% Solution: C Proceeds on sale: $55x500 $27,500 Payoff loan: $ -$13,750 Margin interest paid: $13, -$825 Dividend received: $ +$900 commission paid on sale: $ -$25 Remaining equity $13,800 437 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Initial investment (including commission): $11,275 ($)+($) Return on the initial investment: % ($13,800-$11,275)/$11,275 R34-6 Margin Transaction掌握概念及计算： 1) 概念：margin transactions involve buying securities with borrowed money. 2) 计算：Trigger price (margin of long position)P 0(1- MIM1-M)IM=Initial Margin MM=Maintenance Margin P4-6 Call Markets Q41-6 A security market in which all the bids and asks for a stock are gathered to arrive at a single price that satisfies most of the orders is best described as a A. Call market. B. Dealer market. C. Primary market. Solution: A In Call Markets, different from the continuous markets, the stock is only traded at specific times, all trades bids ,and asks are declared and then one negotiated price is set that clears the market for the stock. Dealer market is often defined as Quote-Driven Markets or OTC markets, trader transact with dealers who post bid and ask prices. Primary markets refer to the sale of newly issued securities. Call Markets掌握概念： R35-6 Call market & Continuous markets的异同 Call Markets Continuous Markets At specific times At any time when market is open All bids and asks are gathered and The price is determined either by an auction the n a negotiated price is produced p ocess or through a dealer bid-ask process. R36-6 Call markets & Continuous markets（重点）  In call markets, the stock is only traded at specific times. All trades, bids, and asks are declared, and then one negotiated price is set that clears the market for the stock. This method is used in smaller markets and to set opening prices and prices after trading halts on major exchanges  In continuous markers, traders occur at any time the market is open. The price is set by either the auction process or by dealer bid-ask quotes R37-6 Exchanged markets, OTC market, third market(listed stock traded in OTC by dealer), fourth market (electronic trade) 438 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P5-6 security market index的定义 Q42-6 A security market index represents the: A. risk of a security market. B. efficiency of security market C. performance of security market, market segment, or an asset class. Solution: C A security market index represents the value of a given security market, market segment, or asset class. Q43-6 ★Security market indices are: A. constructed and managed like a portfolio of securities. B. simple interchangeable tools for measuring the returns of different asset classes. C. valued on a regular basis using the actual market prices of the constituent securities. Solution: A Security market indices are constructed and managed like a portfolio of securities. Q44-6 When creating a security market index, the target market: A. determines the investment universe. B. is usually a broadly defined asset class. C. determines the number of securities to be included in the index. Solution: A The target market determines the investment universe and the securities available for inclusion in the index. Q45-6 ★★One month after inception, the price return version and total return version of a single index (consisting of identical securities and weights) will be equal if: （原版书R48-4） A. market prices have not changed. B. capital gains are offset by capital losses. C. the securities do not pay dividends or interest. Solution: C The difference between a price return index and a total return index consisting of identical securities and weights is the income generated over time by the underlying securities. If the securities in the index do not generate income, both indices will be identical in value. Q46-6 ★Hari Raju, CEO of Securities Tracking Associates (STA), is thinking of devising a new index for the Indian stock market. He does not, however, like an index that requires adjustment for stock splits. Given this preference, Raju would be least likely to develop which of the following types of Indexes? 439 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. Un-weighted Index B. Price-weighted Index C. Value-weighted Index Solution: B A price-weighted index, such as the Dow Jones Industrial Average, is computed by summing up the prices of individual stocks and dividing by a divisor that is adjusted for stock splits such that the index value is the same before and after the split. Q47-6 An ETF analyst collected data of an index comprising three stocks as follows: December 31 2009 January 1 2009 Price Stocks Price Stocks Hymalaya 65 600,000 30 1,000,000 Blanc 42 3,000,000 50 3,000,000 Kirimazaro 40 5,000,000 96 2,500,000 The base of the index on January 1 2009 is 137, the market value weighted index is closest to: A. 157. B. 87. C. 119. Solution: C The base market capitalization is 30 υ1,000,000+50 υ3,000,000+96 υ2,500,000=420,000,000 Index 65 υυ600,000 42 3, 0 υ0υ0,00040 5 ,00 0 ,υ0υ003031 3υ786 . 9%*137119,0,0503 |,0,0962,50,0 Q48-6 ★Which kind of stock index will be most likely affected by a large-cap stock? A. Nikkei 225 Dow Jones index B. CAC 40 index C. Value Line Index Solution: B Nikkei 225 Dow Jones index is price-weighted index. Value Line Index is geometric-weighted index. CAC 40 index is market-value weighted index. Only market-value weighted index is affected by large-cap stocks. Q49-6 ★Which of the following statements is most accurate with respect to rebalancing and reconstitution of security market indices? A. Equal weighted indices require frequent rebalancing. B. Turnover within an index results from a reconstitution but not from rebalancing. C. A price-weighted index requires rebalancing more than a market-capitalization-weighted index. 440 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A After an equal weighted index is constructed and the prices of constituent securities change, the index is no longer equally weighted. Therefore, maintaining equal weights requires frequent adjustments (rebalancing) to the index. Q50-6 The data for four stocks in an index are as follows: Shares % Shares in Beginning of End of Period Dividends Per StocOutstanding Market Float Period Price Price Share k A 5,000 90 40 45 B 2,000 100 68 60 C 6,000 70 60 70 D 4,000 40 20 24 Assuming the beginning value of the float-adjusted market-capitalization-weighted equity index is 100, the ending value is closest to: A. . B. . C. . Solution: A In float-adjusted market-capitalization weighting, the weight on each constituent security is determined by adjusting its market capitalization for its market float. Per computations shown below, the ending value of the index so computed equals . (654,900 ÷ 600,000) Stock Shares % Shares Shares in BeginninBeg. Float End of Ending Outstandiin Index g Adj. Period Float Adj. ng Market of Period Market Price Market (1) F(lo2a) t (1) x (2) = Pric(4e) ($) (C3a) px ($4)) ($6) (C3a) px (($6)) A 5,000 90 4,(530) 0 40 18=0(,50)0 0 45 202,500 B 2,000 100 2,000 68 136,000 60 120,000 C 6,000 70 4,200 60 252,000 70 294,000 D 4,000 40 1,600 20 32,000 24 38,400 Total 600,000 654,900 Index 100 Value Q51-6 ★The index weighting that results in portfolio weights shifting away from securities that have increased in relative value toward securities that have fallen in relative value whenever the portfolio is rebalanced is most accurately described as:（MOCK79-85） A. equal weighting B. fundamental weighting C. float-adjusted market-capitalization weighting. Solution: B Fundamental weighting indices generally will have a contrarian "effect" in that the portfolio 441 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 weights will shift away from securities that have increased in relative value and toward securities that have fallen in relative value whenever the portfolio is rebalanced. Q52-6 ★★An analyst gathers the following information for an equal-weighted index comprised of assets Able, Baker, and Charlie: Beginning of End of Period Total Security Period Price (€) Price (€) Dividends (€) Able Baker Charlie The total return of the index is: （原版书R48-7） A. %. B. %. C. %. Solution: C The total return of an index is calculated on the basis of the change in price of the underlying securities plus the sum of income received or the sum of the weighted total returns of each security. The total return of Able is percent; of Baker is 0 percent; and of Charlie is percent: Able: (12 — 10 + )/10 = % Baker: (19 — 20 + 1)/20 = 0% Charlie: (30 — 30 + 2)/30 = % An equal-weighted index applies the same weight (1/3) to each security's return; therefore, the total return = 1/3 X (% + 0% + %) = %. Q53-6 If the following three stocks are held in a portfolio, the portfolio’s total return on an equal-weighted basis (%) is closest to: (MOCK92-85) StocNumber of shares Price ($) per share as Price per share ($) Dividend per share k owned of 1/1/2011 as of 1/1/2012 ($) During 2011 A 500 40 37 B 320 50 52 C 800 30 34 A. . B. . C. . Solution: B Equal weighting assigns an equal weight to each constituent security at inception. Therefore, 442 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 it is the sum of the total return from each security divided by the number of securities in the portfolios (see Exhibit 3). Stock Total Returns (%) (P1 P0 D )/P 0 A (37-40+)/40= B (52-50+)/50= C (34-30+0)/30= Portfolio return with equal weighting: (— + + ) / 3 = % Q54-6 ★★An analyst gathers the following information for a price-weighted index comprised of securities ABC, DEF, and GHI: Beginning of End of Period Total Security Period Price (€) Price (€) Dividends (€) ABC DEF GHI The price return of the index is: （原版书R48-8） A. %. B. %. C. %. Solution: B The price return of the price-weighted index is the percentage change in price of the index: (68 -75)/75 = %. Beginning of End of Period Security Period Price (f) Price (f) ABC DEF GHI TOTAL Q55-6 ★★★An analyst gathers the following information for a market-capitalization¬ weighted index comprised of securities MNO, QRS, and XYZ: Beginning of End of Period Dividends Shares Security Period Price (￥) Price (￥) Per Share (￥) Outstanding MNO 2,500 2,700 100 5,000 QRS 3,500 2,500 150 7,500 XYZ 1,500 1,600 100 10,000 The total return of the index is: （原版书R48-10） A. %. 443 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. %. C. %. Solution: B The total return of the market-capitalization-weighted index is calculated below: Beginning of End of Dividend Security Period Value (V) Period Value (V) Value (V) MNO 12,500,000 13,500,000 500,000 QRS 26,250,000 18,750,000 1,125,000 XYZ 15,000,000 16,000,000 1,000,000 Total 53,750,000 48,250,000 2,625,000 So return= (End Value+ Dividend – Begin Value)/ Begin Value=% Q56-6 ★★★An analyst gathers the following data for an equally-weighted index: Beginning of Period End of Period Security Price (￥) Shares Price (￥) Shares A 300 300 B 300 300 C 2,000 2,000 The return on the index over the period is: （原版书R48-14） A. %. B. %. C. %. Solution: C （22 20-1）+（4850-1）+（30126-1）（♠↔←）=% ≡3≈… Q57-6 ★★★ If the price return of an equal-weighted index exceeds that of a market¬capitalization- weighted index comprised of the same securities, the most likely explanation is: （原版书R48-16） A. stock splits. B. dividend distributions. C. outperformance of small-market-capitalization stocks. Solution:C The main source of return differences arises from outperformance of small-cap securities or underperformance of large-cap securities. In an equal-weighted index, securities that constitute the largest fraction of the market are underrepresented and securities that constitute only a small fraction of the market are overrepresented. Thus, higher equal-weighted index returns will occur if the smaller-cap equities outperform the larger-cap equities. 444 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q58-6 ★As of January 1, the index of three stocks: As of Decmber 31 Share price Outstanding numer Share Price Outstanding number Stock A $22 1500 $28 1,500 Stock B $40 10,000 $50 10,000 Stock C $34 3,000 $30 3,000 The 1-year return on an equal-weighted index of these three stocks is closest to:(Notes P250-2) A. 12% B. % C. % Solution: C （28-1）+（50 -1）+（30-1）（♠1224034↔←3）==% ≡≈… Q59-6 ★ An index of three non-dividend paying stocks is weighted by their book values of equity. After one year, the stock with the largest weight is down 15%, the next-largest is down 10%, and the smallest is down 5%. The total return of this index for the year is: (Notes P328-5) A. less than the price return of the index. B. equal to the price return of the index. C. greater than the price return of the index. Solution: B Because the stocks in the index do not pay dividends, there is no difference between the price return and the total return, regardless of the weighting system used or the direction of price movement. Q60-6 ★ Which of the following market indexes is likely to be reconstituted most frequently? An index that is designed to measure: (Notes P329-8) A. real estate returns. B. growth stock prices. C. commercial paper yields. Solution: C An index of commercial paper yields needs to be reconstituted frequently because its constituent securities need to be replaced when they mature and commercial paper matures in 270 days or less. Indexes of growth stocks and real estate are likely to be reviewed periodically to confirm that their constituent assets still meet the qualifications to be included in the index. Q61-6 ★The values of a price return index and a total return index consisting of identical 445 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 equal-weighted dividend-paving equities will be equal:(原版书R48-5) A. only at inception. B. at inception and on rebalancing dates. C. at inception and on reconstitution dates. Solution: A At inception, the values of the price return and total return versions of an index are equal. Q62-6 ★★Reconstitution of a security market index reduces:（原版书R48-21） A. portfolio turnover. B. the need for rebalancing. C. the likelihood that the index includes securities that are not representative of the target market. Solution: C Reconstitution is the process by which index providers review the constituent securities, re-apply the initial criteria for inclusion in the index, and select which securities to retain, remove, or add. Constituent securities that no longer meet the criteria are replaced with securities that do. Thus, reconstitution reduces the likelihood that the index includes securities that are not representative of the target market. Q63-6 ★★Which of the following index require frequent rebalancing?(真题) A. Price-weighted B. Equal-weighted C. Market-capitalization weighted Solution: B After an equal weighted index is constructed and the prices of constituent securities change, the index is no longer equally weighted. Therefore, maintaining equal weights requires frequent adjustments (rebalancing) to the index. Contrarian style. Q64-6 ★★Which of the following index weighting methods requires an adjustment to the divisor after a stock split? A. Price weighting. B. Fundamental weighting. C. Market-capitalization weighting. Solution: A In the price weighting method, the divisor must be adjusted so the index value immediately after the split is the same as the index value immediately prior to the split. Q65-6 ★★★Which of the following index weighting methods is most likely subject to a value tilt? （原版书R48-18） A. Equal weighting. 446 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. Fundamental weighting. C. Market-capitalization weighting. Solution: B Fundamental weighting leads to indices that have a value tilt. Q66-6 ★A price-weighted index series is composed of the following three stocks: Price before Split Price after Split Stock End of Day 1 End of Day 2 X $10 $12 Y $20 $19 Z $60 $22 If stock Z completes a three-for-one split at the end of Day 1, the value of the index after the split (at the end of Day 2) is closest to(2014 Mock 98-91) A. . B. . C. . Solution: B The value of the price-weighted index is determined by dividing the sum of the security values by the divisor, which is typically set at inception to equal the initial number of securities in the index. In the case of a stock split, the index provider must adjust the value of divisor by dividing the sum of the constituent prices after the split by the value of the index before the split. This adjustment results in a new divisor that keeps the index value at the same level as before the split. The new divisor will then be used to calculate the index value after the split. Index before the split= New divisor, X: 30= X = Index after the split Q67-6 Which of the following most accurately describes the basis for construction of nearly all bond market indices? (2014 Mock 99-93) A. Dealer prices B. Market prices C. Model prices Solution: A 447 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Firms (dealers) are assigned to specific securities and are responsible for creating liquid markets for those securities by purchasing and selling them from their inventory. In addition, many securities do not trade frequently and, as a result, are relatively illiquid. As a result, index providers must contact dealers to obtain current prices on constituent securities to update the index, or they must estimate the prices of constituent securities using the prices of traded fixed-income securities with similar characteristics. Price-weighted Index, Market-weighted Index, Unweighted Index Fundamental Weighting掌握概念及公式： R38-6 概念：理解the use of securities market indexes. R39-6 计算：  price-weighted index=sum of stock pricesnumber of stocks in index adjusted for splitsAssumption: purchasing an equal number of shares of each stock in the index.  value- weighted index= current total market value of the stocks basebase year index value year total market value of the stocksAssumption: making a proportionate market value investments in each stock.  Equal-weighted index Places an equal weight on the returns of all index stock, regardless of their price or market value. Assumption: Investing the same dollar in each stock in the index. Arithmetic mean: Xi is the return on each stock：c h a n g e x in average index value= ƒniGeometric mean: Xi=1+HPRi： change in average index value=nx1x2 υ xυn -υ1 ★Unweighted index assumes that the index portfolio makes and maintains an equal dollar investment in each stock in the index.  ★Fundamental Weighting indices generally will have a contrarian style and value-tilt R40-6 难点：股票分割时，价格权重指数不会变化，所以要调整因子 R41-6 Bias：各个index应用时的bias  Price-weighted bias places a downward bias on the index because large successful firms tend to split their stocks more often than low growth stocks and will weight within the index simply by splitting their stock. （Dow Jones Industrial Average)受高价格股票价格变动影响大。  Value-weighted bias is that firms with greater market capitalization have a greater impact on the index than do firms with lower market capitalization.受高市值股票价格变动影响大。  Unweighted bias places a downward bias in the index by the use of the geometric mean rather than the arithmetic mean. R42-6 Rebalancing and Reconstitution  ★Rebalancing: Adjuste the weights of securities in a portfolio to their target weights after price changes have affected the weights. Equal-weighted requires more frequency to adjust  Reconstitution: Periodically adding and deleting securities that make up an index 448 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P6-6 Uses of security market indices Q68-6 Security market indices are used as: A. measures of investment returns. B. proxies to measure unsystematic risk. C. proxies for specific asset classes in asset allocation models. Solution: C Security market indices play a critical role as proxies for asset classes in asset allocation models. Q69-6 Which of the following statements regarding sector indices is most accurate? Sector indices: A. track different economic sectors and cannot be aggregated to represent the equivalent of a broad market index. B. provide a means to determine whether an active investment manager is more successful at stock selection or sector allocation. C. apply a universally agreed upon sector classification system to identify the constituent securities of specific economic sectors, such as consumer goods, energy, finance, health care. Solution: B Sector indices provide a means to determine whether a portfolio manager is more successful at stock selection or sector allocation. Q70-6 ★Which of the following is an example of a style index? An index based on: A. geography. B. economic sector. C. market capitalization. Solution: C Style indices represent groups of securities classified according to market capitalization, value, growth, or a combination of these characteristics. Q71-6 ★An aggregate fixed-income index: A. comprises corporate and asset-backed securities. B. represents the market of government-issued securities. C. can be subdivided by market or economic sector to create more narrowly defined indices. Solution: C An aggregate fixed-income index can be subdivided by market sector (government, government agency, collateralized, corporate), style (maturity, credit quality), economic sector, or some other characteristic to create more narrowly defined indices. Q72-6 ★Uses of market indices do not include serving as a: 449 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. measure of systematic risk. B. basis for new investment products. C. benchmark for evaluating portfolio performance. Solution: A Security market indices are used as proxies for measuring market or systematic risk, not as measures of systematic risk. Q73-6 ★★Which of the following statements regarding fixed-income indices is most accurate?（原版书R48-26） A. Liquidity issues make it difficult for investors to easily replicate fixed-income indices. B. Rebalancing and reconstitution are the only sources of turnover in fixed-income indices. C. Fixed-income indices representing the same target market hold similar numbers of bonds. Solution: A The large number of fixed-income securities—combined with the lack of liquidity of some securities—makes it costly and difficult for investors to replicate fixed-income indices Q74-6 ★★ Fixed-income indices are least likely constructed on the basis of: （原版书R48-28） A. maturity. B. type of issuer. C. coupon frequency. Solution: C Fixed income indexes can be classified by issuer, collateral, coupon, maturity, credit risk and inflation protection. But coupon frequency is not a dimension on which fixed-income indices are based. Q75-6 ★★Which of the following is not a real estate index category?（原本书R48-31） A. Appraisal index. B. Initial sales index. C. Repeat sales index. Solution: B Real estate indexes can be constructed using returns based on appraisals of properties, repeat property sales, or the performance of Real Estate Investment Trusts(REITs). Initial sales index is not a real estate index category. Q76-6 ★★ A unique feature of hedge fund indices is that they: （原版书R48-32） A. are frequently equal weighted. B. are determined by the constituents of the index. C. reflect the value of private rather than public investments. 450 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B Hedge funds are not required to report their performance to any party other than their investors. Therefore, each hedge fund decides to which database(s) it will report its performance. Thus, for a hedge fund index, constituents determine the index rather than index providers determining the constituents. Q77-6 Which of the following is least likely to be directly reflected in the returns on a commodity index? A. Roll yield B. Changes in the spot prices of underlying commodities C. Changes in the futures prices of commodities in the index Solution: B Commodity indexes are based on the prices of commodity futures contracts, not the spot prices of commodities. Commodity futures contracts reflect the rik-free rate of return, changes in futures prices, and the roll yield. Roll yield —— The yield due to a difference between the spot price and futures price, or a difference between two futures prices with different expiration dates. Q78-6 ★An equity index consists of three securities with market information as follows: Shares Price at Beginning Price at Dividend per Security Outstanding of Period End of Period Share A 5,000,000 $ $ $ B 2,000,000 $ $ $ C 1,500,000 $ $ $ The price-weighted total return index is closest to: (2014 Mock 98-97) A. %. B. %. C. %. Solution: A Calculation of Index and Return Based on Price-Weighted Method Shares BOP Price EOP Price Dividends per Security Outstanding Share A $ $ 5,000,000 $ B 2,000,000 $ $ $ C $ 1,500,000 $ $ Total $ $ $ Index value 451 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Type of Index BOP Value EOP Value Return Price return $ $ % Total return $ $ % BOP = Beginning of period EOP = Ending of period R43-6 Security market indexes have several uses  Reflection of market sentiment  Benchmark of manager performance  Measure of market return and risk  Measure of beta and risk-adjusted return  Model portfolio for index funds R44-6 Characteristics of Equity Indexes 注意掌握不同组合的构成  Broad market index：涵盖市场总市值的90%以上。  Multi-market index：由多个国家的指数构成。  Multi-market index with fundamental weighting：由多个国家的指数构成，同时考虑了基本面因素（比如GDP）  Sector Index：用于衡量行业的回报  Style index：用于衡量市场资本成长型战略、价值型战略的回报 R45-6 ★Several issues with the construction of fixed income indexes  Large universe of securities：  Dealer markets and infrequent trading R46-6 ★Alternative Investment Indexes：  Commodity indexes：Represent futures contracts on commodities such as grains, livestock, metals, and energy.  Weighting method：Some use equal weighting, others weight commodities by their global production values, and others use fixed weights that the index provider determines. As a result, different indexes have significantly different commodity exposures and risk and return characteristics.  Real estate indexes: appraisal value, repeat property sales, performance of REITs  Hedge Fund Indexes：Most hedge fund indexes equally weight the returns of the hedge funds included in the index. P7-6 EMH Q79-6 In an efficient market, the change in a company's share price is most likely the result of A. insiders' private information. B. the previous day's change in stock price. C. new information coming into the market. Solution: C 452 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Today's price change is independent of the one from yesterday, and in an efficient market, investors will react to new, independent information as it is made public. Q80-6 Which of the following inferences concerning market efficiency most accurate? A. Fully exploitable over and under-reactions often occur in efficient markets. B. Market pricing anomalies and behavioral biases are contrary to the existence of market efficiency. C. If a market is semi-strong form efficient neither technicians nor fundamental analysts can expect to consistently earn abnormal returns. Solution: C If securities markets are semi-strong form efficient, active trading to exploit price patterns or public information is not likely to generate abnormal returns. Thus, both technical and fundamental analyses become futile exercises. Q81-6 Which of the following is the characteristic of efficient market?（2012年12月真题） A. A trader without information participate in the market will improve efficiency B. A market with a relatively high transaction cost C. A market with information availability and financial disclosure. Solution: C If a market is efficient, a new trader’s participation will have no impact on the market efficiency and will have low transaction cost. And information availability and financial disclosure is a characteristic of a efficient market. Q82-6 ★★If the investor is a fundamental analyst, which of the following market is consistent with the abnormal return investor can achieve?(真题) A. Weak B. Semi-strong C. Strong Solutionr: A The weak form of the efficient markets hypothesis states that current security prices fully reflect all currently available security market data. Fundamental analysis is based on public information such as earnings, dividends, and various accounting ratios and estimates, so an investor cannot achieve abnormal return under semi-strong market efficiency. Q83-6 ★Arbitrage activity will most likely be higher in securities markets: (Mock84-87) A. that are efficient. B. with no restrictions on short selling. C. with high information-acquisition costs. Solution: B Short selling helps in price discovery. Arbitrageurs benefit from pricing discrepancies 453 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 (inefficiencies); therefore, arbitrage activity will be higher in markets with no restrictions on short selling. Q84-6 If markets are efficient, the difference between the intrinsic value and market value of a company's security is: A. negative. B. zero. C. positive. Solution: B A security's intrinsic value and market value should be equal when markets are efficient Q85-6 ★Which of following below will a technical analysis most likely adhere to? Weak EMH Strong EMH A. No No B. Yes No C. No Yes Solution: A Technical analysis doesn’t hold weak EMH and Strong EMH. Q86-6 In which efficient market hypnosis, the technical analysis can have abnormal return? (2012年12月真题) A. weak form inefficiency B. weak form C. semi-strong form Solution: A In a weak form market, technical analysis cannot have an abnormal return, and if the technical analysis do have an abnormal return , that is to say, the market is weak form inefficiency. Q87-6 ★A financial analyst utilizing his analytical expertise and up-to-date information buys a company’s stock. His close friends, who lack information or expertise, imitate the financial analyst’s action and buy the stock. Which of the following statements concerning this behavioral bias is most accurate? A. It improves market efficiency. B. It is identical to representativeness. C. It is inconsistent with rational behavior. Solution: A This behavioral bias is an example of an information cascade wherein the transmission of information is from those participants who act first and whose decisions influence the decisions of others. Representativeness——invetors assume good companies or good markets are good 454 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 investments. The behavior of informed traders acting first and uninformed traders imitating the informed traders is consistent with rationality. The imitation trading by the uninformed traders helps the market incorporate relevant information and improves market efficiency. Q88-6 ★Kaylee Sumners, Level 1 CFA candidate, has just finished reviewing flash cards for the reading on the efficient market hypothesis (EMH). Confused by the different tests for the different forms of the EMH, she outlines the information (of which four summary points appear below) from memory. It appears that Sumners should review the material because three of the points are incorrect. Which of her summary points is CORRECT? A. Statistical and trading rule tests support the weak-form of the EMH. B. Early tests of the semi-strong form used the equation: Return Abnormal = ReturnActual - (RMarket × BetaStock). C. The superior historical performance of exchange specialists and corporate insiders rejects the semi-strong form of the EMH. Solution: A These two tests support the weak-form EMH contention that securities prices reflect all historical market information and those mechanical trading rules do not result in superior returns. The other statements are false. Later tests of the semi-strong form EMH used the equation: Return Abnormal = ReturnActual – (RMarket × BetaStock). Early tests omitted beta, using the formula: Return Abnormal = ReturnActual – RMarket. The superior historical performance of exchange specialists and corporate insiders rejects the strong form of the EMH. Cross-sectional tests such as the price-earnings ratio, neglected firms tests, and book value to market value tests reject the semi-strong form of the EMH. These tests show that certain stocks have high realized returns (for example, low P/E stocks and high book value to market value stocks). Q89-6 With respect to efficient market theory, when a market allows short selling, the efficiency of the market is most likely to: A. increase. B. decrease. C. remain the same. Solution: A According to the theory, reducing the restrictions on trading will allow for more arbitrage trading, thereby promoting more efficient pricing. Although regulators argue that short selling exaggerates downward price movements, empirical research indicates that short selling is helpful in price discovery. Q90-6 Which of the following will cause market inefficiency?（2012年12月真题） A. High transaction cost. B. Investors’ different expectation 455 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. Economic recession in the near future Solution: A The costs incurred by trader in identifying and exploiting possible market inefficiencies affect the interpretation of market efficiency. And the other two have nothing to do with market inefficiency. Q91-6 With respect to rational and irrational investment decisions, the efficient market hypothesis requires: A. only that the market is rational. B. that all investors make rational decisions. C. that some investors make irrational decisions. Solution: A The efficient market hypothesis and asset-pricing models only require that the market is rational. Behavioral finance is used to explain some of the market anomalies as irrational decisions. Q92-6 ★★If markets are semi-strong-form efficient, then passive portfolio management strategies are most likely to: （原版书R49-13） A. earn abnormal returns. B. outperform active trading strategies. C. underperform active trading strategies. Solution: B Costs associated with active trading strategies would be difficult to recover; thus, such active trading strategies would have difficulty outperforming passive strategies on a consistent after-cost basis. Q93-6 ★★If a market is semi-strong-form efficient, the risk-adjusted returns of a passively managed portfolio relative to an actively managed portfolio are most likely:原版书R49-14 A. lower. B. higher. C. the same. Solution: B In a semi-strong-form efficient market, passive portfolio strategies should outperform active ones. Q94-6 ★With respect to efficient markets, a company whose share price reacts gradually to the public release of its annual report most likely indicates that the market where the company trades is:(原版书R49-19) A. semi-strong-form efficient. 456 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. subject to behavioral biases. C. receiving additional information about the company. Solution: C If markets are efficient, the information from the annual reports is reflected in the stock prices; therefore, the gradual changes must be from the release of additional new information. Q95-6 ★ Under what financial market conditions can active portfolio management outerperform a passive index tracking strategy consistently over time? Active management: (Notes P329-12) A. cannot outperform a passive strategy if markets are weak-form efficient. B. can outperform a passive strategy if markets are weak-form efficient but not semistrong-form efficient. C. can outperform a passive strategy if markets are semistrong-form efficient but not strong-form efficient. Solution: B One of the implications of market efficiency is that if markets are semistrong-form efficient, active portfolio management cannot consistently achieve abnormal risk-adjusted returns. Q96-6 ★Researchers have found that value stocks have consistently outperformed growth stocks. An investor wishing to exploit the value effect should purchase the stock of companies with above-average:(原版书R49-23) A. dividend yields. B. market-to-book ratios. C. price-to-earnings ratios Solution: A Higher than average dividend yield is a characteristic of a value stock, along with low price-to-earnings and low market-to-book ratios. Growth stocks are characterized by low dividend yields and high price-to-earnings and high market-to-book ratios. Q97-6 ★★The intrinsic value of an undervalued asset is:（原版书R49-7） A. less than the asset's market value. B. greater than the asset's market value. C. the value at which the asset can currently be bought or sold. Solution: B The intrinsic value of an undervalued asset is greater than the market value of the asset, where the market value is the transaction price at which an asset can be currently bought or sold. Q98-6 ★★The market value of an undervalued asset is:(原版书R49-8) A. greater than the asset's intrinsic value. 457 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. the value at which the asset can currently he bought or sold. C. equal to the present value of all the asset's expected cash flows. Solution: B The market value is the transaction price at which an asset can be currently bought or sold. R47-6 EMH掌握概念：  Efficient market: security price adjust rapidly to infusion of new information, and therefore current security prices fully reflect all available information. R48-6 factors affect the degree of market efficiency.  Number of market participants analyze and value securities, each is independent of others  Availability of information: new information regarding securities comes to the market in random fashion, and the timing of one announcement is generally of others.  Impediments to trading.  Transaction and information costs. After deducting costs, there are no risk-adjusted return R49-6 区分strong-form EMH & semi-strong form EMH & weak-form EMH 定义  Strong-form EMH states that stock prices fully reflect all information from public and private sources.  Semi-strong form EMH states that stock prices fully reflect all publicly available information. If markets are semi-strong-form efficient, then passive portfolio management strategies are most likely to outperform active trading strategies.  Weak-form EMH states that stock prices fully reflect all currently available security market information. R50-6 ★检验（包含6 anomalies） 1) Tests for Weak-Form EMH (success)  Statistical Tests of Independence  Auto correlation tests  Runs tests  Tests of Trading Rules 2) Tests for semi-strong form EMH  Time-series tests (fail)  Cross-sectional tests (fail)  Event studies(success) 3) Tests for strong-form EMH  Corporate Insider Trading (1970s以前fail， 1980s以后成功)  Stock Exchange Specialists(fail)  Security Analysts (success) R51-6 如果EMH成立哪种分析无效。  Weak-form: 技术分析无效  Semi-strong form: 基本面分析无效  Strong form: 全部无效，不可能打败市场 R52-6 In markets that are highly efficient, investors can typically expect market values to reflect intrinsic values 458 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  The market value: of an asset is its current price.  The intrinsic value or fundamental value of an asset: is the value that a rational investor with full knowledge about the asset’s characteristics would willingly pay. P8-6 Abnormal Return Q99-6 ★The most accurate characterization of the nature of abnormal returns relating to an anomaly and a source of unreliability of an anomaly, respectively, are: Nature of Abnormal Returns Source of Unreliability of An Anomaly A. Persistent Behavioral bias B. Persistent Survivorship bias C. Momentary Behavioral bias Soltution: B The persistent realization of abnormal returns is referred to as an anomaly and survivorship bias is a source of unreliability of an anomaly. Q100-6 ★Which of the following best describes the majority of the evidence regarding anomalies in stock returns? A. Weak-form market efficiency holds but semi-strong form efficiency does not. B. Neither weak-form nor semi-strong form market efficiency holds. C. Reported anomalies are not violations of market efficiency but are the result of resrach methodologies. Solution: C The majority of evidence is that anomalies are not violations of market efficiency but are due to the research methodologies used. Portfolio management based on anomalies will likely be unprofitable after costs are considered. Q101-6 ★★Compared to its market-value-weighted counterpart, a fundamentally weighted index will least likely have a: A. value tilt. B. contrarian “effect.” C. momentum “effect.” Solution: C Momentum “effect” is a characteristic of a market-value-weighted index, not a fundamentally weighted index. Q102-6 ★Which of the following market anomalies is inconsistent with weak-form market efficiency? A. Earnings surprise. B. Momentum pattern. C. Closed-end fund discount. 459 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B Trading based on historical momentum indicates that price patterns exist and can be exploited by using historical price information. A momentum trading strategy that produces abnormal returns contradicts the weak form of the efficient market hypothesis, which states that investors cannot earn abnormal returns on the basis of past trends in prices. Q103-6 ★★Which of the following is least likely to explain the January effect anomaly? A. Tax-loss selling. B. Release of new information in January. C. Window dressing of portfolio holdings. Solution: B The excess returns in January are not attributed to any new information or news; Tax-loss selling——investors sell losing positions in December to realize losses for tax purposes and then repurchase stocks in January, pushing their prices up Window dressing—— portfolio managers sell risky stocks in December to remove them from their year-end statements and repurchases them in January. Abnormal Return掌握概念: R53-6 ★Anomalies in Time-Series Data  Calendar anomalies: During the first five days of January, stock returns, especially for small firms, are significantly higher than they are the rest of the turn-of-the-month effect (stock returns are higher in the days surrounding month end), the day-of-the-week effect (average Monday returns are negative), the weekend effect (positive Friday returns are followed by negative Monday returns), and the holiday effect (pre-holiday returns are higher).  Overreaction and momentum anomalies: The overreaction effect refers to the finding that firms with poor stock returns over the previous three or five years (losers) and then have better subsequent returns. This pattern has been attributed to investor overreaction to both unexpected good news and unexpected bad news. This pattern is also present for bonds and in some international markets. Momentum effects have also been found where high short-term returns are followed by continued high returns. This pattern is present in some international markets as well. R54-6 ★Anomalies in Cross-Sectional Data  The size effect: Small-cap stocks outperform large-cap stocks. This effect could not be confirmed in later studies, suggesting that either investors had traded on, and thereby eliminated, this anomaly or that the initial finding was simply a random result for the time period examined.  ★The value effect: Value stocks [those with lower priceto-earnings (P/E), lower market-to-book (M/B), and higher dividend yields] have outperformed growth stocks (those with higher P/E, higher M/B, and lower dividend yields). This violates the semi-strong form of market efficiency because the information necessary to classify 460 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 stocks as value or growth is publicly available. However, some researchers attribute the value effect to greater risk of value stocks that is not captured in the risk adjustment procedure used in the studies. R55-6 ★Other Anomalies  Closed-end investment funds: The shares of closed-end investment funds trade at prices that sometimes deviate from the net asset value (NAV) of the fund shares. Various explanations have been put forth to explain this anomaly, including management fees, taxes on future capital gains, and share illiquidity. However, transactions costs would eliminate any profits from exploiting the unexplained portion of closed-end fund discounts.  Earnings announcements: An earnings surprise is that portion of announced earnings that was not expected by the market. Positive earnings surprises (earnings higher than expected) precede periods of positive risk-adjusted post-announcement stock returns. The anomaly is that the adjustment process does not occur entirely on the announcement day. Investors could exploit this anomaly by buying positive earnings surprise firms and selling negative earnings surprise firms.  Initial public offerings: IPOs are typically underpriced, with the offer price below the market price once trading begins.  Economic fundamentals: Research has found that stock returns are related to known economic fundamentals such as dividend yields, stock volatility, and interest rates. R56-6 Implications for Investors  The majority of the evidence suggests that reported anomalies are not violations of market efficiency but are due to the methodologies used in the tests of market efficiency. Furthermore, both underreaction and overreaction have been found in the markets, meaning that prices are efficient on average. Other explanations for the evidence of anomalies are that they are transient relations, too small to profit from, or simply reflect returns to risk that the researchers have failed to account for.  The bottom line for investors is that portfolio management based on previously identified anomalies will likely be unprofitable. Investment management based solely on anomalies has no sound economic basis. P9-6 Behavioral Finance Q104-6 ★★Observed overreactions in markets can be explained by an investor's degree of:(原版书R49-25) A. risk aversion. B. loss aversion. C. confidence in the market. Solution: B Behavioral theories of loss aversion can explain observed overreaction in markets, such that investors dislike losses more than comparable gains (., risk is not symmetrical) Q105-6 ★★Which of the following is not included in behavior finance?(真题) 461 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. Risk aversion B. Loss aversion C. Overconfidence Solution: A Risk aversion belongs to traditional finance. Behavioral finance examines investor behavior, its effect on financial markets, how cognitive biases may result in anomalies, and whether investors are rational. Q106-6 ★Like traditional finance models, the behavioral theory of loss aversion assumes that investors dislike risk; however, the dislike of risk in behavioral theory is assumed to be: A. leptokurtic. B. symmetrical. C. asymmetrical. Solution: C Behavioral theories of loss aversion allow for the possibility that the dislike for risk is not symmetrical, which allows for loss aversion to explain observed overreaction in markets such that investors dislike losses more than they like comparable gains. R57-6 ★Behavioral finance:  Traditional finance models, including efficient markets, are based on an assumption that the market as a whole acts rationally, although some individual investors may not.  ★Loss aversion: Investors dislike losses more than they like gains of an equal amount. Dislike of losses may explain investor overreaction. However, investor underreaction is just as common as overreaction, and loss aversion does not explain underreaction.  Investors sometimes overestimate their ability to value securities. If there is a prevalence of investor overconfidence, securities will be mispriced. However, it appears that this mispricing may be hard to predict. Overconfidence in their estimates also causes investors to hold portfolios that are not well diversified, increasing their portfolio risk but not overall market risk.  Other behavioral biases that have been identified include:  Representativeness: Investors assume good companies or good markets are good investments.  Gambler's fallacy: Recent results affect investor estimates of future probabilities.  Mental accounting: Investors classify different investments into separate mental accounts instead of viewing them as a total portfolio.  Conservatism: Investors react slowly to changes.  Disposition effect: Investors are willing to realize gains but unwilling to realize losses.  Narrow framing：Investors view events in isolation.  One explanation for the evidence of the slow adjustment of security prices to new information is the concept of information cascades. This refers to the idea that 462 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 uninformed traders, when faced with unclear information, watch the actions of informed traders to make their decisions. Recall the earnings surprise anomaly, in which prices were slow to adjust to earnings surprises. Information cascades can explain this occurrence.  Behavioral finance can account for how securities prices can deviate from their rational levels and be biased estimates of intrinsic value. Q107-6 The type of equity voting right that grants one vote for each share of equity owned is referred to as: A. proxy voting. B. statutory voting. C. cumulative voting. Solution: B Statutory voting: each share held is assigned one vote in the elction of each member of the board of directors. Cumulative voting: shareholders can allocate their votes to one or more candidates as they choose Proxy voting: having someone else vote as they direct them, on their behalf Q108-6 ★All of the following are characteristics of preference shares except: A. They are either callable or putable. B. They generally do not have voting rights. C. They do not share in the operating performance of the company. Solution: A Preference shares do not have to be either callable or putable. Q109-6 ★When investing in unsponsored depository receipts, the voting rights to the shares in the trust belong to: A. the depository bank. B. the investors in the depository receipts. C. the issuer of the shares held in the trust Solution: A In an unsponsored DR, the depository bank owns the voting rights to the shares. The bank purchases the shares, places them into a trust, and then sells shares in the trust-not the underlying shares-in other markets. Q110-6 ★With respect to Level III sponsored ADRs, which of the following is least likely to be accurate? They:(原版书R50-10) A. have low listing fees. B. are traded on the NYSE, NASDAQ, and AMEX. C. are used to raise equity capital in . markets. 463 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A The listing fees on Level III sponsored ADRs are high. Q111-6 For a . investor, which of the following statements concerning investing in depository receipts (DRs) is least accurate? (MOCK92-87) A. Investing in DRs could provide arbitrage opportunities and entail currency risk. B. Sponsored DRs are subject to greater reporting requirements than unsponsored DRs. C. Investors in unsponsored DRs would have the same voting rights as the direct owners of common shares. Solution: C Investors of unsponsored DRs would not have the same voting rights as the direct owners of common shares because the depository bank retains the voting rights. Q112-6 ★Which of the following is incorrect about the risk of an equity security? The risk of an equity security is:（原版书R50-14） A. based on the uncertainty of its cash flows. B. based on the uncertainty of its future price. C. measured using the standard deviation of its dividends。 Solution: C Some equity securities do not pay dividends, and therefore the standard deviation of dividends cannot be used to measure the risk of all equity securities. Q113-6 If a .-based investor purchases a euro-denominated ETF and the euro subsequently depreciates in value relative to the dollar, the investor will have a total return that is: A. lower than the ETF's total return. B. higher than the ETF's total return. C. the same as the ETF's total return. Solution: A The depreciated value of the euro will create an additional loss in the form of currency return that is lower than the ETF’s return. Q114-6 ★★A . institutional money manager prefers to invest in depository instruments of non-domestic equity securities that are privately placed in the . and not subject to the foreign ownership and capital flow restrictions. The type of security that is most appropriate for this investor is: (Mock 83-88) A. global registered shares. B. global depository receipts. C. American depository shares. 464 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B Global depository receipts (GDRs) meet the investor preferences. They are not subject to the foreign ownership and capital flow restrictions that may be imposed by the issuing company’s home country because they are sold outside of that country. GDRs cannot be listed on . exchanges, but they can be privately placed with the institutional investors based in the United States. Q115-6 Which of the following investment assets has the least investment risk? (2012年真题) A. Putable common share B. Putable preferred share C. Convertible preferred share Solution: B Dividends on preference share are known and fixed, and they account for a large portion of the preference shares’ total return. Therefore, it is less risky than common share. And putable common or preference shares are less risky than the callable or non-callable counterparts because they give the investor the option to sell the shares to the issuer at a pre-determined price. Q116-6 ★An arbitrageur buys a security on a European exchange, where it is quoted in euros, and simultaneously sells the same security on a . exchange, where it is quoted in dollars. The security is most likely a:(Notes 11) A. global registered shares. B. global depository receipts. C. sponsored depository receipt. Solution: A Global registered shares (GRS) are identical shares of the same issuer that trade on multiple global exchanges in the local currencies. Global depository receipts (GDRs) are issued outside the United States and the issuer’s home country. Depository receipt (DR) represent ownership in a foreign firm and are traded in the markets of other countries in local market currencies. If the firm is involved with the issue, the DR is a sponsored DR. Q117-6 ★A friend has asked you to explain the differences between open-end and closed-end funds. Which of the following will you most likely include in your explanation? （原版书） A. Closed-end funds are unavailable to new investors. B. When investors sell the shares of an open-end fund, they can receive a discount or a premium to the fund's net asset value. C. When selling shares, investors in an open-end fund sell the shares back to the fund whereas investors in a closed-end fund sell the shares to others in the secondary market. 465 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C Closed-end funds are available to new investors but they must purchase shares in the fund in the secondary market. The shares of a closed-end fund trade at a premium or discount to net asset value. R58-6 ★Characteristics of various types of equity securities  Common shares：  Putable common shares：股东有权按照预定价格卖回给公司  Callable commmon shares: 公司有权按照预定价格回购股票  Preference shares：fixed periodic payments do not have voting rights  Cumulative preference：当期未获得的优先股股利可以累积到下期  Convertible preference shares：可以转为Common shares R59-6 ★characteristics of private equity  Less liquidity because no public market for the shares exists.  Share price is negotiated between the firm and its investors, not determined in a market.  More limited firm financial disclosure because there is no government or exchange requirement to do so.  Lower reporting costs because of less onerous reporting requirements.  Potentially weaker corporate governance because of reduced reporting requirements and less public scrutiny.  Greater ability to focus on long-term prospects because there is no public pressure for short-term results.  Potentially greater return for investors, once the firm goes public. R60-6 Three main types of private equity investments  Venture capital: The capital provided to firms early in their life cycles to fund their development and growth. Venture capital financing at various stages of a firm's development is referred to as seed or start-up, early stage, or mezzanine financing.  In a leveraged buyout (LBO), investors buy all of a firm's equity using debt financing (leverage). If the buyers are the firm's current management, the LBO is referred to as a management buyout (MBO). Firms in LBOs usually have cash flow that is adequate to service the issued debt, or have undervalued assets that can be sold to pay down the debt over time.  In a private investment in public equity (PIPE), a public firm that needs capital quickly sells private equity to investors. The firm may have growth opportunities, be in distress, or have large amounts of debt. The investors can often buy the stock at a sizeable discount to its market price. R61-6 Methods for investing in non-domestic equity  Direct investing in the securities of foreign companies. Some obstacles to direct foreign investment are that: currency illiquid, be less strict, must be familiar with the regulations and procedures of each market in which they invest.  ★Depository receipts (DRs) represent ownership in a foreign firm and are traded in the markets of other countries in local market currencies. A bank deposits shares of the 466 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 foreign firm and then issues receipts representing ownership of a specific number of the foreign shares. The value of the DR is affected by exchange rate changes, as well as firm fundamentals, economic events.  Global depository receipts (GDRs) are issued outside the . and the issuer's home country. Most GDRs are traded on the London and Luxembourg exchanges.  ★American depository receipts (ADRs) are denominated in . dollars and trade in the United States. The security on which the ADR is based is the American depository share (ADS), Which trades in the firm's domestic market. Some ADRs allow firms to raise capital in the . or use the shares to acquire other firms. Most require . Securities and Exchange Commission (SEC) registration, but some are privately placed (Rule 144A or Regulation S receipts). R62-6 The returns on equity investments: price changes, dividend payments, and, in the case of equities denominated in a foreign currency, gains or losses from changes in exchange rates. P10-6 Herfindahl Index Q118-6 ★Two Industries, A and B, have the following values for N-firm concentration ratio and Herfindahl Index: Industry 3-Firm Concentration Herfindahl Index A 40% B 75% Given this, which of the following statements is most accurate? A. Firms in Industry A would have a greater coordination than firms in Industry B. B. Industry A has a larger number of equivalent firms than Industry B. C. Product differentiation strategy would be more appropriate for firms in Industry B than for firms in Industry A. Solution: B The equivalent” number of firms is the reciprocal of Heffindahl Index and it is for Industry A and for Industry B. Q119-6 The row Firms Fri the Internet search engine industry have the following market shares: Company Market Share Gigloo 50% Ohooho 25% MySearch 15% Foxnet 10% The Herfindahl Index arid the Equivalent Number of firms in this Industry, respectively, are closest to: Herfindahl Index Equivalent Number of Firms A. 467 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. C. Solution: B Heffindahl index = + + + = + + + = Equivalent number of firm = 1 / = ≈ Q120-6 Which of the following statement is mostly likely a advantage of Herfindahl-Hirschman Index (HHI)? （2012年12月真题） A. It reflects the increasing concentration of big companies. B. It reflects the entry barrier of a industry C. It reflects the total risk of a industry Solution: A The Herfindahl-Hirschman Index (HHI) is the square of the percentage market share of each firm summed over the largest 50 firms which can reflects the increasing concentration of big companies. R63-6 Herfindahl Index掌握概念和计算： 概念： There are two measurements for industry concentration analysis: N firms’ concentration ratio & Herfindahl index. 计算：H M12 M 22 / Mn2应用： 1. An H below indicates an un-concentrated industry; 2. An H of to indicates a moderately-concentrated industry; 3. An H above indicates a highly-concentrated industry. P11-6 ROE Q121-6 Holding all other factors constant, which of the following situations will most likely lead to an increase in a company's return on equity? A. The market price of the company's shares increases. B. Net income increases at a slower rate than shareholders' equity. C. The company issues debt to repurchase outstanding shares of equity. Solution: C A company's ROE will increase if it issues debt to repurchase outstanding shares of equity Q122-6 ★★A company's cost of equity is often used as a proxy for investors':（原版书R50-24） A. average required rate of return. B. minimum required rate of return. C. maximum required rate of return. 468 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B Companies try to raise funds at the lowest possible cost. Therefore, cost of equity is used as a proxy for the minimum required rate of return. Q123-6 Which of the following statements is most accurate in describing a company's book value? A. Book value increases when a company retains its net income. B. Book value is usually equal to the company's market value. C. The ultimate goal of management is to maximize book value. Solution: A A company's book value increases when a company retains its net income. Q124-6 Calculate the 2009 return on equity (ROE) of a stable company using the following data: Total sales £2,500,000 Net income £2,000,000 Beginning of year total assets £50,000,000 Beginning of year total liabilities £35,000,000 Number of shares outstanding at the end of 2009 1,000,000 Price per share at the end of 2009 £20 A. %. B. %. C. %. Solution: B A company's ROE is calculated as (NIt/BVEt-1). For 2009, the BVEt-1 is equal to the beginning total assets minus the beginning total liabilities, which equals £50,000,000 - £35,000,000 = £15,000,000. Therefore, ROE= £2,000,000/£ 15,000,000= %. Q125-6 A decomposition of ROE for Integra SA is as follows: 2005 2004 ROE. % % Tax burden Interest burden EBIT margin % % Asset turnover Leverage Which of the following choices best describes reasonable conclusions an analyst might make based on this ROE decomposition? （2012年12月真题） A. Profitability and the liquidity position both improved in 2005. B. The higher average tax rate in 2005 offset the improvement in profitability, leaving ROE 469 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 unchanged. C. The higher average tax rate in 2005 offset the improvement in efficiency, leaving ROE unchanged. Solution: C. The increase in the average tax rate in 2005, as indicated by the decrease in the value of the tax burden (the tax burden equals one minus the average tax rate), offset the improvement in efficiency indicated by higher asset turnover); as a result, ROE remained unchanged at percent. Statement A is not correct because the EBIT margin, measuring profitability, was unchanged in 2005; furthermore, no information is given on liquidity. Statement B is not correct because profitability was unchanged in 2005. R64-6 Market Value and Book Value  The book value of equity: Is the value of the firm’s assets on the balance sheet minus its liabilities.  The market value of equity: Is the total value of a firm’s outstanding equity shares based on market prices and reflects the expectations of investors about the firm’s future performance. R65-6 Return on Equity:  A key ratio used to determine management efficiency is the accounting return on equity, usually referred to simply as the return on equity (ROE). ROENINItaverageBVROE BNVBI t VBV tt1t 1 / 2 The first method is more appropriate when it is the industry convention or when book value is volatile. The latter method is more appropriate when examining ROE for a number of years or when book value is stable.  Higher ROE is generally viewed as a positive for a firm, but the reason for an increase should be examined. For example, if book value is decreasing more rapidly than net income, ROE, will increase. This is not, however, a positive for the firm. A firm can also issue debt to repurchase equity, thereby decreasing the book value of equity. This would increase the ROE but also make the firm's shares riskier due to the increased financial leverage (debt). R66-6 ★The uses of industry analysis  It provides a framework for understanding the firm.  Understanding a firm's business environment can provide insight about the firm's potential growth, competition, and risks.  In an active management strategy, industry analysis can identify industries that are undervalued or overvalued in order to weight them appropriately. Some investors engage in industry rotation, which is overweighting or underweighting industries based on the current phase of the business cycle.  In performance attribution analysis, the sources of portfolio return are determined relative to a benchmark. The industry representation within a portfolio is often a significant 470 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 component of attribution analysis. R67-6 ★methods of classification system  products and services：Systems that are grouped by products and services usually use a firm's principal business activity (the largest source of sales or earnings) to classify firms.  Firms can also be classified by their sensitivity to business cycles. This system has two main classifications: cyclical and non-cyclical firms.  Statistical methods, such as cluster analysis, can also be used. This method groups firms that historically have had highly correlated returns. The groups (., industries) formed will then have lower returns correlations between groups. P12-6 Company & Its Stock Q126-6 Chenchells India Trading Co. (CITC), an importer-exporter of specialty goods and garments, has operations In Asia, Europe, and North America. Marc Twinsing, CFA, a balanced fund manager, is considering adding CITC’s stock to his portfolio and he has compiled the following Information: CITC Industry Average Weighted Average Cost of Capital (WACC) 14% 12% Return on Assets (ROA) 20% 15% Dividend Yield 0% % Consensus Estimate of Stock’s Value $53 N/A Current Price of CITC’s Stock $50 N/A Based on his analysis Twinsings would most likely make conclusions about the company and its stock, respectively, would be: That CITC company is a: That CITC’s stock is a: A. growth company growth stock B. growth company speculative stock C. speculative company growth stock Solution: A CITC is a growth company because its spread between ROA and WACC is larger than the industry average and its dividend yield is 0% compared with the industry average of %. CITC’s stock is a growth stock considering its under-valuation. A speculative stock, on the other hand, would be overvalued. Q127-6 ★A company that is sensitive to the business cycle would most likely: A. not have growth opportunities. B. experience below-average fluctuation in demand C. sell products that the customer can purchase at a later date if necessary. Solution: C Customers' flexibility as to when they purchase the product makes the product more sensitive to the business cycle. 471 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q128-6 Which of the following factors would most likely be a limitation of applying business-cycle analysis to global industry analysis? A. Some industries are relatively insensitive to the business cycle. B. Correlations of security returns between different world markets are relatively low. C. One region or country of the world may experience recession while another region experiences expansion. Solution: C Varying conditions of recession or expansion around the world would affect the comparisons of companies with sales in different regions of the world. Q129-6 ★★In which sector would a manufacturer of personal care products be classified?（原版书R51-5） A. Health care. B. Consumer staples. C. Consumer discretionary Solution: B Personal care products are classified as consumer staples in the "Description of Representative Sectors." Q130-6 ★★Which of the following statements about commercial and government- industry classification systems is most accurate? （原版书R51-6） A. Many commercial classification systems include private for- profit companies. B. Both commercial and government classification systems exclude not-for-profit companies. C. Commercial classification systems are generally updated more frequently than government classification systems. Solution: C Commercial systems are generally updated more frequently than government systems, and include only publicly traded for-profit companies. Industry classification systems R68-6 Commercial classification:  Basic materials and processing firms(produce building materials, chemicals, paper and forest products, container and packaging, and metals, mineral, and mining)  Customer discretionary firm are cyclical and sell goods and services in industries such as automotive, apparel, hotels and restaurants.  Consumer staples firms are less cyclical and sell goods and services in industries such as food, beverage, tobacco, and personal care products.  Energy firms  Financial services firms  Health care 472 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Industrial and producer durables firms produce capital goods for commercial services industries. ( heavy machinery and equipment, aerospace, defense transportation, commercial services and supplies).  Technological firms. An analyst should not assume that two firms in the same narrowest industry classification can be compared with each other for fundamental analysis and valuation. Instead, the analyst should construct peer groups. R69-6 Growth 1) Growth companies: earn higher returns than WACC; sales and earnings grow faster than similar risk firm and the overall economy; have low dividend-payout ratios 2) Growth stocks: with a higher rate of return than similar risk stocks; usually undervalued 3) 注意：可能由于投资者过于乐观而使得增长型公司的股票价格已经被高估，及时公司利润仍在增长，该股票就不是增长型股票；相反，一个普通公司的股票，只要市场价格低于内在价值，就可以认为是增长型股票。 R70-6 ★Defensive 1) Defensive company: earnings are insensitive to downturns in the economy; have low business risk and moderate financial risk.主要看公司的盈利增长和整体经济增长的相关性，如果相关性不高，盈利增长很稳定，就是防守型公司。 2) Defensive stock: the stock’s rate of return do not decline or decline less than the market; have a small positive or negative beta.主要看股票的价格和市场指数的相关性，如果相关性不高，股价增长很稳定，就是防守型股票。 R71-6 Cyclical 1) Cyclical company: sales and earnings are heavily influenced by the aggregate business activity; have high business risk and financial risk主要看公司的盈利增长和整体经济增长的相关性，如果相关性很高，就是周期性公司。 2) Cyclical stock: have high betas; the company of the cyclical stock are more volatile than the overall market主要看股票的价格和市场指数的相关性，如果相关性很高，就是周期性股票。 R72-6 Speculative 1) Speculative company: the company’s assets involve risk but that also has the potential to generate very large earnings; 通常主营业务很不稳定。 2) Speculative stock: usually overpriced, leading to a high probability of low or negative rate of return; 虽然股价已经被高估，但仍有可能进一步上涨。 R73-6 ★Growth vs. value stock 1) Growth stock: a stock of the company that is experiencing rapid growth and sales and earnings; have high P/E and P/B ratios. 2) Value stock: undervalued for reasons other than earnings growth potential; usually has low P/E and P/B ratios. Q131-6 Which of the following statements about peer groups is most accurate? A. Constructing a peer group for a company follows a standardized process. B. Commercial industry classification systems often provide a starting point for constructing a peer group. 473 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. A peer group is generally composed of all the companies in the most narrowly defined category used by the commercial industry classification system. Solution: B Constructing a peer group is a subjective process, and a logical starting point is to begin with a commercially available classification system. This system will identify a group of companies that may have properties comparable to the business activity of interest. Q132-6 Which of the following is a method for constructing a peer group?（2012年12月真题） A. Business cycle B. Competitor’s product and supply C. Life cycle Solution: B Review competitor is a way to construct a peer group. Q133-6 ★With regard to forming a company's peer group, which of the following statements is not correct? A. Comments from the management of the company about competitors are generally not used when selecting the peer group. B. The higher the proportion of revenue and operating profit of the peer company derived from business activities similar to the subject company, the more meaningful the comparison. C. Comparing the company's performance measures with those for a potential peer-group company is of limited value when the companies are exposed to different stages of the business cycle. Solution: A Because it is a fake statement. Reviewing the annual report to find management's discussion about the competitive environment and specific competitors is a suggested step in the process of constructing a peer group. Q134-6 ★In which of the following life-cycle phases are price wars most likely to be absent? A. Mature. B. Decline. C. Growth. Solution: C The growth phase is not likely to experience price wars because expanding industry demand provides companies the opportunity to grow even without increasing market share. When industry growth is stagnant, companies may only be able to grow by increasing market share, ., by engaging in price competition. 474 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q135-6 ★★When graphically depicting the life-cycle model for an industry as a curve, the variables on the axes are: （原版书R51-21） A. price and time. B. demand and time. C. demand and stage of the life cycle. Solution: B The industry life-cycle model shows how demand evolves through time as an industry passes from the embryonic stage through the stage of decline. Q136-6 ★★If an industry tends to be characterized by falling price, relatively low barriers to entry, and relatively low competition, which of the following cycle the industry belongs to? (真题) A. Shakeout B. Mature C. Growth Solution: C A growth industry tends to be characterized by rapidly increasing demand, improving profitability, falling prices, and relatively low competition. The threat of new competitors entering the industry is usually highest when barriers to entry are relatively low. Q137-6 If an industry tends to be characterized by falling growth rate, and significant investment, which of the following cycle the industry belongs to?（2012年12月真题） A. Growth B. Shakeout C. Mature Solution: B The shakeout stage is usually characterized by slowing growth, intense competition and declining profitability. Q138-6 Which of the following statements concerning companies in different industry environments is most accurate?(MOCK92-82) A. Companies in mature industries tend to focus on efficiency gains and gain market share through superior products. B. An industry’s experience curve declines with a decrease in the utilization of capital equipment and spreading overhead over a fewer number of units. C. Companies in fragmented industries would not be highly price competitive because they tend to think individualistically, making coordination difficult. Solution: A Companies in mature industries are likely to be pursuing replacement demand rather than 475 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 new buyers and are probably focused on extending successful product lines rather than introducing revolutionary new products. Therefore, they tend to focus on cost rationalization and efficiency gains rather than on taking lots of market share. Further, companies with superior products or services are likely to gain market share. R74-6 ★peer group及相关概念：  A peer group is a set of similar companies an analyst will use for valuation comparisons.  To form a peer group, an analyst will often start by identifying companies in the same industry classification, using the commercial classification providers previously described.  The following are steps an analyst would use to form a peer group:  Use commercial classification providers to determine which firms are in the same industry.  Examine firms' annual reports to see if they identify key competitors.  Examine competitors' annual reports to see if other competitors are named.  Use industry trade publications to identify competitors.  Confirm that comparable firms have similar sources of sales and earnings, have similar sources of demand, and are in similar geographic markets  Adjust financial statements of non-financial companies for any financing subsidiary data they include R75-6 Illustrate demographic, governmental, social, and technological influences on industry growth, profitability, and risk.  Macroeconomic factors can be cyclical or structural (longer-term) trends, most notably economic output as measured by GDP or some other measure. Interest rates，Credit availability，Inflation.  Technology can change an industry dramatically through the introduction of new or improved products.  Demographic factors include age distribution and population size, as well as other changes in the composition of the population. As a large segment of the population reaches their twenties, residential construction, furniture, and related industries see increased demand. An aging of the overall population can mean significant growth for the health care industry and developers of retirement communities.  Governments have an important and widespread effect on businesses through various channels, including taxes and regulation. The level of tax rates certainly affects industries, but analysts should also be aware of the differential taxation applied to some goods.  Social influences relate to how people work, play, spend their money, and conduct their lives; these factors can have a large impact on industries. R76-6 ★Industry Life Cycle  In the embryonic stage, the industry has just started：Slow growth, High price, Large investment required, High risk of failure  In the growth stage, industry growth is rapid：Rapid growth, Limited competitive pressures, Falling prices, Increasing profitability,  In the shakeout stage, industry growth and profitability are slowing due to strong competition: Growth has slowed, Intense competition, Increasing industry overcapacity, Declining profitability, Increased cost cutting, Increased failures. 476 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  In the mature stage, there is little industry growth and firms begin to consolidate：Slow growth, Consolidation, High barriers to entry, Stable pricing, Superior firms gain market share.  In the decline stage, industry growth is negative: Negative growth, Declining prices, Consolidation.  Growth firms should be reinvesting in operations in an attempt to increase product offerings, increase economies of scale, and build brand loyalty.  Mature firms focus on cost efficiency because demand is largely from replacement. They find few opportunities to introduce, new products. These firms should typically pay out cash to investors as dividends. Q139-6 ★Which of the following industry characteristics is generally least likely to produce high returns on capital? A. High barriers to entry. B. High degree of concentration. C. Short lead time to build new plants. Solution: C With short lead times, industry capacity can be rapidly increased to satisfy demand, but it may also lead to overcapacity, and lower profits. Q140-6 ★★Which factor is most likely associated with stable market share?（原版书R51-14） A. Low switching costs. B. Low barriers to entry. C. Slow pace of product innovation Solution: C A slow pace of product innovation often means that customers prefer to stay with suppliers they know, implying stable market shares. Q141-6 Which of the following is not one of Porter's five forces? A. Intensity of rivalry. B. Bargaining power of suppliers. C. Threat of government intervention. Solution: C Although the threat of government intervention may be considered an element of some of Porter's five forces: Rivalry among existing competitor; threat of new entrants; threat of substitute products; bargaining power of suppliers Q142-6 ★★★An industry with high barriers to entry and weak pricing power most likely has: 477 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. high barriers to exit. B. stable market shares. C. significant numbers of issued patents. Solution: A An industry that has high barriers to entry generally requires substantial physical capital and/or financial investment. With weak pricing power in the industry finding a buyer for excess capacity (., to exit the industry) may be difficult. Q143-6 ★Which of the following statements best describes the relationship between pricing power and ease of entry and exit? Greater ease of entry:(Notes P296-6) A. and greater ease of exit decrease pricing power. B. and greater ease of exit increase pricing power. C. decreases pricing power and greater ease of exit increases pricing power. Solution: C In industries with greater ease of entry, firms have little pricing power because new competitors can take away market share. High costs of exiting result in overcapacity and likely price wars. Greater ease of exit (. low costs of exit) increase pricing power. Q144-6 With respect to competitive strategy, a company with a successful cost leadership strategy is most likely characterized by: A. a low cost of capital. B. reduced market share. C. the ability to offer products at higher prices than competitors. Solution: A Companies with low cost strategies must be able to invest in productivity-improving equipment and finance that investment at a low cost of capital. Market share and pricing depend on whether the strategy is pursued defensively or offensively. Q145-6 ★★Which of the following industries is most likely to be considered to have the lowest barriers to entry? （原版书R51-28） A. Oil services. B. Confections and candy. C. Branded pharmaceuticals. Solution: A The oil services industry has medium barriers to entry because a company with a high level of technological innovation could obtain a niche market in a specific area of expertise. Q146-6 ★★An equity analyst follows two industries with the following characteristics. (Mock 83-89) 478 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Industry 1: A few companies with proprietary technologies; products with unique features; high switching costs; and minimal regulatory influences. Industry 2: A few companies producing relatively similar products; sales varying with disposable income and employment levels; high capital costs and investment in physical plants; rapid shifts in market shares of competing firms; and minimal regulatory influences. Based on the above information, the analyst will most appropriately conclude that compared to the firms in Industry 2, those in Industry 1 would potentially have: A. larger economic profits. B. over-capacity problems. C. high bargaining power of customers. Solution: A The economic profit (the spread between the return on invested capital and the cost of capital) tends to be larger in industries with differentiated products, greater pricing power, and high switching costs to customers. Industry 1 has these features. Firms in Industry 2, on the other hand, have little pricing power (undifferentiated products and rapid shifts in market shares indicating intense rivalry), which is indicative of potentially smaller economic profits. R77-6 ★Industry Concentration  High industry concentration does not guarantee pricing power  Absolute market share may not matter as much as a firm's market share relative to its competitors.  If industry products are undifferentiated and commodity-like, then consumers will switch to the lowest-priced producer.  If the industry is capital intensive, and therefore costly to enter or exit, overcapacity can result in intense price competition. R78-6 ★Ease of Entry  In industries with low barriers to entry, firms have little pricing power.  Capital, intellectual property, and customer base should be considered to assess the ease of entry.  Examine the composition of the industry over time. If the same firms dominate the industry today as ten years ago, entry is probably difficult.  High barriers to entry do not necessarily mean firm pricing power is high( overcapacity)  Low barriers to entry do not ensure success for new entrants. R79-6 ★Capacity  Undercapacity, a situation in which demand exceeds supply at current prices, results in pricing power.  Capacity is fixed in the short run and variable in the long run.  However, producers may overshoot the optimal industry capacity, especially in cyclical markets.  Capacity is not necessarily physical. For example, an increase in demand for insurance can 479 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 be more easily and quickly met than an increase in demand for a product requiring physical capacity, such as electricity or refined petroleum products.  If capacity is physical and specialized, overcapacity can exist for an extended period if producers expand too much over the course of a business cycle. R80-6 Market Share Stability  Whether firms' market shares in an industry have been stable over time.  Market shares that are highly variable likely indicate a highly competitive industry in which firms have little pricing power.  Switching costs, such as the time and expense of learning to use a competitor's product, tend to be higher for specialized or differentiated products. R81-6 Principles of strategy analysis of an industry  Industries differ markedly in profitability because of differences in economic fundamentals, industry structure, and degree of competition.  ★The degree of economic profits depends in part on pricing power  Rivalry among existing competitors：Rivalry increases when many firms of relatively equal size compete within an industry. Slow growth leads to competition as firms fight for market share, and high fixed costs lead to price decreases as firms try to operate at full capacity. Industries with products that are undifferentiated or have barriers (are costly) to exit tend to have high levels of competition.  Threat of new entrants：Industries that have significant barriers to entry (., large capital outlays for facilities) will find it easier to maintain premium pricing.  Threat of substitute products：Substitute products limit the profit potential of an industry because they limit the prices firms can charge by increasing the elasticity of demand.  Bargaining power of buyers：Buyers' ability to bargain for lower prices or higher quality influences industry profitability. Bargaining by governments and ever-larger health care providers have put downward pressure even on patented drugs  Bargaining power of suppliers：Suppliers' ability to raise prices or limit supply influences industry profitability. Suppliers are more powerful if there are just a few of them and their products are scarce.  Summary（重要，请仔细阅读）  Higher barriers to entry reduce competition.  Greater concentration (a small number of firms control a large part of the market) reduces competition, whereas market fragmentation (a large number of firms, each with a small market share) increases competition.  Unused capacity in an industry, especially if prolonged, results in intense price competition.  Stability in market share reduces competition. For example, loyalty of a firm's customers tends to stabilize market share and profits.  More price sensitivity in customer buying decisions results in greater competition.  Greater maturity of an industry results in slowing growth. A company analysis should include the following elements:  Firm overview, including information on operations, governance, and strengths and weakness. 480 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Industry characteristics.  Product demand.  Product costs.  Pricing environment.  Financial ratios, with comparisons to other firms and over time.  Projected financial statements and firm valuation. P13-6 DDM Q147-6 An analyst collected the following data about a listed company: Earnings per share 20 Dividend declared 3 Return on assets 6% Debt/Equity ratio Net profit margin 12% The constant growth rate of dividends is closest to: （2012年12月真题） A. 2% B. 12% C. 20% Solution: B From debt/equity ratio we can calculate the Asset/Equity ratio=. ROE= ROA υFinancial Leverage = 6% υ = % Constant growth rate of dividends g= ROE υretention ratio = ROE υ(1- payout ratio) = % υ(1-3/20) = % Q148-6 A company’s series B, 8% preferred stock with a par value of $50 pays quarterly dividends. Its current market value is $35. The shares are retractable (at par) with the retraction date set for three years from today. Similarly rated preferred issues have an estimated nominal required rate of return of 12%. Analysts expect a sustainable growth rate of 4% for the company’s earnings. The intrinsic value estimate of a share of this preferred issue is closest to: A. $. B. $. C. $. Solution: B Because the current market value is well below the retraction price, retraction is likely and the preferred share will be priced on the basis of retraction feature. Quarterly dividend = ($50×) /4 = $1 a share; Quarterly required return = 12% / 4 = 3%; V0= [$1/ + 1/ + 1/ + ... + 1/ + 1/+ 50/] = $ Using a financial calculator: PMT = $1, N = 12; FV = $50; I = 3%; Compute PV = $ 481 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q149-6 ★★Which of the following is the most appropriate reason for using a free-cash-flow-to-equity (FCFE) model to value equity of a company?(Mock85-87) A. FCFE is a measure of the firm’s dividend-paying capacity. B. FCFE models provide more accurate valuations than the dividend discount models. C. A firm’s borrowing activities could influence dividend decisions but they would not impact FCFE. Solution: A FCFE is a measure of the firm’s dividend paying capacity. Q150-6 ★Geo Telecommunications Inc. is a fast growing company with a double-digit growth rate that is expected to continue for three more years. In his pursuit of valuing the company’s stock, Dimiter Nenkov, a free-lance equity analyst, has compiled the following data about the company: Current years free cash flow to equity €20 million Growth rate in free cash flow during the next three 30% in years 1 and years 2 20% in year 3 Growth rate in free cash flow for year 4 and beyond 8% Weighted average cost of capital 12% Cost of equity capital 15% Number of outstanding shares 50 million Based on the above information, Nenkov’s best estimate of the value per share for Geo Telecommunications would be closest to: A. €. B. €. C. € . Solution: A Time FCFE PVIF @15% Present Value Period 1 20 υ=26 € 2 20 υ= € 3 20 υ υ= € 4&Beyond V3=（ υ）/( – )= € Value of Equity € Value per share = Value of Equity / # of outstanding shares € Q151-6 ★An investor uses the data below and the constant growth model to evaluate a company's common stock. To estimate growth, she uses the average value of the: 1. dividend growth rate over the period 2004-2009 and 2. sustainable growth rate for the year 2009 482 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Year EPS DPS ROE 2009 $ $ 12% 2008 $ $ 17% 2007 $ $ 13% 2006 $ $ 15% 2005 $ $ 11% 2004 $ $ 9% If her requited return is 15 percent, the stock's estimated value is closest to: A. $ B. $ C. $ Solution: B Dividend growth rate over the period 2004-2009= (1+g5)=; g=%=9% Sustainable growth rate for the year 2009; retention rate= (1-Dividend payout ratio)=[1-( g= bxROE; g=%=% Average of the two approaches=(9+)/2=% V0=D1/(r-g)=($)/()= Q152-6 An investor evaluating a company's common stock for investment has gathered the following data. Current year's earnings per share $ Dividend payout ratio 60% Dividend growth rate expected during Year 1 and 25% 2D ividend growth rate expected after Year 2 5% Investors' requited rate of return 12% The value per shore of this common stock is closest to: A. $ B. $ C. $ Solution: B Current year's dividend per share =$=$ V=()/+()/+()()/()}/ = $+$+ =$ Q153-6 ★★The best model to use when valuing a voting dividend-paying company that is just entering the growth phase is most likely the: （原版书R52-19） A. Gordon growth model. B. two-stage dividend discount model. C. three-stage dividend discount model. 483 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C The Gordon growth model is best suited to valuing mature companies. The two-stage model is best for companies that are transitioning from a growth stage to a mature stage. The three-stage model is appropriate for young companies just entering the growth phase. Q154-6 ★An analyst estimates a value of $45 for a stock with a market price of $50. The analyst is most likely to conclude that a stock is overvalued if:(Notes P325-1) A. few analysts follow the stock and the analyst has less confidence in his model inputs. B. few analysts follow the stock and the analyst is confident in his model inputs. C. many analysts follow the stock and the analyst is confident in his model inputs. Solution: B If the analyst is more confident of his input values, he is more likely to conclude that the security is overvalued. The market price is more likely to be correct for a security followed by many analysts and less likely correct when few analyst follow the security. Q155-6 ★★An investor gathered the following data in order to estimate the value of the company's preferred stock: (Mock 83-81) Par value of preferred stock offered at a 6% dividend rate 100 Company's sustainable growth rate 5% Yield on comparable preferred stock issues % Investor's marginal tax rate 30% The value of the company's preferred stock is closest to: A. $. B. $. C. $. Solution: A V0 = D0/r = ($100 ×)/ = $ R82-6 DDM掌握计算： 1. The general DDM valueD1DDD(1k123?e)(1k)2(1k)3ee(1k?e)2. Multiple-year holding period DDM valueDDP11ke)12(1ke)22((1k2e)3. Preferred stock valutition vaDlue pkp  The constant growth DDM 484 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 D0(1gGGM) PV (c)0 D1ke-gcke-g c Dividends grow at a constant rate g, 通过公式的变形，求k 和 g 的关系。 k PDeV1 g 0c4. ★Sustainable growth (g)=(1-dividend payout ratio)×ROE  Assumption: 1) The firm expects to pay a dividend, D, in one year. 2) Dividends will grow at a constant rate, g, forever. 3) The growth rate(g) is less than the required rate(r)  Limitations: 1) Very sensitive to estimates of r and g 2) Difficult with non-dividend stocks 3) Difficult with unpredictable growth patterns(use multi-stage model) R83-6 Free cash flow to equity model: A. FCFE=net income+depreciation-increase in working capital-fixed capital investment (FCInv)-debt principle repayments+new borrowing. B. FCFE= CFO-FCInv+net borrowing C. The required return for equity is calculated using CAPM model. P14-6 P/E Ratio Q156-6 ★An investor gathers the following data. To estimate the stock's justified forward P/E, the investor prefers to use:  the earnings growth rate rather than the dividends growth rate and  the average of the payout ratios over the relevant period, in this case 2006-2009, rather the most recent payout ratio. Year EPS DPS ROE 2009 $ $ 12% 2008 $ $ 17% 2007 $ $ 13% 2006 $ $ 15% The yield on 10-year T-notes is 3 percent and the current equity risk premium is percent. If beta is , then the stock's justified forward P/E is closest to: A. 12. B. 16. C. 21. Solution:C Earnings growth rate over the period 2006-2009=(1+g3)=; g=% Average payout ratio=(+++)/4= Required rate of return on share i= Current expected risk-free rate of return+ Betax[Market (equity) risk premium]=3%+(%)=% 485 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P/E1=payout rate/(r-g) = Q157-6 An investor evaluating a company's common stock now available on the market is selling for $15, and he has gathered the following data. Current year's earnings per share $ Dividend retention ratio 40% Expected dividend growth rate 5% Investors' requited rate of return 12% The justified leading P/E ratio is: （2012年12月真题） A. 6 B. C. 10 Solution: B The justified leading P/E ratio is D1P0 E 1E =1-b=60%=-g12%-5% Q158-6 A price earnings ratio that is derived from the Gordon growth model is inversely related to the: A. growth rate. B. dividend payout ratio. C. required rate of return. Solution: C The justified forward P/E is calculated as follows: P E0 payo ut rate1rgP/E is inversely related to the required rate of return, r, and directly related to the growth rate, g and the dividend payout ratio, D/E. Q159-6 An investor gathers the following data to estimate the intrinsic value of a company’s stock using the justified forward P/E approach. Next year’s earnings per share $ Return on equity % Dividend payout ratio 60% Required return on shares 10% The intrinsic value per share is closest to: A. $36. B. $48. C. $72. 486 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution:A Dividend growth rate = (1 - Payout ratio) × ROE = × = 5%; Justified forward P/E: P0 / E1 = payout ratio/ (r — g) = / ( — ) = 12; intrinsic value:P0 = P/E1 × E1 = 12 × $3 = $36 Q160-6 An analyst collects the following data on the return on equity (ROE) and the payout ratio for two companies, M and N. Using a required return of % for both companies, she computes the justified forward P/E ratios, which are also given below. Company Return on equity (%) Payout ratio (%) Justified forward P/E M 30 N 40 If Company M increases its dividend payout ratio to 40% and Company N decreases its dividend payout ratio to 30%, which of the following will most likely occur? The justified P/E ratio of: A. both companies would increase. B. both companies would decrease. C. Company M would increase but that of Company N would decrease. Solution:A Dividend growth rate = (1 – Payout ratio) × ROE; Justified forward P/E: P0/E1 = pay out ratio/(r – g). Using the new payout ratios, the justified forward P/Es, calculated below, of both firms would increase. Company M: New dividend growth rate = (1 – ) x 12% = %; New Justified forward P/E = – ) = . Company N: New dividend growth rate = (1 – ) x 14% = %; New Justified forward P/E = – ) = Q161-6 An analyst gathered the following information about a company: Current earnings per share $ Current dividend per share $ Current market price per share $35 Required rate of return on the stock % Expected growth rate of earnings and dividends % Which of the following statements best describes the company’s price-to-earnings ratio (P/E)? Compared with the company’s trailing P/E, the P/E based on the Gordon growth dividend discount model is: (2014 Mock 99-87) A. the same. B. lower. 487 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. higher. Solution:B The P/E based on the Gordon growth dividend discount model is lower: TraCurrent stock price35iling P/E= P/E based on the Gordon growth dividend discount model D1/E1 (2 .)/(6υ) υ P/E Ratio计算： R84-6 区分Trailing P/E (P0 / E0)，Leading P/E (P0 / E1)。  trailing/ market price per share PEEPS over previous 12 months leading P/E market price per shareforecast EPS over next 12 month Justified P/E (使用DDM模型演算而来的P/E): Leading P/E =P/ED/E 01 11P/E1-br-g01 r-gTrailing P/E P0/E1 D1/E1 (1 b)(1 g)k-gr g P同的k和g 的组合对其大E ,以及不0 PR(D1 / E小影响 1)1- kgR85-6 required rate of return所包含的三个因素：RFRreal，IP，RP。  k=required rate of return=(1+RFRreal)(1+IP)(1+RP)-1  k= required rate of return(approximate)≈RFRreal+IP+RP  g=(RR)(ROE) P15-6 Price Multiples Q162-6 ★Strongsville Fabricators Inc. uses the FIFO method or inventory valuation. Assuming a rising costs environment and other factors held constant, Strongsville’s price-to-earning and price-to-book multiples relative to those for another company that uses the LIFO method or inventory valuation would be: Price-to-earnings Multiple Price-to-book Multiple A. Overstated overstated B. Overstated understated C. Understated understated Solution: C In a rising costs environment, FIFO would result in higher earnings, higher ending inventory, as 488 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 well as higher book value of equity. Thus, both P/E and P/BV tend to be understated relative to a comparable firm that uses LIFO method. Q163-6 ★★An analyst makes the following statement: "Use of P/E and other multiples for analysis is not effective because the multiples are based on historical data and because not all companies have positive accounting earnings." The analyst's statement is most likely:（原本书R52-23） A. inaccurate with respect to both historical data and earnings. B. accurate with respect to historical data and inaccurate with respect to earnings. C. inaccurate with respect to historical data and accurate with respect to earnings. Solution: A The statement is inaccurate in both respects. Although multiples can be calculated from historical data, forecasted values can be used as well. For companies without accounting earnings, several other multiples can be used. These multiples are often specific to a company's industry or sector and include price to-sales and price to cash flow. Q164-6 ★The stocks of a bank are trading for 78 euros currently. An analyst lists the following data: Shares currently outstanding 1,000,000 Contributed capital 42,000,000 Additional paid-in capital 135,000,000 Treasury stocks (50,000) 14,000,000 Ending retained earnings 21,000,000 The price/book value ratio is closest to: A. B. C. Solution: B P/B ratio = book value of equity / number of shares outstanding = (42,000,000 + 135,000,000 + 21,000,000-14,000,000) / 1,000,000=184, 78 / 184 = Q165-6 An analyst has prepared a table of the average trailing twelve-month price-to-earning (P/E), price-to-cash flow (P/CF), and price-to-sales (P/S) for the Tanaka Corporation for the years 2005 to 2008. Year P/E P/CF P/S 2005 2006 2007 2008 As of the date of the valuation in 2009, the trailing twelve-month P/E, P/CF, and P/S are, 489 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 respectively, , , and . Based on the information provided, the analyst may reasonably conclude that Tanaka shares are most likely: A. overvalued. B. undervalued. C. fairly valued. Solution: A Tanaka shares are most likely overvalued. As the table below shows: all the 2009 multiples are currently above their 2005-2008 averages. Year P/E P/CF P/S 2005 2006 2007 2008 Average Q166-6 Enterprise value is most often determined as market capitalization of common equity and preferred stock minus the value of cash equivalents plus the: A. book value of debt. B. market value of debt. C. market value of long-term debt. Solution: B The market value of debt must be calculated and taken out of the enterprise value. Enterprise value, sometimes known as the cost of a takeover, is the cost of the purchase of the company, which would include the assumption of the company's debts at market value. Q167-6 An investor who wants to estimate the enterprise value multiple (EV/EBITDA) of a company has gathered the following data: Market value of debt $10million Market capitalization $45million Cash and short-term investments $ EBITDA $15million Firm’s marginal tax rate 40% The company’s EV/EBITDA multiple is closest to: A. . B. . C. . Solution: B Enterprise value measures total company value. EV = Market value of common and preferred stock + MV of debt - cash & short-term investments 490 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 EV = 45 + 10 = ; EV/EBITDA = / 15 = Q168-6 ★★An analyst has determined that the appropriate EV/EBITDA for Rainbow Company is . The analyst has also collected the following forecasted information for Rainbow Company:（原版书R52-30） EBITDA = $22,000,000 Market value of debt = $56,000,000 Cash = $1,500,000 The value of equity for Rainbow Company is closest to: A. $169 million. B. $224 million. C. $281 million Solution: A EV = x 22,000,000 = $224,400,000 Equity value = EV — Debt + Cash = 224,400,000 — 56,000,000+ 1,500,000 = $169,900,000 Q169-6 ★A company’s market information and balance sheet data at the end of fiscal year 2012 are as follows: Price per Share and Shares Outstanding Current market price per share $ Number of shares outstanding (millions) Balance Sheet Data As of 2012 ($ millions) Cash and cash equivalents Current liabilities Accounts receivable Long-term liabilities Inventories Investment securities Common shareholders’ equity Property, plant, and equipment Total assets Total liabilities and equity If an analyst estimates that the market value of the company’s investment securities is 115% of their reported value, the company’s ratio of price to adjusted book value is closest to: (2014 Mock 98-87) A. . B. . C. . Solution:A Adjusted book value per share = (Adjusted value of assets – Total liabilities)/Number of shares Market value of assets = + + + ( × ) + 30 = $ million Market value of liabilities = + = $ million Adjusted book value per share = ( – )/ = $ Price-to-adjusted book value = $ = 491 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Price Multiples 掌握概念及计算： R86-6 比较各价格乘数 P/E，P/BV，P/S，P/CF: P/marke E tprEicPeSpershareP/BVma rketvalueofequity marketpricepersharebookvalueofequitybookva luepershareP/S=marke t value of equity=market price per sharetotal salessales per sharemark P/CF=et value of equitymarket price per sharecash= flwcash flow per share注：CF=net income +depreciation+amortization adjusted CFO =CFO+ (>net cash interest outflow)*(1-tax rate) ≅ cash flow=CF,adjusted CFO,FCFE,or EBITDAR87-6 应用：The security with the lower multiple is relatively undervalued compared to the other one or its industry’s mean or median. 以及各price multiple的优缺点，适用行业。  P/E ratio is popular in the investment community  Darwbacks of using the P/E ratio 1) Earnings can be negative 2) The volatile,transitory portion of earnings makes the interpretation of P/E difficult for analysts  P/B ratio can typically be used when P/E cannot and is more stable than P/ is an appropriate measure in finance, investment, insurance, and banking firms.  ★Adjustment BV: report tangible book value per share, which is subtracting reported intangible assets from common shareholders’ equity. The intangible assets include goodwill (not really an asset) and patent (not separable). Certain adjustment may be appropriate for comparability, such as the off-balance sheet assets and liabilities, and the accounting rule.)  Advantages of P/B  BV almost always>0  BV is more stable than EPS  Measure NAV per share, more fit for valuing companies composed chiefly of liquid assets, such as finance institutions.  Justified P/B: P/B=(ROE-g)/(r-g)  Drawbacks of using the P/B ratio 1) P/BV ratios do not recognize the value of nonphysical assets such as human capital. 2) Inflation and technological change can cause the book and market value of assets to differ significantly.  ★P/S is meaningful even for distressed firms which BV can be negative. And sales/revenue is not easy to is popular in mature or cyclical industries and start-up companies. 492 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  P/S  Advantages:  Meaningful even for distressed firms  Sales revenue not easily manipulated  Not as volatile as P/E ratios.  Useful in valuing mature, cyclical, and start-up firms without record of earnings.  Differences in P/S may be related to differences in long-run average returns.  Disadvantages:  High sales do not imply high profits and cash flows.  Does not capture cost structure difference.  Revenue recognition practices still distort sales.  ★P/CF Advantages:  Cash flow is less subjected to manipulate than EPS.  More stable than P/E  Fit for differences in accounting conservatism between companies. Disadvantages:  Difficult to estimate true CFO  FCFE is better but is more volatile and more frequently negative.  ★EV/EBITDA Enterprise value: it measures total company value, not only equity. EV= market value of common stock+market value of preferred equity+market value of debt+minority interest-cash and investments. Q170-6 ★An analyst gathers the following information about a company: Balance Sheet Assets Liabilities and Shareholders’ Equity Cash $ 5,000 Accounts payable $ 10,000 Accounts receivable 15,000 Notes payable 15,000 Inventory 25,000 Long-term debt 40,000 Net fixed assets 80,000 Common shareholders’ equity 60,000 Total assets $125,000 Total liabilities and equity $125,000 Additional Information Number of outstanding shares 7,000 Market value of long-term debt $45,000 Market value of accounts receivable and inventory 90% of reported values Net fixed assets 120% of reported value Accounts payable and notes payable Same as the reported value Using asset-based valuation approach, the estimated value per share is closest to: A. $ . B. $. C. $. Solution: A 493 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Market value of assets $5,000 + $40,000() + $80,000() $137,000 Market value of liabilities 10,000 + $15,000 + $45,000 $70,000 Estimated value per share ($137,000 - $70,000) / 7,000 shares $ Q171-6 Which of the following is most likely a reason for using asset-based valuation? A. The analyst is valuing a privately held company. B. The company has a relatively high level of intangible assets. C. The market values of assets and liabilities are different from the balance sheet values. Solution: A Asset-based valuations are most often used when an analyst is valuing private enterprises. Both B and C are considerations in asset-based valuation but are more likely to be reasons to avoid that valuation model rather than reasons to use it. Q172-6 ★Which of the following firms would most appropriately be valued using an asset-based model? (Notes P325-13) A. An energy exploration firm in financial distress that owns drilling right for offshore areas. B. A paper firm located in country that is experiencing high inflation. C. A software firm that invests heavily in research and development and frequently introduces new products. Solution: A The energy exploration firm would be most appropriately valued using an asset-based model. Its near-term cash flows are likely negative, so a forward-looking model is of limited use. Futhermore, it has valuable assets in the form of drilling rights that likely have a readily determined maket value. The paper firm would likely not be appropriately valued using an asset-based model because high inflation makes the values of a firm’s assets more difficult to estimate. An asset-based model would not be appropriate to va;ue the software firm because the firm’s value largely consists of internally developed intangible assets. R88-6 ★Asset-based valuation  Equity value is the market or fair value of assets minus the market or fair value of liabilities.  Applying asset-based models is especially problematic for a firm that has a large amount of intangible assets, on or off the balance sheet.  Asset-based model valuations are most reliable when the firm has: primarily tangible short-term assets, assets with ready market values, The firm will cease to operate and is being liquidated.  Asset-based models are often used to value private companies R89-6 Compare the advantages and disadvantages of each category of valuation model. Advantages of discounted cash flow models:  They are based on the fundamental concept o discounted present value and are well grounded in finance theory.  They are wide accepted in the analyst community. 494 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Disadvantages of discounted cash flow models:  Their input must be estimated.  Value estimates are very sensitive to input values. ★Advantages of comparable valuation using price multiples:  Evidence that some price multiples are useful for predicting stock returns.  Price multiples are widely used by analysts.  Price multiples are readily available.  They can be used in time series and cross-sectional comparisons.  EV/EBITDA multiples are useful when comparing firm values independent of capital structure or when earning are negative and the P/E ratio cannot be used. ★Disadvantages of comparable valuation using price multiples:  Lagging price multiples reflect the past.  Price multiples for cyclic firms may be greatly affected by economic conditions at a given point in time.  A stock may appear overvalued by the comparable method but undervalued by a fundamental method, or vice versa.  Different accounting methods can result in price multiples that are not comparable across firms, especially internationally.  A negative denominator in a price multiple results in a meaningless ratio. The P/E ratio is especially susceptible to this problem. ★ Advantages of price multiple valuations on fundamentals:  They are based on theoretically sound valuation models.  They correspond to widely accepted value metrics. ★Disadvantages price multiple valuations based on fundamentals:  Price multiples based on fundamentals will be very sensitive to the inputs(especially the k-g denominator) ★Advantages of asset-based models:  They can provide floor value.  They are most reliable when the firm has primarily tangible short-term assets, assets with ready market values, or when the firm is being liquidated.  They are increasing useful for valuing public firms that report fair values ★Disadvantages of asset-based models:  Market values are often difficult to obtain.  Market values are usually different than book values.  They are inaccurate when a firm has a high proportion of intangible assets or future cash flows not reflected in asset values.  Assets can not be difficult to value during periods of hyperinflation. 495 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 7-Fixed Income P1-7 Basic features of a fixed-income security Q1-7 A sovereign bond which has a maturity of 15 years can be described as a (2014 原版书R52-2) A. Perpetual bond. B. Pure discount bond. C. Capital market security. Solution: C A capital market security has an original maturity longer than one year. A is incorrect because a perpetual bond does not have a stated maturity date. Thus, the sovereign bond, which has a maturity of 15 years, cannot be a perpetual bond. B is incorrect because a pure discount bond is a bond issued at a discount to par value and redeemed at par. Some sovereign bonds (., Treasury bills) are pure discount bonds, but others are not. Q2-7 An 8-year bond was issued two years ago. The bond is denominated in . dollars, offers a coupon rate of 8% with interest paid semi-annually, and is currently priced at 102% of par. Which of the following is most accurate? (2014 原版书R52-1) A. The bond’s tenor is six years. B. Its nominal rate is 4%. C. The redemption value is 102% of the par value. Solution: A The tenor of the bond is the time remaining until the bond's maturity date. Although the bond had a maturity of 8 years at issuance (original maturity), it was issued two years ago. Thus, there are six years remaining until the maturity date. B is incorrect because the nominal rate is the coupon rate, ., the interest rate that the issuer agrees to pay each year until the maturity date. Although interest is paid semi-annually, the nominal rate is 8%, not 4%. C is incorrect because it is the bond's price, not its redemption value (also called principal amount, principal value, par value, face value, nominal value, or maturity value), that is equal to 102% of the par value. R1-7 描述basic features of a fixed-incom security  issuer  maturity  par value  coupon rate and frequency  currency P2-7 bond indenture, affirmative and neagtive convenants Q3-7 ★The purpose of an affirmative covenant is most likely to: (2014 原版书R52-6) A. limits on the issuer's leverage ratio. B. how the proceeds of the bond issue will be used. 496 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. the maximum percentage of the issuer's gross assets that can be sold. Solution: B Affirmative (or positive) covenants enumerate what issuers are required to do and are typically administrative in nature. A common affirmative covenant describes what the issuer intends to do with the proceeds from the bond issue. A and C are incorrect because imposing a limit on the issuer's leverage ratio or on the percentage of the issuer's gross assets that can be sold are negative covenants. Negative covenants prevent the issuer from taking actions that could reduce its ability to make interest payments and repay the principal. Q4-7 ★★Which of the following content is included in negative bond covenants. The issuer is: (2014 原版书R52-7) A. required to pay taxes as they come due. B. prohibited from investing in risky projects. C. required to maintain its current lines of business. Solution: B Prohibiting the issuer from investing in risky projects restricts the issuer's potential business decisions. These restrictions are referred to as negative bond covenants. A and C are incorrect because paying taxes as they come due and maintaining the current lines of business are positive covenants Q5-7 ★★Which of the following content is in affirmative covenant? (2014 原版书R52-8) A. The company can’t sell assets that have been pledged as collateral; B. To insure and perform periodic maintenance on financed assets. C. The company can’t borrow additional money unless certain financial conditions are met. Solution: B Affirmative covenants indicate what the issuer "must do" and are administrative in nature. A covenant requiring the issuer to insure and perform periodic maintenance on financed assets is an example of affirmative covenant. A and C are incorrect because they are negative covenants; they indicate what the issuer cannot do. R2-7 描述functions of a bond indenture  Defines the obligations of and restrictions on the borrower  Forms the basis for all future transactions between the bondholder and the issuer R3-7 区分negative covenants & affirmative covenants  Negative covenants: restrictions on a bond issuer’s operating decisions.  Restrictions on asset sales  Negative pledge fo collateral  Restrictions on additional borrowing 497 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Affirmative covenants: administrative actions the issuer must perform  Make timely interest and principal payments to bondholders  Insure and maintain assets  Comply with applicable laws and regulations P3-7 Leagl, regulatory and tax consideration Q6-7 Which of the following entity is most likely responsible for the timely payment of interest and repayment of principal to bondholders? (2014 原版书P312-2) A. Trustee. B. Primary or lead bank of the issuer. C. Treasurer or chief financial officer of the issuer. Solution: A Although the issuer is ultimately the source of the contractual payments, it is the trustee that ensures timely payments. Doing so is accomplished by invoicing the issuer for interest payments and principal repayments and holding the funds until they are paid. Q7-7 Which of the following is the benefit of issuing bonds through a special purpose vehicle? (2014 原版书P312-4) A. Bankruptcy remoteness. B. Beneficial tax treatments. C. Greater liquidity and lower issuing costs. Solution: A A SPV is a bankruptcy-remote vehicle. Bankruptcy remoteness is achieved by transferring the assets from the sponsor to the SPV. Once this transfer is completed, the sponsor no longer has ownership rights. If the sponsor defaults, no claims can be made to recover the assets that were transferred or the proceeds from the transfer to the SPV. Q8-7 Which of the following bonds can be repaid by using the repayment of previous loans made by the issuer is: (2014 原版书P313-5) A. Sovereign bonds. B. Supranational bonds. C. Non-sovereign bonds. Solution: B The source of payment for bonds issued by supranational organizations is either the repayment of previous loans made by the organization or the paid-in capital of its member states. A is incorrect because national governments rely on their taxing authority and money creation to repay their debt. C is incorrect because non-sovereign bonds are typically repaid from the issuer's taxing authority or the cash flows of the project being financed. Q9-7 ★Which of the following is not an example of external credit enhancement? (2014 原498 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 版书R52-5) A. A Letter of credit B. A surety bond C. Overcollaterization Solution: C Overcollaterization is a type of internal credit enhancement. Q10-7 Collateral trust bonds is most likely backed by: (2014 原版书P313-6) A. Securities. B. Mortgages. C. Physical assets. Solution: A Collateral trust bonds are secured by securities, such as common shares, other bonds, or other financial assets. B is incorrect because mortgage¬backed securities are secured by mortgages. C is incorrect because equipment trust certificates are backed by physical assets such as aircraft, railroad cars, shipping containers, or oil rigs. Q11-7 ★★Which of the following external credit enhancement has the least amount of third-party risk(2014 原版书P313-7) A. surety bond. B. letter of credit. C. cash collateral account. Solution: C The third-party (or counterparty) risk for a surety bond and a letter of credit arises from both being future promises to pay. In contrast, a cash collateral account allows the issuer to immediately borrow the credit-enhancement amount and then invest it. Q12-7 ★A South African company issues bonds denominated in dollars that are sold to investors in the . These bonds can be best described as: 2014 原版书R52-8) A. Eurobonds. B. Global bonds. C. Foreign bonds. Solution: C Foreign bonds are issued by an incorporated in a foreign country that trade on the national bond market of another country in that country’s currency. A is incorrect because Eurobonds are bonds issued outside the jurisdiction of any single country. B is incorrect because global bonds are bonds issued in the Eurobond market and at least one domestic country simultaneously. ( Q13-7 ★Which of the following is an example of a domestic bond? (2014 原版书P316-1) 499 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. A bond is issued by LG Group from South Korea, denominated in British pounds, and sold in the United Kingdom. B. A bond is issued by the . Debt Management Office, denominated in British pounds, and sold in the United Kingdom. C. A bond is issued by Wal-Mart from the United States, denominated in . dollars, and sold in various countries in North America, Europe, the Middle East, and Asia Pacific. Solution: B A domestic bond is issued by a local issuer, denominated in local currency, and sold in the domestic market. Gilts are British pound—denominated bonds issued by the . Debt Management Office in the United Kingdom. Thus, they are . domestic bonds. A is incorrect because a bond issued by LG Group from South Korea, denominated in British pounds, and sold in the United Kingdom, is an example of a foreign bond (bulldog bond). C is incorrect because a bond issued by Wal-Mart from the United States, denominated in . dollars, and sold in various countries in North America, Europe, the Middle East, and Asia Pacific is most likely an example of a global bond, particularly if it is also sold in the Eurobond market. Q14-7 Most of Eurobonds are : (2014 原版书R52-9) A. bearer bonds. B. registered bonds. C. subject to greater regulation. Solution: A Eurobonds are typically issued as bearer bonds, ., bonds for which the trustee does not keep records of ownership. In contrast, domes-tic and foreign bonds are typically registered bonds for which ownership is recorded by either name or serial number. B is incorrect because Eurobonds are typically issued as bearer bonds, not registered bonds. C is incorrect because Eurobonds are typically subject to lower, not greater, regulation than domestic and foreign bonds. Q15-7 ★★An investor in a country with an original issue discount tax provision purchases a 20-year pure discount bond. If the investor plans to hold the bond until maturity. The investor will most likely report: (2014 原版书R52-11) A. a capital gain at maturity. B. a tax deduction in the year the bond is purchased. C. taxable income from the bond every year until maturity. Solution: C The original issue discount tax provision requires the investor to include a prorated portion of the original issue discount in his taxable income every tax year until maturity. The original issue discount is equal to the difference between the bond's par value and its original issue price. A is incorrect because the original issue discount tax provision allows the investor to increase 500 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 his cost basis in the bond so that when the bond matures, he faces no capital gain or loss. B is incorrect because the original issue dis-count tax provision does not require any tax deduction in the year the bond is purchased or afterwards. Q16-7 ★interest portion of a bond investment is taxed as: (2014 原版书P318-1) A. ordinary income. B. short-term capital gain. C. long-term capital gain. Solution: A Interest income is typically taxed at the ordinary income tax rate, which may be the same tax rate that individuals pay on wage and salary income. R4-7 legal, regulatory 和 tax consideration对fixed-income securities 发行及交易的影响  The places where fixed-income securities are issued and traded  National bond market  Domestic bond: bond issued by a firm domiciled in a country and also traded in that country’s currency  Foreign bond: bond issued by a firm incorporated in a foreign country that trade on the national bond market of another country in that country’s currency  Eurobond market  Eurobond: issued outside the jurisdiction of any one country and denominated in a currency different from the currency of the countries in which they are sold.  Global bonds: Eurobonds that trade in the national bond market of a country other than the country that issues the currency the bond is denominated in , and in the Eurobond market.  Issuing entities: may be a government or agency; a corporation, holding company, or subsidiary; or a special purpose entity  Sources of repayment:  For sovereign bonds: country’s taxing authority  For non-sovereign government bonds: taxing authority or revenues from a project  For corporate bonds: funds from the firm’s operations  For securitized bonds: cash flows from a pool of financial assets  Collateral and credit enhancements  Secured: backed by specific collateral.  Internal credit enhancement-overcollateralization: collateral pledged has a value greater than the par value of the debt issued.  Internal credit enhancement-excess spread: yield on the financial assets supporting the debt is greater than the yield promised on the bonds issued.  Internal credit enhancement-tranches with different seniority of claims: any losses of assets supporting a securitized bond are firs absorbed by the bonds with 501 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 the lowest seniority, then the bonds with the next-lowest priority of claims (waterfall structure).  External credit enhancements-surety bonds: issued by insurance companies and are a promise to make up any shortfall in the cash available to service the debt.  External credit enhancement-letter of credit: a promise to lend money to the issuing entity if it does not have enough cash to make the promised payments on the covered debts.  A cash collateral account: the issuer immediately borrows the credit enhancement amount and then invest that amount usually in highly rated short-term commpercial paper. A cash collateral account mitigate investors’ exposure to third-party risk, the possibility that a guarantor cannot meet its obligation.  Unsecured: represent an overall claim against the issuer’s cash flow and assets.  Taxation of bond imcome  Interest income: taxed as ordinary income at the same rate as wage and salary income.  Interest income from bonds issued by municipal government: tax-exempt  Capital gain: gain or loss between purchase price and selling price.  税率高低比较：利息税税率高于资本利得税税率  OID bond(original issue discount bond): pure-dicount bonds and other bonds sold at significant discounts to par  会产生tax liability的原因： Because the gains over an OID bond’s tenor as the price moves towards par value are really interest income, these bonds can generate a tax liability even when no cash interest payment has been made.  A portion of the discount from par at issuance is treated as taxable interest income each year. This tax treatment also allows that the tax basis of the OID bond is increased each year by the amount of interest income recognized, so there is no additional capital gains tax liability at maturity. P4-7 Cash flow structure Q17-7 ★Which kind of bond has a fixed periodic payment schedule that reduces the bond's outstanding principal amount to zero by the maturity date? (2014 原版书R52-11) A. bullet bond. B. plain vanilla bond. C. fully amortized bond. Solution: C A fully amortized bond calls for equal cash payments by the bond's issuer prior to maturity. Each fixed payment includes both an interest payment component and a principal repayment component such that the bond's out-standing principal amount is reduced to zero by the maturity date. A and B are incorrect because a bullet bond or plain vanilla bond only make interest payments 502 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 prior to maturity. The entire principal repayment occurs at maturity. Q18-7 ★Which of the following structure requires the largest repayment of principal at maturity? (2014 原版书P322-1) A. Bullet bond. B. Fully amortized bond. C. Partially amortized bond. Solution: A The entire repayment of principal occurs at maturity for a bullet (or plain vanilla) bond, whereas it occurs over time for fully and partially amortized bonds. Thus, the largest repayment of principal at maturity is that of a bullet bond Q19-7 ★★Relative to a fully amortized bond, the coupon payments of an otherwise similar partially amortized bond are (2014 Mock 102-101) A. lower or equal. B. equal. C. higher or equal. Solution: C Except at maturity, the principal repayments are lower for a partially amortized bond than for an otherwise similar fully amortized bond. Consequently, the principal amounts outstanding and, therefore, the amounts of interest payments are higher for a partially amortized bond than for a fully amortized bond, all else equal. The only exception is the first interest payment, which is the same for both repayment structures. This is because no principal repayment has been made by the time the first coupon is paid. Q20-7 ★Sinking funds are most likely to: 2014 Mock102 第95题 A. Reduce credit risk (default risk). B. Never allow issuers to retire more than the sinking fund requirement. C. Always reduce the outstanding balance of the bond issue to zero prior to maturity. Solution: A Sinking funds are designed to reduce default risk (the crisis-at-maturity). If present in the indenture, sinking funds must be met. They are not optional. Some sinking funds allow for accelerated sinking funds provisions. Some sinking funds pay only part of the outstanding balance, leaving a balloon payment at maturity. Q21-7 Which type of fixed-income security is most likely to have coupon payments that reset periodically:?2014 Mock99 第106题 A. Convertible bonds B. Floating-rate notes C. Callable bonds 503 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B A floating-rate bond does not have a fixed coupon rate over its life. Instead, its coupon payments reset periodically according to some reference rate, such as the one-month London interbank offered rate (LIBOR). Q22-7 ★If interest rates are expected to decline, an investor can earn a higher coupon interest rate by purchasing a (n): 2013 百题Q9-7 A. callable bond B. inverse floater C. floater with a cap Solution: B Inverse floaters have a coupon formula such that the coupon rate increases when the reference rate decreases and decreases when reference rate increases. The coupon rate moves in the opposite direction from the change in the reference rate. Q23-7 ★★A 5-year floating-rate security was issued on January 1, 2006. The coupon rate formula was 1-year LIBOR + 300 bps with a cap of 10% and a floor of 5% and annual reset. The 1-year LIBOR rate on January 1st of each year of the security’s life is provided in the following table: 2013 百题Q11-7 Year 1-Year LIBOR 2006 % 2007 % 2008 % 2009 % 2010 % During 2010, the payments owed by the issuer were based on a coupon rate closest to: A. %. B. %. C. %. Solution: B LIBOR + 300 bps at the reset date equals % + % = %, which is below the floor of % so the coupon rate will be equal to the floor. Q24-7 ★★A 10-year, capital-indexed bond linked to the Consumer Price Index (CPI) is issued with a coupon rate of 8% and a par value of 1,000. The bond pays interest semi-annually. During the first six months after the bond's issuance, the CPI increases by 3%. On the first coupon payment date, the bond's: 2014 原版书 R52-14 504 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. coupon rate increases to 11%. B. coupon payment is equal to . C. principal amount increases to 1,100. Solution: B Capital-indexed bonds pay a fixed coupon rate that is applied to a principal amount that increases in line with increases in the index during the bond's life. If the consumer price index increases by 3%, the coupon rate remains unchanged at 8%, but the principal amount increases by 2% and the coupon payment is based on the inflation-adjusted principal amount. On the first coupon payment date, the inflation-adjusted principal amount is 1,000 x (1 + ) = 1,030 and the semi-annual coupon payment is equal to ( x 1,030) / 2 = . Q25-7 ★A zero-coupon bond can be considered as a special kind of : 2014 原版书P330-2 A. Step-up bond. B. Credit-linked bond. C. Deferred coupon bond. Solution: C Because interest is effectively deferred until maturity, a zero-coupon bond can be thought of as a deferred coupon bond. Q26-7 The table below provides a history of a fixed-income security's coupon rate and the risk-free rate over a five-year period. Year Risk-Free Rate Coupon Rate 1 % % 2 % % 3 % % 4 % % 5 % % The security is most likely a (n): (2014 Mock 102-99) A. step-up note. B. inverse floater. C. deferred coupon bond. Solution: B The security's coupon rate moves in the opposite direction (inversely) with the risk-free rate. (Specifically, the coupon rate = %-2x risk-free rate) R5-7 fixed-income securities 现金流的构成  根据本金偿还方式分类  Bullet structure 505 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  periodic interest payment(coupon payments) over the life of the bond  entire principal value at maturity  amortizing structure: repay part of principal at each payment date  fully amortizing structure: equally periodic payment(interest+principal)  partially amortizing structure: a balloon payment at maturity, which repays the remaining principal as a lump sum  sinking fund provision  requires the issuer to retire a portion of a bond issue at specified times during the bonds’ life  根据利息偿还方式分类  floating-rate notes: coupon rates that adjust based on a reference rate such as LIBOR.  Step-up coupon bonds: have a coupon rate that increases over time.  Credit-linked coupon bond: coupon rate will go up (down) by a certain amount if the credit rating of the issuer falls (improves).  Pay-in-kind (PIK) bond: allows the issuer to make the coupon payment by increasing the principal amount of the outstanding bonds, essentially paying bond interest with more bonds.  Deferred coupon bonds (split coupon bond): interest payments are deferred for a specified number of years.  Index-linked bond: coupon payments and/or a principal value that is based on a commodity index.  Inflation linked bonds/ linkers: payments are based on the change in an inflation index, . CPI  Index-annuity bonds: fully amortizing with the periodic payments directly adjusted for inflation or deflation  Indexed zero-coupon bonds: the payment at maturity is adjusted for inflation.  Interest-indexed bonds: coupon rate is adjusted for inflation while the principal value remains unchanged.  Capital-indexed bonds: coupon rate remains constant, and principal value is increased by the rate of inflation. . Treasury inflation Protected Securities (TIPS)  principal protected bonds: will not pay less than their original par value at maturity, even when the index has decreases.  Equity-linked notes (ETN): no periodic interest payments, and the payment at maturity is based on an equity index. P5-7 Contingency provisions Q27-7 ★★Which kind of following risk is most likely inherent to a callable bond ? 2014 原版书P336-3 A. Credit risk. 506 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. Interest rate risk. C. Reinvestment risk. Solution: C Reinvestment risk refers to the effect that lower interest rates have on available rates of return when reinvesting the cash flows received from an earlier investment. Because bonds are typically called following a decline in market interest rates, reinvestment risk is particularly relevant for the holder of a callable bond. Q28-7 ★★Which of the following bond has a lower price than an otherwise similar bond without the embedded option? 2014 原版书P336-2 A. Putable bond. B. Callable bond. C. Convertible bond. Solution: B The call provision is an option that benefits the issuer. Because of this, callable bonds sell at lower prices and higher yields relative to otherwise similar non-callable bonds. A and C are incorrect because the put provision and the conversion provision are options that benefit the investor. Thus, putable bonds and convertible bonds sell at higher prices and lower yields relative to otherwise similar bonds that lack those provisions. Q29-7 ★★Compared with a similar option-free bond, which of the following is most accurate? 2014 原版书 R52-17 A. Putable bond will trade at a higher price. B. Callable bond will trade at a higher price. C. Convertible bond will trade at a lower price. Solution: A A put feature is beneficial to the bondholders. Thus, the price of a putable bond will typically be higher than the price of an otherwise similar non-putable bond. Q30-7 ★The characteristic of a putable bond is that it: 2014 原版书P336-4 A. Limits the risk to the issuer. B. Limits the risk to the bondholder. C. Does not materially affect the risk of either the issuer or the bondholder. Solution: B A putable bond limits the risk to the bondholder by guaranteeing a pre-specified selling price at the redemption dates. Q31-7 ★Assume that a convertible bond has a par value of $1,000,000 and is currently priced at $1,100,000. The underlying share price is $40,000 and the conversion ratio is 25:1. The conversion condition for this bond is: 2014 原版书P336-5 507 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. Parity. B. Above parity. C. Below parity. Solution: C The conversion value of the bond is 40,000 x 25 = $1,000,000. The price of the convertible bond is $1,100,000. 'Thus, the conversion value of the bond is less than the bond's price, and this condition is referred to as below parity. Q32-7 ★The provision that gives the bondholders the right to sell the bond back to the issuer at an agreed price prior to the bond's maturity date is referred to as: 2014 原版书R52-15 A. A put provision. B. A make-whole call provision. C. An original issue discount provision. Solution: A A put provision provides bondholders the right to sell the bond back to the issuer at a predetermined price prior to the bond's maturity date. B is incorrect because a make-whole call provision is a form of call provision; ., a provision that provides the issuer the right to redeem all or part of the bond before its maturity date. A make-whole call provision requires the issuer to make a lump sum payment to the bondholders based on the present value of the future coupon payments and principal repayments not paid because of the bond being redeemed early by the issuer. C is incorrect because an original issue discount provision is a tax provision relating to bonds issued at a discount to par value. The original issue discount tax provision typically requires the bondholders to include a prorated portion of the original issue discount (., the difference between the par value and the original issue price) in their taxable income every tax year until the bond's maturity date. Q33-7 ★★Compared with an otherwise identical option-free bond, when interest rates fall, the price of a callable bond will: (2014 Mock 101-99) A. rise more. B. rise less. C. fall less. Solution: B When interest rates fall, the price of the embedded call option increases. The price of a callable bond equals the price of an option-free bond minus the price of the embedded call option. So, the price of the callable bond will not increase as much as an option-free bond because the price of the call option is increasing. As interest rates fall, the bond is more likely to be called, limiting the upside price increase potential. Q34-7 An analyst stated that a callable bond has less reinvestment risk and more price appreciation potential than an otherwise identical option-free bond. The analyst's statement most likely is(2014 Mock 102-96) 508 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. incorrect with respect to both reinvestment risk and price appreciation potential. B. incorrect with respect to reinvestment risk, but correct with respect to price appreciation potential. C. correct with respect to reinvestment risk, but incorrect with respect to price appreciation potential. Solution: A Both statements are incorrect. An issuer is more likely to call a bond when rates have declined, thereby increasing the reinvestment risk relative to an option-free bond. Because of the call provision, the callable bond has less price appreciation potential than an identical option-free bond (termed price compression). R6-7 contingency provisions有哪些及分别给borrower还是lender带来好处  contingency provisions: an action that may be taken if an event actually occurs.  Call option: allow the issuer to redeem bonds at a specified call price Vcallable bond = Vpure bond- Vcall option  If interest rates fall  Issuer can retire the bond paying high coupon rate, and replace it with lower coupon bonds.  When the bond is called, the proceeds can only be reinvested at a lower interest rate.  Three styles of exercise for callable bonds  American style: can be called anytime after the first call date.  European style: can only be called on the call date specified.  Bermuda style: can be called on specified dates after the first call date, often on coupon payment dates.  Put option: allow the bondholder to sell bonds back to the issuer at a specified put price Vputable bonds= Vpure bonds+ Vput option.  If interest rates rise  The bondholders can sell the bond back to the issuer and get cash.  When the bond is put, the proceeds can be reinvested at a higher interest rate.  Converstion option: (benifit bondholders) allow the bondholder to exchange bonds for a specified number of shares of the issuer’s common stock.  Warrants: (benefit bondholders) entitles the bondholder to buy the underlying stock of the issuing company at a fixed exercise price until the expiration date.  Contingent convertible bonds (“CoCos”): bond that convert from debt to common equity automatically if a specific event occurs. P6-7 Classcification of global fixed-income markets Q35-7 The classification of a bond issued by a city would most likely be a: 2014 原版书P355-2 509 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. Supranational bond. B. Quasi-government bond. C. Non-sovereign government bond. Solution: C Non-sovereign (local) government bond issuers include provinces, regions, states, and cities. A is incorrect because supranational bonds are issued by international organizations. B is incorrect because quasi-government bonds are issued by agencies that are either owned or sponsored by governments Q36-7 A fixed-income security with a maturity of nine months is most likely classified as a: 2014 原版书P355-3 A. Securitized investment. B. Capital market security. C. Money market security. Solution: C Money market securities are issued with a maturity at issuance (original maturity) ranging from overnight to one year. A is incorrect because securitization does not relate to a bond's maturity but to the process that transforms private transactions between borrowers and lenders into securities traded in public markets. B is incorrect because capital market securities are issued with an original maturity longer than one year. Q37-7 Which of the following can be regarded as an issuer of bonds? 2014 原版书P355-1 A. Hedge fund B. Pension fund C. Local government Solution: C Major issuers of bonds include sovereign (national) governments, non-sovereign (local) governments, quasi-government agencies, supranational organizations, and financial and non-financial companies. A and B are incorrect because hedge funds and pension funds are typically investors in, not issuers of, bonds. Q38-7 Which of the following statement best describe the investment of retail investors? They: A. Do not invest in fixed income. 2014 原版书P358-1 B. Invest in fixed income directly by buying and selling securities. C. Invest in fixed income indirectly through mutual funds or exchange-traded funds. Solution: C Retail investors typically invest heavily in fixed-income securities because of the attractiveness of relatively stable prices and steady income production. However, because most retail investors lack the expertise to value fixed-income securities and are not large enough investors to buy and sell them directly, they usually invest in fixed income indirectly through mutual funds and 510 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 exchange-traded funds. Q39-7 The purpose of the process used by central banks to buy and sell bonds is most likely to: 2014 原版书P355-2 A. Implement fiscal policy. B. Control the monetary base. C. issue and repay government debt Solution: B Open market operations refer to the purchase or sale of bonds, usually sovereign bonds issued by the national government. By purchasing (selling) bonds, central banks increase (decrease) the monetary base in the economy, thus controlling the money supply. A is incorrect because open market operations help facilitate monetary policy, not fiscal policy (which is the taxing and spending by the national government). C is incorrect because although Treasury departments and some central banks may facilitate the issuance and repayment of government debt, open market operations specifically refer to the implementation of monetary policy. R7-7 全球fixed-income markets分类  by type of issuer  by credit quality  by original maturities  by coupon structure  by currency denomination  by geography  by indexing  by tax status R8-7 fixed-income indices  a multi-purpose tool used by investors and managers to describe a given bond market or sector, as well as to evaluate the performance of investments and investment managers.  Index construction: security selection and index weighting  Major types of fixed-income indices  Barclays Capital Global Aggregate Bond Index: represents a broad-based measure of the global investment-grade fixed-rate bond market.  Morgan Emerging Market Bond Index: used to describe the emerging market  FTSE Bond Index Series: set up to provide coverage of different classes of securities related to the government and corporate bond markets.  Investors in fixed-income securities  Major categories of bond investors  Central banks: use open market operations(purchase or sale of bonds)to implement monetary policy.  Institutional investors: represent the largest groups of investors in fixed income securities 511 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Retail investors: invest heavily due to the attractiveness of relatively stable prices and steady income production  Central banks and institutional investors typically invest directly, while retail investors invest often indirectly through fixed-income mutual funds or exchange-traded funds  Fixed-income securities are more diverse and more difficult to understand and access than equity securities P7-7 LIBOR和floating-rate bond的reference rate Q40-7 ★Interbank offered rates are best described as the rates at which major banks can: 2014 原版书P356-5 A. Issue short-term debt. B. Borrow unsecured funds from other major banks. C. Borrow from other major banks against some form of collateral. Solution: B Interbank offered rates represent a set of interest rates at which major banks believe they could borrow unsecured funds from other major banks in the interbank money market for different currencies and different borrowing periods ranging from overnight to one year. Q41-7 ★A company issues floating rate bonds. The coupon rate is expressed as the three-month Libor plus a spread. The coupon payment are most likely to increase as: 2014 原版书P356-6 A. Libor increases. B. The spread increases. C. The company’s credit quality decreases. Solution: A The coupon payments of a floating-rate bond that is tied to the three-month Libor will reset every three months, based on changes in Libor. Thus, as Libor increases, so will the coupon payments. B is incorrect because the spread on a floating-rate bond is typically constant; it is set when the bond is issued and does ont change afterward. C is incorrect because the issuer’s credit quality affects the spread and thus the coupon rate that server as the basis for the calculation of the coupon payments, but only when the spread is set-that is , at issuance. R9-7 interbank offered rates作为reference rates的作用  a reference rate is one that matches a floating-rate note’s currency and frequency of rate resets  最常用的reference rate:LIBOR  the rates are based on the expected rates for unsecured loans from one bank to another in the interbank money market. 512 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P8-7 Primary market and secondary market Q42-7 ★The primary market for bonds is a market: 2014 原版书P366-1 A. in which bonds are issued for the first time to raise capital. B. that has a specific location where the trading of bonds takes place. C. in which existing bonds are traded among individuals and institutions. Solution: A Primary bond markets are markets in which bonds are issued for the first time to raise capital. B is incorrect because having a specific location where the trading of bonds takes place is not a requirement for a primary bond market. C is incorrect because a market in which existing bonds are traded among individuals and institutions is the definition of a secondary, not primary, market. Q43-7 The seller in a secondary market is most likely be: 2014 原版书P366-4 A. The bond's issuer. B. The bond's lead underwriter. C. Another investor in the bond. Solution: C Secondary bond markets are where bonds are traded among investors. A and B are incorrect because a bond purchased from the bond's issuer or from the bond's lead underwriter would happen in the primary, not secondary, market. Q44-7 The settlement date of the corporate bonds will most likely be the: 2014 原版书P366-5 A. Trade date. B. Trade date plus one day. C. Trade date plus three days. Solution: C Corporate bonds typically settle on a T + 3 basis—that is, three days after the transaction date. A is incorrect because cash settlement occurs for some government and quasi-government bonds and for many money market trades. B is incorrect because settlement on a T + 1 basis is typical for government, not corporate, bonds. Q45-7 ★A mechanism by which an issuer may be able to offer additional bonds to the general public without preparing a new and separate offering circular best describes: 2014 原版书P391-9 A. The grey market B. A shelf registration C. A private palcement Solution: B A shelf registration allows certain authorized issuers to offer additional bonds to the general 513 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 public without having to prepare a new and separate offering circular. The issuer can offer multiple bond issuances under the same master prospectus, and only has to prepare a short document when additional bonds are issued. A is incorrect because the grey market is a forward market for bonds about to be issued. C is incorrect because a private placement is a non-underwritten, unregistered offering of bonds that are not sold to the general publice but directly to an investor or a mall group of investors. R10-7 primary markets债券发行机制  A public offering: bonds can be resisted with securities regulators for sale to the public and is typically done with the help of an investment bank.  Underwritten offering: the investment bank or syndicate purchasing the entire issue and selling the bonds to dealers.  Best efforts offering: investment bank sells the bonds on a commission basis and do not commit to purchase the whole issue.  Shelf registration: a bond issue is registered with securities regulators in its aggregate value with a master prospectus and can be issued over time when issuer needs to raise funds.  A private placement: sale of an entire issue to a qualified investor or a group of investors, which are typically large institutions. R11-7 Secondary market  Secondary markets: trading of previously issued bonds.  Exchange market  OTC dealer Market P9-7 Bonds issued by government, nonsovereign governments, government agcneies, and supranational entities Q46-7 Which type of the Sovereign bonds’ maturity at issuance will be shorter than one year ? 2014 原版书P370-1 A. Floating-rate bonds. B. Zero-coupon bonds. C. Coupon-bearing bonds. Solution: B Most bonds issued by national governments with a maturity at issuance (original maturity) shorter than one year are zero-coupon bonds. A and C are incorrect because floating-rate bonds and coupon-bearing bonds are typically types of sovereign bonds with maturities longer than one year Q47-7 The coupon payments and/or principal repayments of Sovereign bonds are adjusted by a consumer price index are most likely described as: 2014 原版书P370-3 A. Linkers. B. Floaters. 514 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. consols. Solution: A Because sovereign bonds whose coupon payments and/or principal repayment are adjusted by a consumer price index are known as inflation-linked bonds or linkers. B is incorrect because floaters describe floating-rate bonds that have a coupon rate tied to a reference rate such as Libor. C is incorrect because consols are sovereign bonds with no stated maturity date issued by the . government. Q48-7 ★Compared with sovereign bonds, the yield of non-sovereign bonds with similar characteristics most likely is: 2014 原版书P372-1 A. Lower. B. The same. C. Higher. Solution: C Non-sovereign bonds usually trade at a higher yield and lower price than sovereign bonds with similar characteristics. The higher yield is because of the higher credit risk associated with non-sovereign issuers relative to sovereign issuers, although default rates of local governments are historically low and their credit quality is usually high. The higher yield may also be a consequence of non-sovereign bonds being less liquid than sovereign bonds with similar characteristics. Q49-7 ★A governmental agency bonds are most likely: 2014 原版书P372-2 A. Repaid from the cash flows generated by the agency. B. Guaranteed by the national government that sponsored the agency. C. Backed by the taxing power of the national government that sponsored the agency. Solution: A Most bonds issued by a governmental agency are repaid from the cash flows generated by the agency or from the project the bond issue is financing. B and C are incorrect because although some bonds issued by governmental agencies are guaranteed by the national government or are backed by the taxing power of the national government that sponsored the agency, bonds are most likely repaid first from the cash flows generated by the agency. Q50-7 ★The bond issued by a multilateral agency such as the International Monetary Fund (IMF) can be regarded as a: 2014 原版书R53-15 A. Sovereign bond. B. Supranational bond. C. Quasi-government bond. Solution: B The IMF is a multilateral agency that issues supranational bonds. A and C are incorrect because sovereign bonds and quasi-government bonds are issued by national governments and by 515 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 entities that perform various functions for national governments, respectively. R12-7 sovereign government bond, non- sovereign government bond, government agency bonds 和supranational bonds  Sovereign bonds: issued by national governments and backed by their tax power.  Nonsovereign government bonds: issued by governments below the national level.  Agency bonds (quasi-government bonds): issued by entities created by national government and may be explicitly or implicitly backed by government.  Supranational bonds: issued by supranational agencies (multilateral agencies,eg,the IMF,the World Bank) that operate across national. P10-7 Bonds issued by corportation Q51-7 ★The characteristic of Eurocommerical paper is most likely that: 2014 原版书R53-17 A. It is negotiable. B. It is denominated in euro. C. It is issued on a discount basis Solution: A Commercial paper, whether . commercial paper or Eurocommercial paper, is negotiable—that is, investors can buy and sell commercial paper on secondary markets. B is incorrect because Eurocommercial paper can be denominated in any currency. C is incorrect because Eurocommercial paper is more frequently issued on an interest-bearing (or yield) basis than on a discount basis. Q52-7 ★A loan made by a group of banks to a private company is most likely: 2014 原版书P380-1 A. A bilateral loan B. A syndicated loan C. A private placemet Solution: B A loan from a group of lenders to a single borrower is a syndicated loan. A is incorrect because a bilateral loan is a loan from a single lender to a single borrower. C is incorrect because a private placement involves placing the debt issued by a borrower directly with a lender or a group of lenders. The fact that the borrower is a private company is irrelevant. R13-7 由公司发行的债务类别  Bank debt  Bilateral loan: involves only one bank  Syndicated loan: funded by several banks  Commercial paper: short term, unsecured, low rate ( issued by corporations of high credit quality) debt.  commercial paper Vs. Eurocommercial paper 516 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Feature commercial paper Eurocommercial paper Currency dollar Any currency Maturity Overnight to 270 days Overnight to 364 days Interest Discount basis (pure discount security) Interest-bearing basis (add-on yield) Settlement T+0 T+2 Negotiable Can be sold to another Can be sold to another  Corporate bonds: may have a term maturity structure or a serial maturity structure and may have a sinking fund provision.  Medium-term notes: corporate issues that can be structured to meet the requirements of investors. P11-7 Short-term funding available to banks Q53-7 ★Which of the following are not refer to wholesale funds? 2014 原版书P386-1 A. Interbank funds B. Central bank funds C. Repurchase agreements Solution: C Wholesale funds refer to the funds that financial institutions lend to and borrow from each other. They include central bank funds, interbank funds, and certificates of deposit. Although repurchase agreements are an important source of funding for banks, they are not considered wholesale funds. Q54-7 ★Most negotiable certificate of deposit: 2014 原版书P386-3 A. is traded in the open market. B. is purchased by retail investors. C. has a penalty for early withdrawal of funds. Solution: A Large-denomination negotiable certificates of deposit (CDs) can be traded in the open market. B is incorrect because it is small-denomination, not large-denomination, negotiable CDs that are primarily purchased by retail investors. C is incorrect because it is non-negotiable, not negotiable, CDs that have a penalty for early withdrawal of funds. 517 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R14-7 银行的短期融资工具  customers deposits: including checking accounts, savings accounts, and money market mutual funds  certificates of deposit(CDs): interest-bearing CDs that mature on specific dates and are offered in a range of short-term maturities.  Negotiable certificates of deposit: CDs which may be sold in the wholesale market  Central bank funds market: banks may buy or sell excess reserves deposited with their central bank.  Interbank funds: banks make unsecured loans to one another for periods up to a year. P12-7 Repurchase agreements Q55-7 ★The higher the level of repo margin: 2014 原版书P386-6 A. the higher the quality of the collateral. B. the higher the credit quality of the counterparty. C. the longer the length of the repurchase agreement. Solution: C The longer the length of the repurchase agreement, the higher the repo margin (haircut). A is incorrect because the higher the quality of the collateral, the lower the repo margin. B is incorrect because the higher the credit quality of the counterparty, the lower the repo margin. Q56-7 ★The interest on a repurchase agreement is known as the: 2014 原版书P386-5 A. Repo rate B. Repo yield C. Repo margin Solution: A The repo rate is the interest rate on a repurchase agreement. B is incorrect because the interest on a repurchase agreement is known as the repo rate, not repo yield. C is incorrect because the repo margin refers to the difference between the market value of the security used as collateral and the value of the loan. Q57-7 ★A repurachse agreement is most comparable to a(n): 2014 原版书P392-21 A. Interbankk deposit B. Collateralized loan C. Negotiable certificate of deposit Solution: B A repurchase agreement(repo) can be viewed as a collateralized loan where the security sold and subsequently repurchased represents the collateral posted. A and C are incorrect because interbank deposits and negotiable certificates of deposit are unsecured deposits-that is, there is no collateral backing the deposit. 518 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q58-7 ★★Which of the following factors will most likely drive the repo margin lower? (2014 Mock 99-97) A. Lower quality of the collateral B. Lower credit quality of the counterparty C. Shorter supply of the collateral Solution: C If the collateral is in short supply or if there is a high demand for it, repo margins are lower. Repo margin is the difference between the market value of the security used as collateral and the value of the loan. R15-7 repurchase agreement(repos) 及其对于短期资金投资者的重要性  Repurchase agreement(repos): a form of short-term collateralized borrowing in which one party sells a security to another party and agree to buy it back at a predetermined future date and price.  Repurchase agreements are an important source of short-term financing for bond dealers.  Repo rate: the interest rate on a repurchase agreement.  The repo rate is lower when  Repo term is shorter  Credit quality of the collateral security is higher  Collateral security is delivered to the lender  Interest rate for alternative sources of funds are higher  Repo margin (haircut): the difference between the market value of the security used as collateral and the value of the loan.  The repo margin is lower when  Repo term is shorter  Credit quality of the collateral security is higher  Credit quality of the borrower is higher  Collateral security is in high demand or low supply. P13-7 给定dicount rate，计算bond price Q59-7 ★The present value of a $1,000 par value, zero-coupon bond with a three-year maturity assuming an annual discount rate of 6 percent compounded semiannually is closest to: 2013 百题Q67-7 A. $. B. $. C. $. Solution: A The present value of the bond = Maturity value / (1 + i) Year to maturity X 2 Where: i = 519 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 semiannual discount rate = 6% / 2 = 3% PV = $1,000 / () = $ Q60-7 ★A bond offers an annual coupon rate of 5%, with interest paid semiannually. The bond matures in seven years. At a market discount rate of 3%, the price of this bond per 100 of par vulue is closest to: 2014 原版书P444-5 A. B. C. Solution: B PV 1 2 0. 0 153... )( 15 13 )( ) ()( )(1 Q61-7 Consider a $100 par value bond with a 7 percent coupon paid annually and 5 years to maturity. At a discount rate of percent, the value of the bond is $. One year later, the appropriate discount rate has risen to percent and the bond's value is $. What part of this change in value is most likely attributable to the passage of time? 2013 百题Q68-7 A. $ B. $ C. $ Solution: B With 4 years remaining to maturity and a discount rate that is unchanged at percent, the value of the bond would be $ or N=4, I/Y=6, PMT=7, FV=100, CPT(PV)= R16-7 给定market discount rate, 计算bond’s price  对于年付息1次、剩余期限为N年的债券， pr couponcouponcoupon pricipa liceYTMYTM2...(1)(1)(1YT M )N 对于年付息2次、剩余期限为N年的债券， coupo p n coupon... cou p on pricipalrice YTM Y TMY(1)(1)2N22(1 T2 M) P14-7 Relationship among a bond’s price, coupon rate, maruity, and market discount rate Q62-7 A bond with 14 years to maturity and a coupon rate of percent has a yield-to-maturity (YTM) of percent. Assuming the bond's YTM remains constant, the 520 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 bond's value as it approaches maturity will most likely: 2013 百题Q69-7 A. Increase. B. Decrease. C. Remain constant. Solution: B The bond is selling at a premium (coupon rate >YTM). As it approaches maturity, the bond's value will decrease towards par value Q63-7 Each of the option-free bonds listed below has a par value of $1,000: 2013 百题Q71-7 Bond 1 Bond 2 Time to maturity 10 years 10 years Annual coupon rate % % Discount rate today % % Which of the following statements about the two bonds is most accurate? If the discount rate for each of the bonds remains at percent for ten years, the passage of time will result in a decrease in value for: A. Bond 1 only. B. Bond 2 only. C. Both of the bonds. Solution: B Bond 1 is currently selling at a discount to par and Bond 2 is selling at a premium to par. If the discount rate does not change for either bond, Bond 1 will increase in price and Bond 2 will decrease in price because all bonds are expected to mature at par value. Q64-7 ★★Consider a $100 par value bond with a 7% coupon paid annually and 5 years to maturity. At a discount rate of %, the value of the bond today is $. One day later, the discount rate increases to %. Assuming the discount rate remains at % over the remaining life of the bond, what is most likely to occur to the price of the bond between today and maturity? (2014 Mock 100-109) A. Decreases then increases B. Decreases then remains unchanged C. Increases then decreases Solution: A If the discount rate increases to % from %, the price of a bond decreases. At a discount rate of %, the bond sells at a discount to face value. As a discount bond approaches maturity, it will increase in price over time until it reaches par at maturity. R17-7 Relationship among a bond’s price, coupon rate, maturity, and market discount rate  At a point in time, a decrease (increase) in a bond’s YTM will increase (decrease) its 521 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 price.  If a bond’s coupon rate is greater than its YTM, its price will be at a premium to par value. If a bond’s coupon rate is less than its YTM, its price will be at a discount to par value.  The percentage decrease in value when the YTM increase by a given amount is smaller than the increase in value when the YTM decreases by the same amount(the price-yield relationship in convex)  Other things equal, the price of a bond with a lower coupon rate is more sensitive to a change in yield than is the price of a bond with a higher coupon rate.  Other things equal, the price of a bond with a longer maturity is more sensitive to a change in yield than is the price of a bond with a short maturity.  A bond’s price moves toward par value as time passes and maturity approaches. P15-7 使用spot rate计算bond price Q65-7 ★Assume a $1,000,000 par value, semiannual coupon . Treasury note with two years to maturity and a coupon rate of 10 percent. Using the following Treasury spot rates and ignoring accrued interest and transactions costs, the arbitrage-free value of the Treasury note is closest to: 2013 百题Q88-7 Maturity Spot Rate (%) Six months Twelve months Eighteen months Twenty-four months A. $846,210. B. $1,000,000. C. $1,002,647. Solution: C Note that the four cash flows are, in percent of par terms, 5, 5, 5, and 105. Adjust the spot rates for semiannual compounding. Solve (5 / ) + (5 / ()) + (5 / ()) + (105 / ()) = percent of par. As par is $1,000,000, the correct answer is $1,002,647. R18-7 spot rate:market discount rates for single payment to be made in the future coupon , where S is thce spoot rate. pr uponcouponpricip aliceS S )(1)2...(11(1SN )N P16-7 计算flat price, accrued interest和full price Q66-7 An investor sells a bond at the quoted price of $. In addition he receives accrued interest of $. The clean price of the bond is: 2013 百题Q16-7 522 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. Par value plus accrued interest. B. Accrued interest plus agreed upon bond price. C. Agreed upon bond price excluding accrued interest. Solution: C Because the agreed upon bond price without accrued interest is simply referred to as the price as well as the clean price. Q67-7 The price often quoted by the bond dealers is most likely: 2014 原版书 R54-18 A. Flat price. B. Full price. C. Full price plus accrued interest. Solution: A Bond dealers usually quote the flat price. When a trade takes place, the accrued interest is added to the flat price to obtain the full price paid by the buyer and received by the seller on the settlement date. The reason for using the flat price for quotation is to avoid misleading investors about the market price trend for the bond. If the full price were to be quoted by dealers, investors would see the price rise day after day even if the yield-to-maturity did not change. That is because the amount of accrued interest increases each day. Then after the coupon payment is made the quoted price would drop dramatically. Using the flat price for quotation avoids that misrepresentation. The full price, flat price plus accrued interest, is not usually quoted by bond dealers. Accrued interest is included in not added to the full price and bond dealers do not generally quote the full price. Q68-7 ★Bond G, described in the exhibit below, is sold for settlement on 16 June 2014. The full price that bond G will settle at on 16 June 2014 is closest to: 2014 原版书P448-19 Annual coupon:5% Coupon payment frequency:semiannual Interest payment date:10 April and 10 October Maturity date: 10 October 2016 Day count convention:30/360 Annual yield-to-maturity:4% A. B. C. Solution: B PV 1 2 3 4 5 ()()()()()*(102)66/ Q69-7 ★The bonds of Whakatane and Co. are priced for settlement on 15 July 2014 and have 523 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 the following features. Par value $ Annual coupon rate 8% Coupon payment frequency Semiannual Coupon payment dates 15 May and 15 November Maturity date 15 November 2017 Day count convention Actual/Actual Annual yield to maturity % On the basis of this information, the difference between the full and flat prices is closest to (2014 Mock 98-102) A. . B. . C. . Solution: C The difference between the full and flat prices is the accrued interest, which is computed as follows. Based on the Actual/Actual day convention, the number of days between the coupon periods is 183 days. Also, using the Actual/Actual day count convention, the number of days between 15 May 2014 and 15 July 2014 is 16 days remaining in May + 30 days in June + 15 days in July = 61 days. Accrued interest (per $100 par value) = (61/183)( = . R19-7 计算flat price, accrued interest 和 full price  Accrued Interest: the interest received by the seller when a bond trades between coupon dates.  accrued interest coupon* TT 11 T 2 Clean Price(or flat price): the agreed upon price of the bond.  Full Price (or dirty price, or invoice price): the amount that the buyer pays to the seller, which equals the clean price plus any accrued interest. Full Price = Clean Price +Accrued Interest Full price=PV*(1 YTM), wht/Tere t is the number of days from the last coupon payment date until the date the bond trade will settle, and T is the number of days between the last coupon payment and the next. 524 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P17-7 Matrix pricing Q70-7 ★By using matrix pricing, investors can estimate market discount rates and prices for bonds: 2014 原版书 R54-22 A. With different coupon rates. B. That are not actively traded. C. With different credit quality. Solution: B For bonds not actively traded or not yet issued, matrix pricing is a price estimation process that uses market discount rates based on the quoted prices of similar bonds (similar times-to-maturity, coupon rates, and credit quality). Q71-7 When underwriting new corporate bonds, matrix pricing can be used to estimate: 2014 原版书 R54-23 A. Required yield spread over the benchmark rate. B. Market discount rate of other comparable corporate bonds. C. Yield-to-maturity on a government bond having a similar time-to-maturity. Solution: A Matrix pricing is used in underwriting new bonds to get an estimate of the required yield spread over the benchmark rate. The benchmark rate is typically the yield-to-maturity on a government bond having the same, or close to the same, time-to-maturity. The spread is the difference between the yield-to-maturity on the new bond and the benchmark rate. The yield spread is the additional compensation required by investors for the difference in the credit risk, liquidity risk, and tax status of the bond relative to the government bond. R20-7 matrix pricing  matrix pricing is a method used to estimate the yield-to-maturity for bonds that are not traded or infrequently traded. P18-7 Yield measure Q72-7 The annual yield-to-maturity, stated for with a periodicity of 12, for a 3-year, zero-coupon bond priced at 80 per 100 of par value is closest to: 2014 原版书R54-25 A. %. B. %. C. %. Solution: C The annual yield-to-maturity, stated for a periodicity of 12, is %. It is calculated as follows: PVFVN 80100(1)(1r) 525 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 YTM=*12=% Q73-7 ★Which of the following yield is only related with the coupon rate and bond price? 2013 百题Q77-7 A. Current yield B. Effective annual yield C. Holding period yield Solution: A Current yield = annual cash coupon payment / bond price Q74-7 ★★A 5-year, 5% semiannual coupon payment corporate bond is priced at per 100 of par value. The bond's yield-to-maturity, quoted on a semiannual bond basis, is %. An analyst has been asked to convert to a monthly periodicity. Under this conversion, the yield-to-maturity is closest to: 2014 原版书P448-26 A. %. B. %. C. %. Solution: A Y T M(11212)(1)212YTM * Q75-7 ★★A 365-day year bank certificate of deposit has an initial principal amount of USD million and a redemption amount due at maturity of USD 100million. The number of days between settlement and maturity is 350. The bond equivalent yield is closest to : 2014 原版书P450-33 A. % B. % C. % Solution: C BEY365 *100 % .Q76-7 ★★The bond equivalent yield of a 180-day banker’s acceptance quoted at a discount rate of % for a 360-day year is closest to: 2014 原版书P450-34 A. % B. % C. % 526 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C PV 1 80100*(1*)9 7. 875360 BEY365100 * Q77-7 ★A 10% coupon bond with annual payments, maturing in 3 years, is priced at 105. The bond is callable in one year at a call price of 104 or two years at a call price of 102. The bonds yield to worst most likely occurs when the bond is: 2013 百题Q76-7 A. Called in year 1. B. Called in year2. C. Held until maturity. Solution: C The yield to worst for a callable bond is the lowest of the yields to call for each possible call date and the yield to maturity. The yield to call or yield to maturity solves the following equation: P TCF/(1 i)tt t ƒ, where i is the yield to call, or yield to maturity CF is the cash flow at date t, 1and T is the maturity or call date. The yield to call if the bond is called in one year is %, because 105=10 104 yield to call if the bond is called in two years is %, because 105=10 10 . yield to maturity of the bond is %, because105 10. Th e 1010 to worst is the lowest of these and occurs when the bond is held until maturity (., it is the yield to maturity). Q78-7 ★An analyst evaluates the following information relating to floating rate notes (FRNs) issued at par value that have 3-month Libor as a reference rate: Floating Rate Note Quoted Margin Discount Margin X % % Y % % Z % % Based only on the information provided, the FRN that will be priced at a premium on the next reset date is: 2014 原版书 R54-32 A. FRN X. B. FRN Y. C. FRN Z. 527 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A FRN X will be priced at a premium on the next reset date because the quoted margin of % is greater than the discount or required margin of %. The premium amount is the present value of the extra or "excess" interest payments of % each quarter (% - %). FRN Y will be priced at par value on the next reset date since there is no difference between the quoted and discount margins. FRN Z will be priced at a discount since the quoted margin is less than the required margin. Q79-7 ★★DMT Corp. issued a five-year floating-rate note (FRN) that pays a quarterly coupon of three-month LIBOR plus 125 bps. The FRN is priced at 96 per 100 of par value. Assuming a 30/360 day-count convention, evenly spaced periods, and constant three-month LIBOR of 5%, the discount margin for the FRN is closest to: (2014 Mock 99-105) A. 221 bps. B. 400 bps. C. 180 bps. Solution: A The interest payment each period per 100 of par value is: (Index Q mM) FυV(. 0 125)100 υ The discount margin can be estimated by solving for DM in the equation: 96 DM D M… 0 .0 5D M (14)(14)2(1204)The solution for the discount rate, r = (+DM)/4 is %. Therefore DM = %, or 221 bps. R21-7 yield measures  Yield measures for fixed-rate bonds  The effective yield of a bond depends on its periodicity, or annual frequency of coupon payments. Ef YTfective yielmM d=(1)m1 For annual-pay bond: effective yield = YTM For bonds with greater periodicity, the effective yields is greater than YTM  Bond Equivalent Yield (BEY): A Semiannual YTM or Semiannual-Pay YTM 528 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 BEY=2*semiannual discount rate BEY2BEY of an annual-pay bond:(2 1) (1 a nn ualYTM ) EAY与BEY的转化关系式：(BEY2 1)2 (1 E A Y)  Bond yield that follow street convention use the stated coupon payment dates.  A true yield accounts for coupon payments that are delayed by weekends or holidays.  Current yield is the ratio of a bond’s annual coupon payment to its price.  Simple yield adjusts current yield by using straight-line amortization of any discount or premium.  For a callable bond, a yield-to-call may be calculated using each of tis call dates and prices. The lowest of these yields and YMT is a callable bond’s yield-to-worst.  Floating-rate note yields  The margin used to calculate the bond coupon payments is called the quoted margin.  The margin used to calculate the return of the FRN to its par value is called the required margin(discount margin).  Yield for money market instruments  Yield quoted on a discount basis: quote on . Treasury bills DR (year*F，V PVdaysw)hFereV DR is the yield quoted on a discount basis  Yield quoted on an add-on basis: LIBOR, bank CD rates AOR year*(FV PVdays, where APOVR) is the yield quoted on an add-on basis. Both discount basis and add-on yields in the money market are quoted as simple annual interest and can be based on a 360-day or 365-day basis  Bond equivalent yield for money market security is an add-on yield based on a 365-day year. BE36, where AOR is Y 5days*AORthe yield quoted on an add-on basis P19-7 Spot curve, yiled curve on coupon bonds, par curve and forward curve Q80-7 ★Which of the following statements describing a par curve is incorrect? 2014 原版书 P450-35 A. A par curve is obtained from a spot curve. B. All bonds on a par curve are assumed to have different credit risk. 529 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. A par curve is a sequence of yields-to-maturity such that each bond is priced at par value. Solution: B All bonds on a par curve are assumed to have similar, not different, credit risk. Par curves are obtained from spot curves and all bonds used to derive the par curve are assumed to have the same credit risk, as well as the same periodicity, currency, liquidity, tax status, and annual yields. A par curve is a sequence of yields-to-maturity such that each bond is priced at par value. Q81-7 ★A yield curve constructed from a sequence of yields-to-maturity on zero-coupon bonds is the: 2014 原版书P450-36 A. Par curve B. Spot curve C. Forward curve Solution: B The spot curve, also known as the strip or zero curve, is the yield curve constructed from a sequence of yields-to-maturities on zero-coupon bonds. The par curve is a sequence of yields-to-maturity such that each bond is priced at par value. The forward curve is constructed using a series of forward rates, each having the same timeframe. R22-7 spot curve, yield curve on coupon bonds, par curve and forward curve  Yield curve: yield 与maturity之间的关系  spot curve(spot rate yield curve): a yield curve for single payments in the future  yield for coupon bonds: coupon bond的YTM与maturity之间的关系  par curve(=par bond yield curve): shows the coupon rates for bonds of various maturities that would result in bond prices equal to their par values.  Forward curve: a yield curve composed of forward rates P20-7 Spot rate与forward rate之间的转化 Q82-7 ★★All rates are annual rates stated for a periodicity of one(effective annual rates). Time period Forword rate 0y1y % 1y1y % 2y1y % 3y1y % 4y1y % The 3-year implied spot rate is closest to: 2014 原版书P451-38 A. % B. % C. % Solution: B 530 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 (* 2*)(1 ) % Z33Z3R23-7 spot rate与forward rate之间的转化  forward rate:current lending/borrowing rates for short-term loans to be made in future periods.  Forward rate与spot rate之间的转换公式 (1ST)T(1S1)(11y1y)K(1(T1)y1y) P21-7 使用forward rate计算bond price Q83-7 The value per 100 of par value of a two-year, % coupon bond with interest payments paid annually, based on the information related to the previous question, is closest to: 2014 原版书P451-39 A. B. C. Solution: B bond p 1 080* 7 4 () Q84-7 ★★Using the following US Treasury forward rates, the value of a 2½-year $100 par value Treasury bond with a 5% coupon rate is closest to: (2014 Mock 100-106) Forward Period Years Rate 1 % 2 1 % 3 % 4 2 % 5 % A. $. B. $. C. $. Solution: A The value of the bond is 531 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 (1 0 .012/2)(10 .0 18/2)( 1 2/2)( 8 /2)( /2 ) (1 0 .018/2)(10 .0 23/2)( 2 7/2) $ (1 0 .018/2)(10 .0 23/2)( 2 7/2)( 0 /2) R24-7 给定forward rate计算bond price bond v alue CFCFCF1 nS 1 S 11y 1 y... ()(11)()(1S 1) (1 1y1y ). ..(1(T1) y 1y) P22-7 G-spread, I-spread, Zero-volatility and option-adjusted spreads Q85-7 ★The yield spread of a specific bond relative to the standard swap rate in that currency of the same tenor is most likely: 2014 原版书P451-41 A. I-spread. B. Z-spread. C. G-spread. Solution: A The I-spread, or interpolated spread, is the yield spread of a specific bond over the standard swap rate in that currency of the same tenor. The yield spread in basis points over an actual or interpolated government bond is known as the G-spread. The Z-spread (zero-volatility spread) is the constant spread such that is added to each spot rate such that the present value of the cash flows matches the price of the bond. Q86-7 ★★The G-spread in basis points(bps) on the bond is closest to: 2014 原版书P452-42 bond Coupon Time-to-maturity price Benchmark Bond 2% 3 year Bond 5% 3 year Both bonds pay interest annually. The current three-year EUR interest rate swap benchmark is %.(2014 原版书 P452-42 ) A. 264 bps B. 285 bps C. 300 bps Solution: B Yield-to-maturity on the . corporate bond: 532 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 100 r1 r 2 r 3 , 4 762or476 b ps (1)(1)(1)Yield-to-maturity on the benchmark: 2102 r1 r 2 r 3 , 1 913191 (1)(1)(1rorbps)The G-spread is 476-191=285 bps Q87-7 ★A corporate bond offers a 5% coupon rate and has exactly 3 years remaining to maturity. The following rates are from the benchmark spot curve: Time-to-maturity Spot rate 1 year % 2 year % 3 year % The bond is currently trading at a Z-spread of 234 basis points. The value of the bond is closest to: 2014 原版书P452-43 A. B. C. Solution: A PV 55105 1 2 ( 65 ) 392. 3 8()() Q88-7 ★★An option-adjusted-spread(OAS) on a callable bond is the Z-spread: 2014 原版书P452-44 A. Over the benchmark spot curve. B. Minus the standard swap rate in that currency of the same tenor. C. Minus the value of the embedded call option expressed in basis points per year. Solution: C The option value in basis points per year is subtraced from the Z-spread to calculate the option-adjusted spread(OAS). The Z-spread is the constant yield spread over the benchmark spot curve. The I-spread is the yield spread of a specific bond over the standard swap rate in that currency of the same tenor. R25-7 各种yield spread  yield spread: the difference between the yields of two different bonds.  Benchmark spread: a yield spread relative to a benchmark bond.  G-spread: the benchmark is government bond yield 533 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 G spread Y T MbondYT M treasury Interpolated spread/I-spread: the benchmark is swap rate  Z-spread: the spread that must be added to each rate on the benchmark yield curve to make the present value of a bond equal to its price. Pm CF1CF2arket R Z R Z ... (12)(1) Option-adjusted spread(OAS): used for bonds with embedded options.  Callable bond: ZS>OAS  Putable bond: ZS<OAS  OAS=Z-spread-option cost Pm CF1CF R O AS R O2arket1A S ... (1)() P23-7 Sources of return from investing in a fixed-rate bond Q89-7 ★A "buy-and-hold" investor purchases a fixed-rate bond at a discount and holds the security until it matures. Which of the following sources of return is least likely to contribute to the investor's total return over the investment horizon, assuming all payments are made as scheduled? 2014 原版书P518-1 A. Capital gain B. Principal payment C. Reinvestment of coupon payments Solution: A A capital gain is least likely to contribute to the investor's total return. There is no capital gain (or loss) because the bond is held to matu-rity. The carrying value of the bond at maturity is par value, the same as the redemption amount. When a fixed-rate bond is held to its maturity, the investor receives the principal payment at maturity. This principal payment is a source of return for the investor. A fixed-rate bond pays periodic coupon payments, and the reinvestment of these coupon payments is a source of return for the inves-tor. The investor's total return is the redemption of principal at maturity and the sum of the reinvested coupons. Q90-7 ★★Which of the following sources of return is most likely exposed to interest rate risk for an investor of a fixed-rate bond who holds the bond until maturity? 2014 原版书P518-2 A. Capital gain or loss B. Redemption of principal C. Reinvestment of coupon payments Solution:C 534 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Because the fixed-rate bond is held to maturity (a "buy-and-hold" investor), interest rate risk arises entirely from changes in coupon reinvestment rates. Higher interest rates increase income from reinvestment of coupon payments, and lower rates decrease income from coupon reinvestment. There will not be a capital gain or loss because the bond is held until maturity. The carrying value at the maturity date is par value, the same as the redemption amount. The redemption of principal does not expose the investor to interest rate risk. The risk to a bond's principal is credit risk. Q91-7 ★★An investor purchases a bond at premium value and two years later, the investor sells the bond. The resulting capital gain or loss can be calculated by comparing the price at which the bond is sold to the: 2014 原版书P518-3 A. Carrying value. B. Original purchase price. C. Original purchase price value plus the amortized amount of the premium. Solution:A Capital gains (losses) arise if a bond is sold at a price above (below) its constant-yield price trajectory. A point on the trajectory represents the carrying value of the bond at that time. That is, the capital gain/loss is measured from the bond's carrying value, the point on the constant-yield price trajectory, and not from the original purchase price. The carrying value is the original purchase price plus the amortized amount of the discount if the bond is purchased at a price below par value. If the bond is purchased at a price above par value, the carrying value is the original purchase price minus (not plus) the amortized amount of the premium. The amortized amount for each year is the change in the price between two points on the trajectory. Q92-7 ★An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. After the bond is purchased and before the first coupon is received, interest rates increase to 8%. The investor sells the bond after five years. Assume that interest rates remain unchanged at 8% over the five-year holding period. Per 100 of par value, the future value of the reinvested coupon payments at the end of the holding period is closest to: 2014 原版书P518-4 A. . B. . C. . Solution:C 7* 7*1. 083 7 * *1 .087 4 6 2 Q93-7 ★An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. After the bond is purchased and before the first coupon is received, interest rates increase to 8%. The investor sells the bond after five years. Assume that interest rates remain unchanged at 8% over the five-year holding period. The capital gain/loss per 100 of 535 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 par value resulting from the sale of the bond at the end of the five-year holding period is closest to a: 2014 原版书P518-5 A. loss of . B. loss of . C. gain of . Solution:B PV7 1 7 71 ()()( )Capital gain/loss=-100= Q94-7 ★★An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. After the bond is purchased and before the first coupon is received, interest rates increase to 8%. The investor sells the bond after five years. Assume that interest rates remain unchanged at 8% over the five-year holding period. Assuming that all coupons are reinvested over the holding period, the investor's five-year horizon yield is closest to: 2014 原版书P518-6 A. %. B. % C. % Solution:B 4 r5,r () R26-7 Three sources of return:  Coupon and principal payments  Reinvestment of coupon payments  Capital gain or loss if bond is sold before maturity  Total return: future value of reinvested coupon interest payments and the sale price (par value if the bond is held to maturity) R27-7 投资时间与YTM的关系  An investor who holds a fixed-rate bond to maturity will earn an annualized rate of return equal to the YTM of the bond when purchased.  An investor who sells a bond prior to maturity will earn a rate of return equal to the YTM at purchase if the YTM at sale has not changed since purchase.  If the market YTM for the bond, our assumed reinvestment rate, increases (decreases) after the bond is purchased but before the first coupon date, a buy-and-hold investor's realized return will be higher (lower) than the YTM of the bond when purchased.  If the market YTM for the bond, our assumed reinvestment rate, increases after the bond is purchased but before the first coupon date, a bond investor will earn a rate of 536 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 return that is lower (higher) than the YTM at bond purchase if the bond is held for a short period.  If the market YTM for the bond, our assumed reinvestment rate, decreases after the bond is purchased but before the first coupon date, a bond investor will earn a rate of return that is lower (higher) than the YTM at bond purchase if the bond is held for a long period. R28-7 Investment horizon与price risk、reinvestment risk的关系  Short investment horizon:  market price risk > reinvestment risk  annualized holding period return is negatively related with YTM  long investment horizon:  market price risk < reinvestment risk  annualized holding period return is positively related with YTM R29-7 Annualized holding period return: calculated as the compound annual return earned from the holding period auunazed h oldingp e riodret ur ntotalreturn1li(bo n d p rice)n1 P24-7 Macaulay, modified and effective durations Q95-7 ★★An investor buys a three-year bond with a 5% coupon rate paid annually. The bond, with a yield-to-maturity of 3%, is purchased at a price of per 100 of par value. lAossumiwng a 5-beasis rpoint chaynge in yield-tol-mdaturity, the bond'st apopro ximate modifimed a turityby5 b ps to 2 .9 5% duration is closest to: 2014 原版书P519-7 A. A . 55105B. PB . 105 . 804232 123C. C . (1 )(1 0 .00295)(10 .0 0295) Sohlutioni:A gher y ield to m a turityby5 b ps to 3 .0 5% 55105PV 105 . 510494 123(1 305)(1 0 .00305)(10 .0 0305) m odifiedd u ration 8 2** Q96-7 ★Which of the following statements about duration is correct? A bond's: 2014 原版书P519-8 A. effective duration is a measure of yield duration. B. modified duration is a measure of curve duration. 537 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. modified duration cannot be larger than its Macaulay duration. Solution:C A bond's modified duration cannot be larger than its Macaulay duration. The formula for modified duration is:M, where r is the bond’s yiled-to-maturity odifieddurationMacaulay d uration1 r per period. A bond's yield-to-maturity has an effective lower bound of 0, and thus the denominator 1 + r term has a lower bound of 1. Therefore, ModDur will typically be less than duration is a measure of curve duration. Modified duration is a measure of yield duration. Q97-7 ★★An investor buys a 6% annual payment bond with three years to maturity. The bond has a yield-to-maturity of 8% and is currently priced at per 100 of par. The bond's Macaulay duration is closest to: 2014 原版书P519-9 A. . B. . C. . Solution:C period Cash flow Present value weight Period*weight 1 6 2 6 3 106 Q98-7 ★★The interest rate risk of a fixed-rate bond with an embedded call option is best measured by: 2014 原版书P519-10 A. effective duration. B. modified duration. C. Macaulay duration. Solution:A The interest rate risk of a fixed-rate bond with an embedded call option is best measured by effective duration. A callable bond's future cash flows are uncertain because they are contingent on future interest rates. The issuer's decision to call the bond depends on future interest rates. Therefore, the yield-to-maturity on a callable bond is not well defined. Only effective duration, which takes into consideration the value of the call option, is the appropriate interest rate risk measure. Yield durations like Macaulay and modified durations are not relevant for a callable bond because they assume no changes in cash flows when interest rates change. Q99-7 ★A Canadian pension fund manager seeks to measure the sensitivity of her pension liabilities to market interest rate changes. The manager determines the present value of the liabilities under three interest rate scenarios: a base rate of 7%, a 100 basis point increase in rates up to 8%, and a 100 basis point drop in rates down to 6%. The results of the manager's 538 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 analysis are presented below: Interest rate assumption Present value of liabilities 6% CAD million 7% CAD million 8% CAD million The effective duration of the pension fund's liabilities is closest to: 2014 原版书P519-11 A. . B. . C. . Solution:B effective d uration 5 *0*45514 . . Q100-7 ★Which of the following statements about Macaulay duration is correct? 2014 原版书P519-12 A. A bond's coupon rate and Macaulay duration are positively related. B. A bond's Macaulay duration is inversely related to its yield-to-maturity. C. The Macaulay duration of a zero-coupon bond is less than its time-to-maturity. Solution:B A bond's yield-to-maturity is inversely related to its Macaulay duration: The higher the yield-to-maturity, the lower its Macaulay duration and the lower the interest rate risk. A higher yield-to-maturity decreases the weighted average of the times to the receipt of cash flow, and thus decreases the Macaulay duration. A bond's coupon rate is inversely related to its Macaulay duration: The lower the coupon, the greater the weight of the payment of principal at maturity. This results in a higher Macaulay duration. Zero-coupon bonds do not pay periodic coupon payments; therefore, the Macaulay duration of a zero-coupon bond is its time-to-maturity. Q101-7 Assuming no change in the credit risk of a bond, the presence of an embedded put option: 2014 原版书P520-13 A. reduces the effective duration of the bond. B. increases the effective duration of the bond. C. does not change the effective duration of the bond. Solution:A The presence of an embedded put option reduces the effective duration of the bond, especially when rates are rising. If interest rates are low compared with the coupon rate, the value of the put option is low and the impact of the change in the benchmark yield on the bond's price is very similar to the impact on the price of a non-putable bond. But when benchmark interest rates rise, the put option becomes more valuable to the investor. The ability to sell the bond at par value 539 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 limits the price depreciation as rates rise. The presence of an embedded put option reduces the sensitivity of the bond price to changes in the benchmark yield, assuming no change in credit risk. Q102-7 ★★A bond portfolio consists of the following three fixed-rate bonds. Assume annual coupon payments and no accrued interest on the bonds. Prices are per 100 of par value. The bond portfolio's modified duration is closest to: 2014 原版书P520-14 bond maturity Market price Coupon Yield-to-marurity Modified value duration A 6 years 170,000 % % B 10 years 120,000 % % C 15 years 100,000 % % A. . B. . C. . Solution:A market v alueo f the p ort fo lio170, 00 0120,00 0 100,000 390,000 portfolio d uration 5 .42*(170,000/390,000)8. 4 4*(120,000/390,000) *(100,000/390,000) Q103-7 ★★A limitation of calculating a bond portfolio's duration as the weighted average of the yield durations of the individual bonds that compose the portfolio is that it: 2014 原版书P520-15 A. assumes a parallel shift to the yield curve. B. is less accurate when the yield curve is less steeply sloped. C. is not applicable to portfolios that have bonds with embedded options. Solution:A A limitation of calculating a bond portfolio's duration as the weighted average of the yield durations of the individual bonds is that this measure implicitly assumes a parallel shift to the yield curve (all rates change by the same amount in the same direction). In reality, interest rate changes frequently result in a steeper or flatter yield curve. This approximation of the "theoreti-cally correct" portfolio duration is more accurate when the yield curve is flatter (less steeply sloped). An advantage of this approach is that it can be used with portfolios that include bonds with embedded options. Bonds with embedded options can be included in the weighted average using the effective durations for these securities. Q104-7 ★★Consider two bonds that are identical except for their coupon rates. The bond that will have the highest interest rate risk most likely has the: (2014 Mock 101-110) A. lowest coupon rate. 540 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. coupon rate closest to its market yield. C. highest coupon rate. Solution:A A lower coupon rate means that more of the bond's value comes from repayment of face value, which occurs at the end of the bond's life. R30-7 定义、计算及解释Macaulay duration, modified duration 和 effective duration  Interest rate risk: 债券价格对利率变化的敏感程度，价格对利率变化越敏感，价格波动的可能性就越高  Duration: a measure of a bond’s interest rate risk or sensitivity of a bond’s full price to a change in its yield.  Macaulay duration: the weighted average number of coupon periods until a bond’s scheduled cash flows. ntPVCFM ƒ υtnacaulaydura tion tƒ 1 PVCF P ƒ[t(P VυCF/Pt0)](0)tt 1  Modified duration: a linear estimate of the percentage change in a bond’s price that would result from a 1% change in its YTM. ModMacaulaydurationifiedduration1periodicmarketyield ApproxVVimate modified durationV-20YTM  Effective duration: a linear estmate of the percentage change in a bond’s price that would result from a 1% change in the benchmark yield curve. Eec uraV-Vfftivedtion 2V0curveR31-7 为什么effective duration 是衡量bonds with embedded options最有效的方法  Interest rates may change the future cash flows of bonds with embedded options R32-7 债券的maturity, coupon, embedded option 和 yield level对interest rate risk的影响  Lower coupon means higher duration.  Longer maturity means higher duration.  Lower market yield means higher duration  a put or call provision means lower duration  zero-coupon bond的久期等于债券的剩余期限 perpetuity的久期1 YTM=YTM  fixed-rate coupon的久期 541 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  bond trading at par of at premium: the longer time to maturity, the higher Macaulay duration  bond trading at discount:  usual: the longer to maturity, the higher Macaulay duration  exception: on long-term, low-coupon bonds, it is possible to have a lower duration than on an otherwise comparable shorter-term bond R33-7 计算portfolio的duration并解释portfolio duration 的局限性  Calculate the weighted average number of periods until cash flows will be received using the portfolio’s IRR.  Limitation: better theoretically but cannot be used for bonds with options.  Calculate the weighted average of durations of bonds in the portfolio. Portfolio duration = w1D1+ w2D2 + ……+wnDn  Limitations: the yields may not change equally on all the bond in the portfolio. P25-7 Money duration and PVBP Q105-7 ★Using the information below, which bond has the greatest money duration per 100 of par value assuming annual coupon payments and no accrued interest? 2014 原版书P520-16 bond Time-to-maturity Price per 100 of Coupon Yield-to-maturity Modified par value rate duration A 6 years % % B 10 years % % C 9 years % % A. Bond A B. Bond B C. Bonc C Solution:B MoneyDur of Bond A = x = MoneyDur of Bond B = x = MoneyDur of Bond C = x = Q106-7 ★★A bond with exactly nine years remaining until maturity offers a 3% coupon rate with annual coupons. The bond, with a yield-to-maturity of 5%, is priced at per 100 of par value. The estimated price value of a basis point for the bond is closest to: 2014 原版书P520-17 A. B. C. Solution:B Lowering the yield-to-maturity by one basis point to % results in a bond price of : 542 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 PV3 103 1 ... 985. 8 49134()() Increasing the yield-to-maturity by one basis point to % results in a bond price of : PV3 103 ... 85. 7 19638()()PVBP85 .849134 R34-7 money duration和PVBP  money duration: stated in currency units and is sometimes expressed per 100 of bond value Money duration=annual modified duration * full price of bond Money duration per 100 units of par value=annual modified duration * full price of bond per 100 of par value  PVBP(=price value of a basis point): the money change in full price of a bond when its YTM changes by one basis point(%) PVBP=money duration* P26-7 Convexity Q107-7 ★Which of the following is the "second-order" effect on a bond's percentage price change given a change in yield-to-maturity? 2014 原版书 P521-18 A. Duration. B. Convexity. C. Yield volatility. Solution:B Convexity measures the "second order" effect on a bond's percentage price change given a change in yield-to-maturity. Convexity adjusts the percentage price change estimate provided by modified duration to better approximate the true relationship between a bond's price and its yield-to-maturity which is a curved line (convex). Duration estimates the change in the bond's price along the straight line that is tangent to this curved line ("first order" effect). Yield volatility measures the magnitude of changes in the yields along the yield curve. Q108-7 ★★Consider the following statements about non-callable bonds. Statement 1: "For non-callable bonds, duration provides only a linear approximation of a bond's price changes as interest rates change." Statement 2: "Incorporating convexity into the analysis of a non-callable bond's price changes as interest rates change always results in higher bond price estimates than derived by using only - the bond's duration. This is true whether interest rates increase or decrease." Are the statements most likely correct or incorrect? 2013 百题Q108-7 543 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. Both statements are correct. B. Statement 1 is incorrect, but Statement 2 is correct. C. Statement 1 is correct, but Statement 2 is incorrect. Solution:A Duration is a linear approximation. It is the tangent line to the actual bond pricing curve for a given starting point (interest rate). The actual pricing curve for an option-free bond is convex. Because of convexity, as you move away from the tangency (the starting point), actual prices (., those on the actual pricing curve) will always be above the tangent line. Q109-7 ★★If three bonds are otherwise identical, the one exhibiting the highest level of positive convexity is most likely the one that is: 2013 百题Q112-7 A. Putable. B. Callable. C. Option-free. Solution:A A is correct because when interest rates rise, a putable bond is more likely to be put back to the issuer by the investor, limiting the loss of value and giving the bond more positive convexity than an option-free bond. In contrast, a callable bond is likely to be called from the investor when interest rates fall, limiting the gain in value and giving the bond negative convexity. Q110-7 ★★A bond is currently trading for per 100 of par value. If the bond’s yield-to-maturity(YTM) rises by 10 basisi points, the bond’s full price is expected to fall to . if the bond’s YTM decreases by 10 basisi points, the bond’s full price is expeted to increase to . thebond’ s approximate convexity is closest to: 2014 原版书P520-19 A. B. C. Solution:B approximate c o nvexity [9 . 669(2* 9 )]/(*) 6 Q111-7 ★★A bond has an annual modified duration of and annual convexity of . If the bond's yield-to-maturity decreases by 25 basis points, the expected percentage price change is closest to: 2014 原版书P521-20 A. % B. % C. Solution:C % P∋Vfull [7| .020*(0. 00 25)][ * *( 5 )2] 5 4,% 544 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q112-7 ★An analyst accurately calculates that the price of an option-free bond with percent coupon would change 15% if market yields increase 100 basis points. If market yields decrease 100basis points, the bond’s price would likely: 2013 百题Q107-7 A. Increase by less than 15% B. Decrease by less than 15% C. Increase by more than 15% Solution:C Percentage change in price ={ [- duration×(△y)]+[×convexity×(△y)^2]}100 When the bond yield increase, △y >0, the price decreases 12%, now the bond yield decreases, △y<0, percentage change in price will be greater than the one when yield increases. Q113-7 ★The duration of an option-free bond priced at $900 is . If yields decrease by 150 basis points, the most accurate statement about the actual price of the bond after the decrease in yields is that the actual price will be: 2013 百题Q109-7 A. Equal to $1,. B. Greater than 1,. C. Less than 1, because the lower level of yields increases the bond's interest rate risk. Solution:B The price adjustment for duration can be calculated as follows: X () X 100 = %. $900() = $1, This adjusts the price for duration only. Because the bond is option-free and the change in yield is large, using duration alone underestimates the actual price of the bond because of the effect of convexity. Once an adjustment is made for convexity, the price would be greater than $1,. R35-7 计算及解释approximate convexity，并区分approximate convexity 和 effective convexity  Convexity: a measure of the curvature of the price-yield curve. approxVV2Vimateconvexity ∋ 0 (YTM)2V0 Effective convexity: appropriate for bonds with embedded options. E VV2Vffectiveconvexity 0 ( c∋urveV )2R36-7 给定债券duration和convexity，计算债券价格变动的百分比 % ∋ a nn u al mifiedduratio n YTM 1∋annual c onvex2fullpriceod()2ity( YT M) ∋ 545 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P27-7 Relationship among a bond’s holding period return, duration, and the investment horizon Q114-7 If the term structure of yield volatility is downward sloping, then: 2014 原版书P521-22 A. Short-term rates are higher than long-term rates. B. Long-term yields are more stable than short-term yields. C. Short-term bonds will always experience greater price fluctuation than long-term bonds. Solution:B If the term structure of yield volatility is downward-sloping, then short-term bond yields-to-maturity have greater volatility than for long-term bonds. Therefore, long-term yields are more stable than short-term yields. Higher volatility in short-term rates does not necessarily mean that the level of short-term rates is higher than long-term rates. With a downward-sloping term structure of yield volatility, short-term bonds will not always experience greater price fluctuation than long-term bonds. The estimated percentage change in a bond price depends on the modified duration and convexity as well as on the yield-to-maturity change. Q115-7 The coupon reinvestment risk just offsets the market price risk when The holding period for a bond equals to2014 原版书P521-23 A. Duration gap. B. Modified duration. C. Macaulay duration. Solution:C When the holder of a bond experiences a one-time parallel shift in the yield curve, the Macaulay duration statistic identifies the number of years necessary to hold the bond so that the losses (or gains) from coupon reinvestment offset the gains (or losses) from market price changes. The duration gap is the difference between the Macaulay duration and the investment horizon. Modified duration approximates the percentage price change of a bond given a change in its yield-to-maturity. Q116-7 ★When the investor's investment horizon is larger than the Macaulay duration of the bond she owns: 2014 原版书P521-24 A. The investor is hedged against interest rate risk. B. Reinvestment risk dominates, and the investor is at risk of lower rates. C. Market price risk dominates, and the investor is at risk of higher rates. Solution:B The duration gap is equal to the bond's Macaulay duration minus the investment horizon. In this case, the duration gap is positive, and price risk dominates coupon reinvestment risk. The investor risk is to higher rates. The investor is hedged against interest rate risk if the duration gap is zero; that is, the investor's investment horizon is equal to the bond's Macaulay duration. The investor is at risk of lower rates only if the duration gap is negative; that is, the investor's investment horizon is greater than the bond's Macaulay duration. In this case, coupon reinvestment risk dominates market price risk. 546 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q117-7 ★An investor purchases an annual coupon bond with a 8% coupon rate and exactly 20 years remaining until maturity at a price equal to par value. The investor's investment horizon is eight years. The approximate modified duration of the bond is years. The duration gap at the time of purchase is closest to: 2014 原版书P521--25 A. . B. . C. . Solution:C The duration gap is closest to . The duration gap is a bond's Macaulay duration minus the investment horizon. The approximate Macaulay duration is the approximate modified duration times one plus the yield-to-maturity. It is (= x ). Given an investment horizon of eight years, the duration gap for this bond at purchase is positive: - 8 = . When the investment horizon is less than the Macaulay duration of the bond, the duration gap is positive, and price risk dominates coupon reinvestment risk. R37-7 yield volatility的term structure是如何影响债券的interest rate risk的  Term structure of yield volatility: the relationship between maturity and yield volatility.  Shorter-term bond may be have more price volatility than a longer bond with a greater duration because of the greater yield volatility of the shorter-term yield. R38-7 描述债券holding period return, duration和investment horizon之间的关系  If investment horizon > Macaulay duration, then reinvestment risk dominates price risk, investor’s risk is to lower interest rates.  If investment horizon = Macaulay duration, then reinvestment risk offsets price risk  If investment horizon < Macaulay duration, then price risk dominates reinvestment risk, investor’s risk is to higher interest rates.  Duration gap = Macaulay duration – investment horizon P28-7 Credit risk premiun and liquidity risk premium Q118-7 ★A company receives a ratings upgrade and the price increases on its fixed-rate bond. The reason of the price increase was most likely a(n): 2014 原版书P522-26 A. Decrease in the bond's credit spread. B. Increase in the bond's liquidity spread. C. Increase of the bond's underlying benchmark rate. Solution:A The price increase was most likely caused by a decrease in the bond's credit spread. The ratings upgrade most likely reflects a lower expected probability of default and/or a greater level of recovery of assets if default occurs. The decrease in credit risk results in a smaller credit spread. The increase in the bond price reflects a decrease in the yield-to-maturity due to a smaller credit spread. The change in the bond price was not due to a change in liquidity risk or an increase in the benchmark rate. 547 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q119-7 What type of risk most likely affects an investor's ability to buy and sell bonds in the desired amounts and at the desired time?(2014 Mock 100-105) A. Default B. Market liquidity C. Spread Solution:B The size of the spread between the bid price and the ask price is the primary measure of market liquidity of the issue. Market liquidity risk is the risk that the investor will have to sell a bond below its indicated value. The wider the bid–ask spread, the greater the market liquidity risk. R39-7 Credit risk premiun and liquidity risk premium  A bond’s yield spread to the benchmark curve includes a premium for credit risk and a premium for illiquidity.  An increase or decrease in any of these components of yield will increase or decrease the bond’s YTM by the same amount % ∋b on dval u ed ur at io n(spread )∋1 x22convei ty(spread) ∋ P29-7 Credit risk and credit-related risk Q120-7 ★The risk that a bond’s creditworthiness declines is best described by: 2014 原版书P594-1 A. Credit migration risk B. Market liquidity risk C. Spread widening risk Solution:A Credit migration risk or downgrade risk refers to the risk that a bond issuer's creditworthiness may deteriorate or migrate lower. The result is that investors view the risk of default to be higher, causing the spread on the issuer's bonds to widen. Q121-7 ★Stedsmart Ltd and Fignermo Ltd are alike with respect to financial and operating characteristics, except that Stedsmart Ltd has less publicly traded debt outstanding than Fignermo Ltd. Therefore, Stedsmart Ltd is most likely to have: 2014 原版书P594-2 A. no market liquidity risk. B. lower market liquidity risk. C. higher market liquidity risk. Solution:C Market liquidity risk refers to the risk that the price at which investors transact may be different from the price indicated in the market. Market liquidity risk is increased by (1) less debt outstanding and/or 548 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 (2) a lower issue credit rating. Because Stedsmart Ltd is comparable to Fignermo Ltd except for less publicly traded debt outstanding, it should have higher market liquidity risk. R40-7 Credit risk and credit-related risk  Credit risk: the risk associated with losses stemming from the failure of a borrower to make timely and full payments of interest or principal. Credit has two components:  Default risk: the probability that a borrower fails to pay interest or repay principal when due.  Loss severity, or loss given fault: the value a bond investor will lose if the issuer defaults. Loss severity can be stated as a monetary amount or as a percentage of a bond’s value(principal and unpaid interest)  Spread risk:  credit migration (or downgrade risk):the possibility that spreads will increase because the issuer has become less creditworthy.  market liquidity risk: the risk of receiving less than market value when selling a bond and is reflected in the size of the bid-ask spreads. Expected loss = Default probability * Loss severity given default Loss severity given default = 1 – Recovery rate P30-7 Seniority rankings of corporate debt Q122-7 In the event of default, debentures' claims will most likely rank: 2014 原版书P594-3 A. above that of secured debt holders. B. below that of secured debt holders. C. the same as that of secured debt holders. Solution:B Secured debt holders have a direct claim on certain assets and their associated cash flows whereas unsecured debt holders only have a general claim on the issuer's assets and cash flow. Q123-7 ★In the event of default, the recovery rate of which of the following bonds would most likely be the highest? 2014 原版书P594-4 A. First mortgage debt B. Senior unsecured debt C. Junior subordinate debt Solution:A First mortgage debt is the highest ranked debt in terms of priority of claims and is considered secured debt. First mortgage debt will also have the expected highest recovery rate. First mortgage debt refers to the pledge of specific property. Neither senior unsecured nor junior subordinate debt has any claims on specific assets. Q124-7 During bankruptcy proceedings of a firm, the priority of claims was not strictly adhered 549 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 to. Which of the following is the least likely explanation for this outcome? 2014 原版书P594-5 A. Senior creditors compromised. B. The value of secured assets was less than the amount of the claims. C. The judge's order resulted in actual claims not adhering to strict priority of claims. Solution:B Whether or not secured assets are sufficient for the claims, this would not influence priority of claims. The difference between pledge assets and the claim becomes senior unsecured debt and still adheres to the guidelines of priority of claims. R41-7 Seniority rankings of corporate debt  Priority of claims: in the event of default, unsecured debtholders claim rank below (., get paid after) those of secured creditors.  Secured debt is backed by collateral  Unsecured debt (debentures) represent a general claim to the issuer’s assets and cash flows.  General seniority ranking for debt repayment priority  First lien or first mortgage  Senior secured debt  Junior secured debt  Senior unsecured debt  Senior subordinated debt  Subordinated debt  Junior subordinated debt  All debt within the same category is said to rank pari passu, or have same priority of claims P31-7 Issuer credit rating, issue credit rating, and “notching” Q125-7 ★Although rating agencies assess the creditworthiness of debt issuers and issues, the least likely reason that a fixed income analyst should conduct an independent analysis of credit risk is because rating agencies: 2014 原版书P594-6 A. may at times mis-rate issues. B. often lag the market in pricing credit risk. C. cannot foresee future debt-financed acquisitions. Solution:C Neither an analyst nor ratings agencies can anticipate unexpected events. Q126-7 In both Moody's and S&P ratings, which of the following pairs of ratings is known as "below investment grade," speculative grade," or "junk"?2014 原版书P546-2 A. Baal/BBB– B. B3/CCC+ 550 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. Baa3/BB+ Solution:B Note that issuers with ratings such as Baa3/BB+ (answer C) are called "crossovers" because one rating is investment grade (the Moody's rating of Baa3) and the other is high yield (the S&P rating of BB+). Q127-7 ★Based on the practice of notching by the rating agencies, a subordinated bond from a company with an issuer rating of BB would likely carry what rating? 2014 原版书P546-4 A. B+ B. BB C. BBB Solution:A The subordinated bond would have its rating notched lower than the company's BB rating, probably by two notches, reflecting the higher weight given to loss severity for below-investment-grade credits. R42-7 Issuer credit rating, issue credit rating, and “notching”  Three major credit ratings agencies: Moody’s, S&P, Fitch  Different credit ratings: Triple A, investment grade(BBB及以上), non-investment grade(BB+及以下)  Issuer credit rating(corporate family ratings): a debt issuer’s overall creditworthiness and typically apply to a firm’s senior unsecured debt.  Issue ratings(corporate credit rating): credit risk of a specific debt issue  Notching: assign different ratings to bonds of the same issuer by rating agencies  Structural subordination: Subsidiary’s debt covenant may restrict the transfer of cash or assets upstream to the parent company before the subsidiary’s debt is serviced. Thus the parent company’s bonds are effectively subordinated to the subsidiary’s bonds.  Cross default provision: Provisions whereby events of default such as non-payment of interest on one bond trigger default on all outstanding debt; implies the same default probability for all issues. R43-7 risks in relying on agency ratings  Credit ratings are dynamic  Rating agencies are not perfect.  Event risk is difficult to assess.  Credit ratings lag market pricing. P32-7 Four Cs of credit analysis Q128-7 ★Which of the following should be assessed when a credit analyst analyzes the collateral of a company? 2014 原版书 P595-9 A. Cash flows of the company. 551 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. Soundness of management's strategy. C. Value of the company's assets in relation to the level of debt. Solution:C The value of assets in relation to the level of debt is important to assess the collateral of the company; that is, the quality and value of the assets that support the debt levels of the company. Q129-7 Which of the following would be most appropriate to analyze in order to determine the capacity of a company? 2014 原版书 P595-10 A. Company’s strategy. B. Growth prospects of the industry. C. Aggressiveness of the company's accounting policies. Solution:B The growth prospects of the industry provide the analyst insight regarding the capacity of the company. Q130-7 ★If goodwill makes up a large percentage of a company’s total assets, this most likely indicates that: 2014 原版书P594-8 A. the company has low free cash flow before dividends. B. there is a low likelihood that the market price of the company’s common stock is below book value. C. a large percentage of the company’s assets are of low quality. Solution:C Goodwill is viewed as a lower quality asset compared with tangible assets that can be sold and more easily converted into cash. Q131-7 Using the "Four Cs of Credit Analysis" framework, which of the following is the least likely factor to be considered under the category of "capacity"? (2014 Mock 101-107) A. Industry fundamentals B. History of fraud or malfeasance C. Level of competition Solution:B Any history of fraud or malfeasance is a major warning flag to credit analysis under the category of "character." R44-7 Four Cs of credit analysis  Capacity  Industry structure  Industry fundamentals  Industry cyclicality 552 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Industry growth prospects  Industry published statistics  Company fundamentals  Competitive position  Operating history  Management’s strategy and execution  Ratios and ratio analysis  Collateral  Intangible assets  Depreciation  Equity market capitalization  Human and intellectual capital  Covenants  Affirmative covenant  Negative covenants  Character  Soundness of strategy  Track record  Accounting policies and tax strategies  Fraud and malfeasance record  Prior treatment of bondholders P33-7 Financial ratios uesd in credit analysis Q132-7 Based on the information provided in Exhibit 1, the EBITDA interest coverage ratio of Adidas AG is closest to : 2014 原版书P596-12 A. B. C. Exhibit 1: Adidas AG Excerpt from Consolidated Income Statement Year Ending 31 December 2010(€ in millions) Gross profit 5,730 Royalty and commission income 100 Other operating income 110 Other operating expenses 5,046 Operating profit 894 Interest income 25 Interest expense 113 Income before taxes 806 Income taxes 238 Net income 568 Additional information: Depreciation and amortization: €249 million Source: Adidas AG Annual Financial Statements, December 2010 553 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution:B The interest expense is €113 million and EBITDA = Operating profit + Depreciation and amortization = €894 + 249 million = €1,143 million. EBITDA interest coverage = EBITDA/Interest expense = 1,143/113 = times. Q133-7 The following information is from the annual report of Adidas AG for December 2010: Depreciation and amortization: €249 million Total assets: €10,618 million Total debt: €1,613 million Shareholders' equity: €4,616 million The debt/capital ratio of Adidas AG is closest to: 2014 原版书P596-13 A. %. B. %. C. %. Solution:B Total debt is €1,613 million with Total capital = Total debt + Shareholders' equity = €1,613 + 4,616 = €6,229 million. The Debt/Capital ratio = 1,613/6,229 = %. Q134-7 ★Funds from operations (FFO) of Pay Handle Ltd increased in 2011. In 2011 the total debt of the company remained unchanged, while additional common shares were issued. Pay Handle Ltd's ability to service its debt in 2011, as compared to 2010, most likely: 2014 原版书P596-14 A. improved. B. worsened. C. remained the same. Solution:A If the debt of the company remained unchanged but FFO increased, more cash is available to service debt compared to the previous year. Additionally, the debt/capital ratio has improved. It would imply that the ability of Pay Handle Ltd to service their debt has improved. Q135-7 ★Based on the information in Exhibit 2, Grupa Zywiec SA's credit risk is most likely: 2014 原版书P596-15 Exhibit 2 European Food, Beverage, and Tobacco Industry and Grupa Zywiec SA Selected Financial Ratios for 2010 Total FFO/total Return on Total EBITDA interest debt/total debt(%) capital(%) debt/EBITDA(x) coverage(x) capital(%) Grupa Zywiec SA Industry 554 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Median A. lower than the industry. B. higher than the industry. C. the same as the industry. Solution:A Based on four of the five credit ratios, Grupa Zywiec SA's credit quality is superior to that of the industry. Q136-7 ★Based on the information in Exhibit 3, the credit rating of Davide Campari-Milano . is most likely: 2014 原版书P596-16 Exhibit 3 European Food, Beverage, and Tobacco Industry; Associated British Foods plc; and Davide Campari-Milano Selected Financial Ratios, 2010 Total FFO/total Return on Total EBITDA debt/total debt(%) capital(%) debt/EBITDA(x) interest capital(%) coverage(x) Associcted British Foods plc Davide Compari-Milano . European food,Beverage, and Tobacco Median A. lower than Associated British Foods plc. B. higher than Associated British Foods plc. C. the same as Associated British Foods plc. Solution:A Davide Campari-Milano . has more financial leverage and less interest coverage than Associated British Foods plc, which implies greater credit risk. R45-7 Financial ratios used in credit analysis  Profitability and cash flow measures  EBITDA = operating income + dep. & amor.  FFO = NI from continuing operations + dep. & amor. + deferred income taxes + other non-cash items  FCF before div. = NI + dep. & amor. – capital expenditure – increase (+ decrease) in non-cash working capital – non-recurring items  FCF after div. = FCF before div. – div.  Leveraged ratios 555 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Debt/capital, Capital = total debt + shareholders equity  Debt/EBITDA  FFO/debt  Coverage ratios  EBITDA/interest expense  EBIT/interest expense P34-7 Factors influence yield spreads Q137-7 ★Holding all other factors constant, the most likely effect of low demand and heavy new issue supply on bond yield spreads is that yield spreads will: 2014 原版书P597-17 A. widen. B. tighten. C. not be affected. Solution:A Low demand implies wider yield spreads, while heavy supply will widen spreads even further. Q138-7 ★A credit analyst is assessing a two-year, % coupon bond with a duration. Because of a recent slump in operating revenue, the bond's yield to maturity has increased from % to %. The impact of the change in yield to maturity on the return of the bond is closest to: 2014 原版书P597-18 A. %. B. —%. C. —%. Solution:B Return impact = —(Spread x Duration) Higher credit risk implies widening of the spread by 30 basis points and a lower return. Return impact = —(30 basis points x years) = — basis points = —% Q139-7 Which bonds are most likely to have the least spread volatility? 2014 原版书 P570-1 A. Bonds from issuers rated AA B. Bonds from issuers rated BB C. Bonds from issuers rated A Solution:A Lower-quality bonds exhibit greater spread volatility than higher quality bonds. R46-7 yield spread  Yield spread = liquidity premium + credit spread  Factors affect the spreads on corporate bonds  Credit cycle: credit spreas narrows as the credit cycle improves  Economic conditions: credit spread narrows as the economy strengthens and 556 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 investors expect firms’ credit metrics to improve  Financial market performance: credit spreas narrow in strong-performingmarkets overall  Broker-dealer capital: yield spreads are narrower when broker-dealers provide sufficient capital  General market demand and supply: credit spreads narrow in times of high demand for bonds R47-7 Return impact of spread changes  For small spread changes: Return impact ≈ - modified duration × Δ spread For larger spread changes: Return impact ≈ - modified duration × Δ spread + ×convexity ×(Δ spread)2  Credit curves(spread curves): the relationship between spread and maturity. Because longer maturity bonds tend to have wider spreads, credit curve are typically upward sloping. P35-7 High yield, sovereign, and municipal det Q140-7 ★An investor owns a high yield bond issued by a subsidiary of a parent company. Which of the following provisions is least likely to be benefit to the investor? 高顿题库 A. Restricted payments. B. Change of control put. C. Restricted subsidiary. Solution:C Restricted subsidiaries favor the parent holding company by making its debt pari passu with a subsidiary’s debt, rather than being structurally subordinated to the subsidiary’s debt. A change of control put specifies a form of protection for the bondholder if the subsidiary is sold. A restricted payments covenant provides some protection to the bondholder by limiting the amount of cash paid to equity holders. R48-7 High yield debt  High yield debt=non-investment grade bond=junk bonds(rated below Baa3/BBB-)  Special considerations of high-yield credit analysis:  Greater focus on issuer liquidity and cash flow  Detailed financial projections  Detailed understanding and analysis of the debt structure  Understanding of an issuer’s corporate structure  Covenant analysis R49-7 Sovereign debt  Framework for evaluating sovereign credit and assigning sovereign debt ratings:  Institutional effectiveness  Economic prospects  International investment 557 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Fiscal flexibility  Monetary flexibility R50-7 Municipal debt  GO bonds  backed by the taxing authority of the issuing municipality  The credit analysis has some similarities to sovereign analysis  Revenue bonds  Support specific projects, such as toll roads, bridges, airports, and other infrastructure.  The creditworthiness comes from the revenues generated by usage fees and tolls levied.  Often have higher credit risk than GO bonds.  Analysis of revenue bonds is similar to those for analyzing corporate bonds.  Debt service coverage ratio (DSCR): the ratio of the project’s net revenue to the required interest and principal payments on the bonds.  Many revenue bonds include a covenant requiring a minimum DSCR to protect the lenders’ interests. 558 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 8-Derivatives P1-8 FRA计算payment Q1-8 An investor goes long an FRA that expires in 30 days for which the underlying is 90-day LIBOR for a notional of $10 million. A dealer quotes this Instrument at %. At expiration, 60-days LIBOR is % and 90-day LIBOR is 4%. The payment made at expiration is closest to: （2012年12月真题） A. $12,376 from the investor to the dealer. B. $12,376 from the dealer to the investor. C. $16,570 from the investor to the dealer. Solution: A The underlying of an FRA is an interest payment. The investor is long the rate and will benefit if rates increase. Since rates decreased, the investor must pay the dealer: 10[( - )(90/360)10]$12,(90/360)υ- Q2-8 FRA with a notional principal of $10,000,000 where the 180-day LIBOR rate at expiration is % and the forward contract rate was set at %. Calculate the gain or loss.(原版书R64-9) A. -$588,235. B. -$19,531. C. $19,493. Solution: B A 3 υ 9 FRA uses the 180-day LIBOR contract as the underlying rate. Solve ( - ) υ (180/360) / [1 + υ(180/360)] = - . Multiply by $10,000,000. The answer is approximately -$19,531. Q3-8 A financial institution enters into a forward rate agreement (FRA), expiring in 30 days, to lend $15,000,000 at the 90-day LIBOR interest of 2%. If 90-day LIBOR is 3% when the FRA expires in 30 days, the payoff to the financial institution is closest to: (MOCK92-91) A. -$37,500. B. -$37,221. C. $12,469. Solution: B The financial institution is lending, that is, it is short and will, therefore, lose if the 90-day LIBOR rate at expiration is greater than 2%. The payoff is calculated as follows: $15,000,000 x [(( — ) (90 / 360)) / ((1 + 3(90 / 360))] = -$37, Q4-8 ★An investor enters into a 1 x 3 forward rate agreement at a LIBOR rate of %. At expiration, the 60-day LIBOR rate is % and the 90-day LIBOR rate is %. Assuming the contract covers a $1 million notional principal, what payment will the investor most likely receive? (2014 Mock 98-113) 559 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. $ B. $ C. $ Solution: C $1 million × {(–)(60/360)/[1+ (60/360)]} = $. P2-8 Forward Contracts Q5-8 Derivative markets serve a number of purposes in global economic systems. Which of the following is least likely one of these purposes? A. Reveal prices and volatility of the underlying assets B. Improve market efficiency by lowering transaction costs C. Enable companies to more easily practice risk management Solution: B Derivative markets improve market efficiency for the underlying assets by increasing market fairness and competitiveness, not by lowering transaction costs. Lower transaction cost is a characteristic of derivative markets that is required for them to exist, not a purpose for derivative markets. Q6-8 The main risk faced by an individual who enters into a forward contract to buy the S&P 500 Index is that: A. the market may rise. B. the market may fall. C. market volatility may rise. Solution: B If the market falls, the buyer of a forward contract could pay more for the index, as determined by the price that was contracted for at the inception of the contract, than the index is worth when the contract matures. If the market volatility rise, the value of the contract gets greater. Q7-8 ★The usefulness of a forward contract is limited by some problems. Which of the following is most likely one of those problems?（原版书 -10） A. Once you have entered into a forward contract, it is difficult to exit from the contract. B. Entering into a forward contract requires the long party to deposit an initial amount with the short party. C. If the price of the underlying asset moves adversely from the perspective of the long party, periodic payments must be made to the short party. Solution: A. As opposed to a futures contract, trading out of a forward contract. is quite difficult. There is no exchange of cash at the origination of a forward contract. There is no exchange on a forward contract until the maturity of the contract. 560 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q8-8 Which of the following is most representative of forward contracts and contingent claims? Forward Contracts C o ntingent Claims A. Premium paid at inception Premium paid at inception B. Premium paid at inception No premium paid at inception C. No premium paid at inception Premium paid at inception Solution: C Unlike a contingent claim, a forward commitment typically requires no premium to be paid up front. An intuitive way to look at this is to realize that a forward commitment is binding on both parties, so any up-front fees would cancel, while a contingent claim is binding only on the party in the short position. For this, the party in the short position demands (and receives) compensation. Q9-8 A contract has no contingent claim and is also over the counter traded. Which of the following contract satisfies the characteristics? (2012年12月真题) A. Forward B. Option C. Futures Solution: A Only forward contract has no contingent claim and over the counter traded. Q10-8 A buyer would face the greatest risk of default with: (Mock 84-92) A. A farmer making physical delivery on a short soybean futures position. B. An investment bank making cash settlement on a short euro futures position. C. Multinational firm making cash settlement on a short . dollar forward contract. Solution: C In a forward contract, each party assumes the risk that the other party will default. Q11-8 Two counterparties sign a forward contract on a stock, the underlying stock price goes up afterward, which counterparty/counterparty suffer from credit default risk? （2012年12月真题） A. The long position only B. The short position only C. Both long and short position Solution: A Since long position gains positive profit when underlying price goes up, then long position may suffer from the credit default of the short position. So the long position only suffers from credit default risk when the underlying stock price goes up. 561 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q12-8 ★★Which of the following have the largest counterparty risk? (真题) A. Option B. Forward C. Futures Solution: B Forward contracts are traded on over-the-counter markets. They are largely unregulated markets and each contact is with a counterparty, which may expose the owner of a derivative to default risk. Q13-8 ★★Euribor would most likely be the interest rate quoted on a large: (Mock84) A. euro time deposit in Toronto. B. dollar time deposit in Frankfurt. C. euro dollar time deposit in the United States Solution: A Euribor is the interest rate on large euro currency time deposits traded in most major world cities. R1-8 衍生品就是现在约定将来的交易。  Futures and forward:  Future is standardized and more actively traded in the secondary markets. Future contracts are backed and regulated by the clearinghouse. Forwards is more customized. R2-8 掌握几种常见的forward contract：  Equity forward contract: 标的资产是股票。  Forward contracts on bonds: 标的资产是债券。债券远期必须在债券到期之前交割。  Eurodollar deposits: 标的资产是LIBOR.  Forward rate agreement (FRA)  Currency forward: 标的是汇率，这里请大家注意，USD/Euro, 可以认为欧元是以美元为标价的东西，或资产。Long 欧元的汇率，相当于long欧元的价格。反之亦然。 R3-8 Forward commitment和Contingent claim  Forward commitment: is an agreement between two parties in which one party, the buyer, agrees to buy from the other party, the seller, an underlying asset at a future date at a price established  Contingent claimoption contracts R4-8 FRA掌握概念及公式  概念：Viewed as a forward contract for the long to get a loan from the short at a specific future date at a rate fixed in the contract  A 60-day FRA on 90-day LIBOR（2×5 FRA）means：Settlement or expiration is 60 days from now and the payment at settlement is based on 90-day LIBOR 60 days from now.  The general formula for the payment to the long at settlement is: 562 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 (L-FRA t♣ •)PayoNPυ360ff of long= ♦♥ ÷ ≠1 L t()υ360R5-8 LIBOR and Euribor London Interbank Offer Rate (LIBOR)  USD interest rates.  Quoted as an annualized rates based on a 360-day a year  Add-on rate  Single interest Euro Interbank Offered Rate (Euribor)  Eurodollar time deposit.  Euribor is a similar rate for borrowing and lending in Euros  Trading in euros and euro deposits occurs in most major world cities P3-8 Future的margin和股票市场中的margin有区别 Q14-8 When receive a margin call, an investor must deposit more money to meet the ___________in the future market, whereas to meet the __________ in the stock market: A. Initial margin Initial margin B. Maintenance margin Maintenance margin C. Initial margin Maintenance margin Solution: C In stock market, additional margin must be deposited to bring the ending balance up to the Maintenance margin requirement, however, in futures market; additional margin must be deposited to bring the ending balance up to the initial margin requirement. Q15-8 By nature, margin in futures contracts can be most likely regarded as a: A. Loan granted by brokers B. Advance payment to carry out the ultimate settlement C. Deposit of commission for brokers Solution: B A margin deposit in futures contract is in fact a guarantee of delivery of the underlying assets. The change in the amount of margin is a current gain or loss of counterparties of futures contracts. If a participant has a margin greater than his maintenance margin, he/she can withdraw the part above the maintenance level to realize the gain. The loan granted by brokers is used in a purchase in margin of stocks. Commissions are a fee charged by brokers. It is a transaction cost and has no direct relation with margin. R6-8 掌握股票与期货保证金的区别： 563 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Margin in securities markets Margin in futures markets A percentage of the market value of the asset Performance guarantee Paid to the seller of the security Deposited by both the long and the short and paid to clearinghouse There is interest charged on the borrowed There is no loan involved and, consequently, amount, the margin loan. no interest charges. If falls below maintenance margin, Need back up If falls below maintenance margin, to maintenance margin. Need back up to initial margin. P4-8 Calculation of Margin Q16-8 An investor establishes a short position in a futures contract on Day 0 when the price per contract is $100. The investor deposits $5 per contract to meet the initial margin requirement. The maintenance margin requirement per contract is $3. The Day 1 settlement price that would require the investor deposit additional funds on Day 2 equal to $4 per contract is closest to: (2012年12月真题) A. $. B. $. C. $. Solution: A The investor has a short position and will experience a margin call only if the price increases. Additional margin must be deposited to bring the ending balance up to the initial margin requirement. The investor must deposit $4; therefore, the margin balance on Day 1 is -$4, which would result if the price of the contract was $104. Q17-8 A wheat producer shorted 100 futures contracts in order to hedge price risk. The current price is 30 dollars per contract. The initial margin is 6 dollars per contract and the maintenance margin is 3 dollars. The prices during the following days are as follows: 1st day 35 2nd day 26 At the end of the 2nd day, the margin the investor has in his deposit is closest to: A. 1500. B. 1300. C. 1000. Solution: A At the end of the first day, the price incurred a loss in margin for 5 dollar per contract. The remaining margin is 1 dollar, less than the maintenance margin of 3 dollars. The producer should make a variation margin of 5 dollars. The margin at the beginning of the second day is 6 dollars. At the end of the second day, the price is 26 dollars, based on a marking-to-market strategy, the producer had a gain of 9 dollars (35-26, not 4 based on 30-26). The remaining margin is 15 564 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 dollars per contract (6+9). The total position in margin is 1500 dollars for 100 contracts. Q18-8 The following information relates to a futures market contract: Initial futures price on Day 0 $100 Initial margin requirement $5 Maintenance margin requirement $3 Settlement price on Day 1und $103 Settlement price on Day 2 $96 Settlement price on Day 3 $98 If no funds are withdrawn and margin calls are met at the beginning of the next day, the ending balance on Day 3 for an investor with a short position of 10 contracts is closest to: A. $100. B. $70. C. $80. Solution: A At the end of Day 1, the balance in the investor’s account would be $20. At the beginning of Day 2, the investor would be required to deposit $30. At the end of Day 2, the balance in the investor’s account would be $120. At the end of Day 3, the balance in the investor’s account would be $100. Q19-8 A trader enters into a short position of 20 futures contracts at an initial futures price of $. Initial margin, per contract, is $. Maintenance margin, per contract, is $. Each contract is for one unit of the underlying asset. Over the next three days, the contract settles at $, $, and $, respectively. Assuming the trader does not withdraw any funds from his/her margin account during the period, but does post variation margin sufficient to meet any maintenance margin calls, the balance in the margin account will be: (原版书R62-8) A. $ at initiation and $ at settlement on Day 3. B. $ at initiation and $ at settlement on Day 3. C. $ at initiation and $ at settlement on Day 3. Solution: C Initial margin is 20 contracts X $ margin per contract = $150. At the end of Day 1, the short position has lost $20 ( (85 — 86) X 20 contracts) leaving a margin balance of $130. Because this violates the required maintenance margin of $140, the short must deposit $20 variation margin to bring the margin account back to the initial margin balance of $150. On Day 2, the short position has a daily gain of $35 ( (86 — ) X 20) bringing the margin account to a balance of $185. The short position loses $25 on Day 3 ( ( — ) X 20) leaving a margin balance of $160. R7-8 期货保证金的计算：the balance in the investor’s account 永远是存入保证金与帐户盈亏的总和。 565 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P5-8 Futures Contract Q20-8 ★Tony Harris is planning to start trading in commodities. He has heard about the use of futures contracts on commodities and is learning more about them. Which of the following is Harris least likely to find associated with a futures contract? （原版书R47-11） A. Existence of counterparty risk. B. Standardized contractual terms. C. Payment of an initial margin to enter into a contract. Solution: A Harris is least likely to find counterparty risk associated with a futures contract. There is limited counterparty risk in a futures contract because the clearinghouse is on the other side of every contract. Q21-8 A futures trader goes long one futures contract at $450. The settlement price one day before expiration is $500. On expiration day, the futures is trading at $505. The most likely way the futures trader will lock in her profits on expiration is: A. takes delivery of the underlying asset and pay $500 to the short. B. close out the futures position by selling the futures contract at $505. C. takes delivery of the underlying asset and pays the expiration settlement price to the short. Solution: B To lock in profits, sell the futures contract at the price of the expiration day. Q22-8 A trader buys (takes a long position in) a Eurodollar futures contract ($1 million face value) at and closes it out at a price of . On this contract, the trader has:(Notes R62-3) A. lost $325 B. gained $325 C. locked limit. Solution: B The price is quoted as 100 minus the annualized discount in percent. Remember that the gains and losses on T-bill and Eurodollar futures are $25 per basis point of the price quote. The price is up 13 ticks, and 13*$25 is a gain of $325 for a long position. R8-8 Futures contract的四种结算方式  Delivery of the asset specified in the contract  Cash payment at expiration  Make a close-out or offsetting trade in the futures market (包括与原对手做交易，和与第三方做反向交易，但是在和第三方交易中，会有违约风险。）  An exchange for physicals 566 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R9-8 Treasury bill futures contracts:  base on a $1 million face value 90-day T-bill, settled in cash  The price quotes are: 100×(1－annualized discount)  Minimum tick size is , $ R10-8 Eurodollar futures  based on 90-day LIBOR, settle in cash  The price quotes are: 100×(1－annualized LIBOR)  Treasure bond futures: based on treasure bond with maturity longer than 15 years. 注意为了防止long的一方逼市，有cheapest to deliver 条款，每种债券有conversion factor。  Stock futures: 股指期货。以大盘指数为标的资产的期货。 P6-8 Moneyness, Intrinsic Value, Time Value Q23-8 Unless far out-of-the-money or far in-the-money, for otherwise identical call options, the longer the term to expiration, the lower the price for: (原版书R63-10) A. American call options, but not European call options. B. both European call options and American call options. C. neither European call options nor American call options. Solution: C Although there are exceptions, in general the longer the time to expiration the more valuable is the option, ceteris paribus. With the exception of the rare case in which [options] are so far out-of-the-money or in-the-money that the additional time is of no value, the longer term [options] will be worth more. In addition, it is not always true that a longer-term is beneficial to the holder of a European put. Q24-8 Consider a put option on Deter, Inc., with an exercise price of $45. The current stock price of Deter is $52. What is the intrinsic value of the put option, and is the put option at-the-money or out-of-the-money? Intrinsic Value Moneyness A. $7 At-the-money B. $0 Out-of-the-money C. $0 At-the-money Solution: B The option has an intrinsic value of $0, because the stock price is above the exercise price. Put value is MAX (0, X-S). Equivalently, the option is out-of-the-money. Q25-8 Compare an American call with a strike of 50 which expires in 90 days to an American call on the same underlying asset which has a strike of 60 and expires in 120 days. The underlying asset is selling at 55. Consider the following statements: Statement 1: "The 50 strike call is in-the-money and the 60 strike call is out-of-the-money." 567 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Statement 2: "The time value of the 60 strike call, as a proportion of the 60 strike call's premium, exceeds the time value of the 50 strike call as a proportion of the 50 strike call's premium." Are the statements most likely correct or incorrect? (2012年12月真题) A. Both statements are correct. B. Statement 1 is incorrect, but Statement 2 is correct. C. Statement 1 is correct, but Statement 2 is incorrect. Solution: A A call is in-the-money when the underlying asset price exceeds the strike price. The entire premium of the 60 strike call reflects time value; only a part of the 50 strike call's premium is time value, the rest will be intrinsic value. Q26-8 ★Which of the following statements about put and call options is least accurate? (Notes R63-3) A. The price of the option is less volatile than the price of the underlying stock. B. Option prices are generally higher the longer the time until the option expires. C. For put options, the higher the strike price relative to the stock’s underlying price, the more the put is worth Solution: A Option prices are more volatile than the price of the underlying stock. The other statements are true. Options have time value, which means prices are higher the longer the time until the option expires, and a higher strike price increase the value of a put option. Q27-8 ★★Which of the following statements most closely relates to the concept of moneyness? (Mock 84-93) A. The sum of money the option buyer pays the seller is called the premium. B. Both call and put option prices decline as the time to expiration becomes shorter. C. One would never exercise a call option if the price of the underlying is below the strike price. Solution: C Only an in-the-money option would be exercised. Moneyness describes the relationship between the price of the underlying and an option’s exercise price. Q28-8 ★★★An investor with $5000 to invest believes that the price of ABC Corp. stock will appreciate by $7 to $95 in two months. Two-month at-the- money puts on one share of ABC stock are trading at $, while two-month at-the-money calls are trading at $. What action will he most likely take to profit from his view on ABC stock?(Mock 85-114) A. Sell 100 ABC puts. B. Buy 100 ABC calls. C. Buy 100 ABC shares. Solution: B 568 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Buying a call gives the owner the right to buy the stock at the exercise price. The investor predicts that the stock will increase to $95 at the end of two months. He will be able to exercise the call, buy the stock at $88, and sell it at $95, thereby making a profit. Q29-8 Which of the following is most similar to a short position in the underlying asset? A. Buying a put. B. Writing a put. C. Buying a call. Solution: A Buying a put is most similar to a short position in the underlying asset because the put increase the value if the underlying asset value decreases. The writer of a put and the holder of call have a long exposure to the underlying asset because their positions increase in value if the underlying asset value increase. Q30-8 ★★Pierre-Louis Robert just purchased a call option on shares of the Michelin Group. A few days ago he wrote a put option on Michelin shares. The call and put options have the same exercise price, expiration date, and number of shares underlying. Considering both positions, Robert's exposure to the risk of the stock of the Michelin Group is: A. long. B. short. C. neutral. Solution: A Robert's exposure to the risk of the stock of the Michelin Group is long. The exposure as a result of the long call position is long. The exposure as a result of the short put position is also long. Therefore, the combined exposure is long. Q31-8 Which of the following correctly describe the writer of a put position in the underlying asset?（2012年12月真题） A. Short position and long exposure of risk B. Short position and short exposure of risk C. Long position and long exposure of risk Solution: A Writer of an option sells out a right, so it is the short position. Also writer of a put option sells out a right to sell something in the future, so when the price of underlying asset goes done, then the writer must buy it at the strike price if the long put position exercise the option, so it is also the same as long exposure of risk. R11-8 Option的主要种类：financial option (equity options, interest options, foreign currency options, bond options, index options), option on futures, commodity option). R12-8 Moneyness: 569 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 0TT12American C(T) τC(T)0201optionsP(T) τ P(T)0201XXC(T) max[S ,0] τ C(T)m a x[S ,0]0201tT21(1)(1r) ff金程教育 专业·领先·增值 Moneyness Call option Put option In-the-money S＞X S＜X c(T) τc(T)At-0201the-money S = X S = X Out-of-the-money S＜X SE＞X uropean R13-8 The Effect of Difference in Time to Expiration optionsp(T) can be either 02Greater or Less than p(T)01 R14-8 Intrinsic value and time value  The intrinsic value of an option is the amount that it is in the money, and zero otherwise.  The difference between the value of an option (option premium) and its intrinsic value is termed its time value. If the option is deeply out of money or deeply in the money, time value is negligible. Time value is maximized when option is at the money.  option value=intrinsic value + time value  For European put option, time value can be larger than, smaller than or equal to zero; for others, time value is not less than zero. P7-8 Option Payoff Q32-8 A market participant has a view regarding the potential movement of a stock. He sells a customized over-the-counter put option on the stock when the stock is trading at $38. The put has an exercise price of $36 and the put seller receives $ in premium. The price of the stock is $35 at expiration. The profit or loss for the put seller at expiration is: A. . B. $. C. $.. Solution: C Profit = max (0, -payoff of put at expiration + premium) = max (0, - (X - 5) + premium) = -1 + =$ Q33-8 The recent price per share of Win Big, Inc. is €50 per share. Verna Hillsborough buys 100 shares at €50. To protect against a falling price, Hillsborough buys one put, covering 100 shares of Win Big, with a strike price of €40. The put premium is €1 per share. If Win Big 570 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 closes at €45 per share at the expiration of the put and Hillsborough sells her shares at €45, Hillsborough's profit from the stay/put is closest to: (原版书R65-8) A. -€1,100. B. -€600. C. €900. Solution: B The loss on her stock is (€45-€50) X 100 = -€500. She also paid €100 for the put. The put expires worthless, making her total loss €600. Q34-8 An investor paid $10 for an option that is currently in-the-money $5. If the underlying is priced at $90, which of the following best describes that option?(原版书R63-18) A. Call option with an exercise price of $80. B. Put option with an exercise price of $95. C. Call option with an exercise price of $95. Solution: B A put option is in-the-money if the stock price is less than the exercise price. The put option with an exercise price of $95 is in-the-money $5. The call option with an exercise price of $80 is in-the-money $10, and the call option with an exercise price of $95 is out-of-the-money $5. Q35-8 An investor held 100 stocks, which he purchased for 26 dollars. Estimating that the price of the stocks would not rise significantly in the near future, he wrote call options for 100 stocks. The information of the call options is listed as follows: Strike price 30 Call option price per stock 3 The current price of the stocks is 24 dollars. The maximum profit the investor can expect is closest to A. 100 dollar. B. 700 dollars. C. 7 dollars. Solution: B A covered call is position consisting of a short stock and a long call. The investor holding such a position believes that the stock is likely to rise but cannot rise above a certain level. So he longs a stock to get the rise potential and shorts a put to get a premium. The profit of the position consists of two parts: one part is the gain on stocks held and the other is the call premium. The gain on the stocks is limited to the strike price because buyer of the call will exercise the stock once the price rise above. As a result, the maximum profit=Strike Profit-Purchase Price+ Call Premium. Here the maximum profit = (30 – 26 + 3) 100 = 700 dollars. 571 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P8-8 Interest Rate Caps & Floor Q36-8 A series or interest rate put options that expire on different dates but have the same exercise rate is best characterized as a(n): A. zero-cost collar. B. interest rate cap. C. interest rate floor. Solution: C An interest rate floor is a series of put options on an interest rate, with each option expiring at the date on which the floating loan rate will be reset, and with each option having the same exercise rate. Q37-8 A forward rate agreement is equivalent to the following interest rate options: (Not) A. long a call and a put B. short a call and long a put. C. long a call and short a put. Solution: C A long interest rate call combined with a short interest rate put can have the same payoff as a long position in an FRA(consider the fixed-rate payer) Q38-8 The payoff on an interest rate option:(Notes R63-13) A. comes only at exercise. B. is greater the higher the “strike” rate. C. comes some period after option expiration. Solution: C The payment on a long put increases as the strike rate increases, but not for calls. There is only one payment and it comes after option expiration by the term of the underlying rate. Interest rate caps & floor了解几个主要的概念： R15-8 Interest rate caps: is a series of interest rate call options, having expiration dates that correspond to the reset dates on a floating-rate loan. Caps are often used to protect a floating-rate borrower from an increase in interest rates. Caps place a maximum on the interest payments on a floating-rate loan. R16-8 Interest rate floors: is a series of interest rate put options, having expiration dates that correspond to the reset dates on a floating-rate loan. Floors are often used to protect a floating-rate lender from an decline in interest rates. Floors place a minimum on the interest payments on a floating-rate loan. R17-8 Interest rate collar: combines a cap and a floor. A borrower with a floating-rate loan may buy a cap for protection against rates above the cap and sell a floor in order to defray some of the cost of the cap. 572 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R18-8 Interest rate options vs. FRAs: Interest Rate Options FRAs Similarity There is no deliverable asset They are settled in cash, in an amount based on a notional amount and the spread between the strike rate and the reference rate. Differences Can choose exercise or not Must exercise Payoffs are made at the end of the Payoffs are made at the loan period beginning of the loan period Payoffs need not to discount Payoffs need to discount P9-8 Interest Rate & Volatility Q39-8 The effects on the price of a call option from an Increase in volatility and an Increase in interest rates are: Increase in Volatility Increase in Interest Rates A. Decrease Increase B. Increase Increase C. Increase Decrease Solution: B When volatility increases, the price of options increases. When interest rates increase, call option prices increase. Q40-8 ★A decrease in the risk-free rate of interest will:(Notes R63-5) A. increase put and call prices. B. decrease put prices and increase call prices. C. increase put prices and decrease call prices. Solution: C Interest rates are inversely related to put prices and directly related to call prices. R19-8 影响call option价格的因素： European American American Factor European call put call put Underlying asset price + - + - Strike price - + - + Time + ? + + Risk-less rat e + - + - 573 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Volatility + + + + P10-8 Option Value Q41-8 A European stock index call option has a strike price of $1160 and a time to expiration of 3 months. Given a risk-free rate of 4%, if the underlying index is trading at $1200 and has a multiplier of 1, then the lower bound for the option price is closest to: A. $. B. $. C. $. Solution: C The lower bound on a European call is either zero or the underlying asset’s price minus the present value of the exercise price, whichever is greater Max[0,St-X/(1+RFR)T-t]=Max[0, $1200 - ($1160 / )] = $. Q42-8 ★A call with a strike price of $40 is available on a stock currently trading for $35. The call expires in one year and the risk-free rate of return is 10%. The lower bound on this call's value(2012年12月真题) A. is zero. B. is $5 if the call is American-style. C. is $ if the call is European-style. Solution: A For an American- or European-style call, the lower bound is the greater of zero or the difference between the stock price and the present value of the strike price. Max[0,St-X/(1+RFR)T-t]=Max[0, $35 - ($40 / )] =$0 Q43-8 ★★The greater of either zero or the present value of the exercise price minus the underlying price is most likely the lower bound on the price of a(n): (2012年12月真题) A. European put option. B. American put option. C. American call option Solution: A For a European put, the exercise price must be adjusted to the present value because the option can only be exercised on expiration. Option Min Value Max Value European call Max[0 , St－X/(1+RFRT－t)] St AmericanT－t call Max[0 , St－X/(1+RFR)] St European put Max[0 , X/(1+RFR)T－t－St] X/(1+RFRT－t) American put Pt ≥ Max[0 , X－St] X 574 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q44-8 Which of the following shows correctly the differences between American option and European option?（2012年12月真题） A. American option is always more expensive than European option B. The exercise style is different C. European options allow for exercise on or before the option expiration date. Solution: B American option gives the holder the right to exercise before or at the expiration date, while European option can only be exercised at the expiration date, so the main difference is exercise style. Also since no one would exercise a American call option if the underlying stock pays no dividend, then the American call option may be equal to European call option. Q45-8 An investor purchased an European put option. The current price of the underlying stock is 30 dollars. The exercise price is 40 dollars and the put will expire in 270 days. If the put was not purchased, the investor could invest the premium in T-bills with a discount rate of 3%. The lower bound of put value is closest to: A. 10 dollars B. 9 dollars C. 11 dollars Solution: B The lower bound of an European put option is Max[0 , X/(1+RFR)T－t－St]=$9 Q46-8 A call option with an exercise price of 65 will expire in 73 days. No cash payments will be made by the underlying asset over the life of the option. If the underlying asset price is at 70 and the risk-free rate of return is percent, the lower bounds for an American call option and a European call option, respectively, are closest to(原版书R63-11) Lower bound for American Lower bound for European call option call option A. B. C. Solution: C Because time remains until expiration and the problem deals with calls, the lower bound of the European call will exceed the intrinsic value. In concept, one can invest the strike price amount until it is needed at expiration and earn the risk-free rate on this amount for that period of time. The intrinsic value is $; given the available answers, the lower bound for the European call must be $. This is confirmed by applying the formula Co≥ Max[0, So — X/(1T + r)]. In this problem, the lower bound is Max[0, 70 — () ]= . Note that the value of the American call cannot be less than the value of the European call. 575 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q47-8 A put option with an exercise price of 75 will expire in 73 days. No cash. payments will be made by the underlying asset over the life of the option. If the underlying asset is at 70 and the risk-free rate of return is percent, the lower bounds for an American put option and a European put option, respectively, are closest to: (原版书R63-12) Lower bound for American Lower bound for European put option put option A. B. C. Solution: C When valuing European puts that have time left until expiration, the lower bound must reflect the fact that exercise is delayed until the expiration date. That is, with a European put one can't recognize the current intrinsic value, but must wait until expiration. This delay in receiving payment for selling (putting) the stock to the writer has a cost. The lower bound will therefore be below the intrinsic value (but never negative). This can be confirmed by applying the formula Po Max[0, XT/(1 + r) -So] . In this problem, the lower bound is the greater of 0 or 75/() -70 = . Regarding the American put, as one can recognize the intrinsic value of an American put immediately if one chooses to, the lower bound of an American put, in the absence of intervening cash payments on the underlying asset, will simply be equal to the intrinsic value. P11-8 Put-call Parity Q48-8 A description that will least likely be used to explain put-call parity is: A. The prices of calls and puts on an underlying asset must be consistent with each other to remove arbitrage opportunities. B. A fiduciary call option strategy and a protective put option strategy for an underlying asset are equal in value. C. A put is equivalent to long a call, a long position in the underlying asset, and a long position in the risk-free asset. Solution: C For P=C+Xe-rt-S A put is equivalent to long a call, a short position in the underlying asset, and a long position in the risk free asset. Q49-8 Assume the probability of bankruptcy for the underlying asset is high. Compared to the price of an American put option on the same underlying asset, the price of an equivalent European put option will most likely be: A. lower. B. higher. C. the same because the probability of bankruptcy does not affect pricing. Solution: A 576 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 In bankruptcy, the price of the bankrupt company's stock falls. In the limit it falls to zero. At a price of zero, the price cannot go any lower, and it would be advantageous to exercise the American put at that point in time rather than be forced to wait until the expiration date. Therefore, the American-style put is likely to have a higher price than an equivalent European-style put. Q50-8 A stock is selling at $40, a 3-month put at $50 is selling for $11, a 3-month call at $50 is selling for $1, and the risk-free rate is 6%. How much, if anything, can be made on an arbitrage? A. $0 (no arbitrage). B. $ C. $ Solution: C A Tsynthetic stock is S=C-P+X/[(1+RFR)]=$1-$11+50/[()]=. Since the stock is selling for $40, you can short a share of stock for $40 and buy the synthetic for an immediate arbitrage profit of $. Q51-8 ★To account for positive cash flows from the underlying asset, we need to adjust the put-call parity formula by:(Notes R63-11) A. adding the future value of the cash flows to S. B. adding the future value of the cash flows to X. C. subtracting the present value of the cash flows from S. Solution: C If the underlying asset used to establish the put-call parity relationship generates a cash flow prior to expiration, the asset’s value must be reduced by the present value of the cash flow discounted at the risk-free rate. Q52-8 Using put-call parity, you can create a long position in a synthetic underlying asset by（2012年12月真题） A. combining long positions in a call option, a risk-free bond, and a short put option B. combining short positions in a call option, a long position in risk-free bond, and a put option C. combining long positions in a call option, a short position in risk-free bond, and a put option Solution: A Put-call parity is P0+S0 =C0+X/(1+rT) Solving for the underlying asset, S0 =C0+X/(1+Tr)- P0 Therefore, the synthetic long assets are a combination of long the call, long the risk-free bond, and short the put option. R20-8 熟练掌握put-call parity公式的各种变形： S C-P X /(1R F R)T 577 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P C-S X /(1R F R)TC S P -X /(1R F R)TX/(1 RFR)T S P - C Note that the options much be European-style and the puts and calls mush have the same exercise price for these relations to hold.  Fiduciary call: buy riskless bond that pays X at maturity and a call with exercise price X.  Protective put: buy security and long put. R21-8 Put-call parity 的作用： 1. 为option定价 2. 合成option。 3. 无风险套利。在无风险套利中，遵循long小边，short大边原则 如：，套利方法是， long security, long put, short call, short bonds. C (1 RXFR)T !S PR22-8 Cash flow on underlying assets effects P12-8 Covered Call & protective put Q53-8 An Investor purchases a stock at $60 and at the same time, sells a 3-month call on the stock. The short call has a strike price of $65 and a premium of $. The risk-free rate is 4%. The breakeven underlying stock price at expiration is closest to: A. $ B. $ C. $ Solution: B A covered call breakeven price equals the price paid for the stock less the premium received for the call. Breakeven = (S - c) = (60 - ) = $. Q54-8 ★★Which of the following has the most potential profit? (真题) A. Protective put B. Covered call C. Long position with put option Solution: A A protective put has the same shape profit diagram as a long call. A covered call has the same shape profit diagram as a short put. Only long call position has the most potential profit. 578 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q55-8 What is the maximum profit of a covered call position?（2012年12月真题） A. Initial stock price minus initial call option premium B. Strike price of call option minus initial stock price plus initial call option premium C. It doesn’t have a maximum profit Solution: B The maximum profit of a covered call option is X-S0+c0 Q56-8 The recent price per share of Dragon Vacations, Inc. is $50 per share. Calls with exactly six months left to expiration are available on Dragon with strikes of $45, $50, and $55. The prices of the calls are $, $, and $, respectively. Assume that each call contract is for 100 shares of stock and that at initiation of the strategy the investor purchases 100 shares of Dragon at the current market price. Further assume that the investor will close out the strategy in six months when the options expire, including the sale of any stock not delivered against exercise of a call, whether the stock price goes up or goes down. If the closing price of Dragon stock in six months is exactly $60, the profit to a covered call using the $50 strike call is closest to:(原版书R65-7) A. $400. B. $600. C. $1,600. Solution: B Buying the stock at $50 and delivering it against the $50 strike call generates a payoff of zero. The premium is retained by the writer. The net profit is $ per share X 100 shares or $600. Q57-8 An investor writes a covered call on a $40 stock with an exercise price of $50 for a premium of $2. The investor’s maximum A. gain will be $12 B. loss will be $40 C. loss will be unlimited. Solution: A As soon as the stock rises to the exercises price, the covered call writer will cease to realize a profit because the short call moves into-the-money. Each dollar gain on the stock is the offset with a dollar loss on the short call. Since the option is $10 out-of-the-money, the covered call writer can gain this amount plus the $2 call premium. Thus, the maximum gain is $2+$10=$12. However, because the investor owns the stock, he or she could lose $40 if the stock goes to zero, but gain $2 from the call premium. Maximum loss is $38. Q58-8 ★★An investor purchases ABC stock at $71 per share and executes a protective put strategy. The put option used in the strategy has a strike price of $66, expires in two months, and is purchased for $. At expiration, the protective put strategy breaks 579 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 even when the price of ABC and the maximum loss of the protective put strategy is closest to: (Mock 83-96) A. $; $ B. $; $ C. $; $ Solution: C To breakeven, the underlying stock must be at least as high as the amount expended up front to establish the position. To establish the protective put, the investor would have spent $71 + $ = $. The maximum loss of a protective put equals to S0-X+p0, so the maximum loss equals to 71-66+=$ R23-8 盈亏平衡点：covered call和protective put 的盈亏平衡点实际上是买卖成本的问题。 R24-8 covered call= -c+S=-p+X（short call, long stock)  Value at expiration: VT =ST- max (0, ST-X)  Profit=Profit1+Profit2 = -Max [-c0, ST-X-c0] + (ST-S0) = Min[X-S0+c0, ST- S0+c0]= VT-S0+ c0  Maximum profit: X-S0+c0  Maximum loss: S0-c0  Breakeven underlying price at expiration: S0-c0 R25-8 Protective put strategy=p+S=c+X (long put, long stock)  Value at expiration: VT =ST- max (0, X -ST)  Profit=Profit1+Profit2= Max [-p0, X-ST-p0] + (ST-S0) =Max [-(S0-X+p0), ST-S0-p0]= ST -S0-p0  Maximum profit: ∞  Maximum loss: S0-X+p0  Breakeven underlying price at expiration: S0+p0 Notes：  payoff不考虑premium, G/L要考虑premium  此类题应分别考虑underwriting的盈亏和option的盈亏，然后综合考虑总体的盈亏。排除法是不错的选择。 P13-8 Swap种类 Q59-8 The party making the fixed-rate payment under a swap contract could also have to make the variable payment on that contract if the payments are related to a(n): A. equity swap. B. currency swap. C. interest rate swap. Solution: A If the value of the index on which the swap is based declines, the resulting negative return would have to be paid by the party making the fixed-rate payment. This characteristic is one of the distinguishing features of equity swaps. 580 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P14-8 Payments of Swap Q60-8 HobbyHorse Syndicate has entered into a "plain-vanilla" interest rate swap on $100,000,000 notional principal. HobbyHorse receives a fixed rate of percent on payments that occur every six months. Winnie Investments, a swap broker, negotiates with another firm, WhoaThere, to take the pay-fixed side of the swap. The floating rate payment is based on LIBOR (currently at percent). Because of the volatile interest rate environment, HobbyHorse has created a reserve to cover any cash outlay required at settlement dates. At the time of the next payment (due in exactly six months), the reserve balance is $250,000. To fulfill its obligations under the swap, HobbyHorse will need approximately how much additional cash? A. $375,000 B. $125,000 C. $0 Solution: C The net payment formula for the floating rate payer is: Floating Rate Paymentt = (LIBORt-1 - Swap Fixed Rate) υ (# days in term / 360) Notional Principal If the result is positive, the floating-rate payer owes a net payment and if the result is negative, then the floating-rate payer receives a net inflow. Note: We are assuming a 360 day year. Here, Floating Rate Payment = ( - ) υ (180 / 360) υ 100,000,000 = -$375,000. Since the result is negative, HobbyHorse will receive this amount. Thus, HobbyHorse needs $0 additional cash. Q61-8 ★Agrawal Telecom is considering issuing $10,000,000 of % fixed-coupon bonds to finance an expansion. Alternatively, Agrawal could borrow the funds in the Eurodollar market using a series of six-month LIBOR contracts. A swap contract matching the maturity of the % coupon bonds is available. The swap uses six-month LIBOR as the floating-rate component. Identify the interest rate swap that Agrawal should use to convert the Eurodollar borrowing to the equivalent of issuing fixed-income bonds.(原版书R64-10) A. Agrawal would use a pay-fixed, receive-floating interest rate swap. B. Agrawal would use a pay-floating, receive-fixed interest rate swap. C. Agrawal would use a total return equity payer swaption to evaluate the two borrowing options. Solution: A Agrawal would owe floating-rate interest on the LIBOR loans. The "receive-floating" part of the swap would offset those payments, while the "pay-fixed" side of the swap resembles the fixed-coupon payments on the percent coupon bonds. Q62-8 ★★★Determine the upcoming payments on a swap with a notional principal of $5,000,000 in which the fixed-rate payer makes semiannual fixed payments of 8% and 581 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 the counterparty makes floating-rate payments at Euribor. The Euribor rate at the last settlement period was %. The fixed-rate payments are made on the basis of 180 days in the settlement period and 365 days in a year. The floating-rate payments use a 180/360 day convention. (原版书R64-10) A. The net payment is $16,010 from the fixed-rate payer to the floating-rate payer. B. The net payment is $18,750 from the fixed-rate payer to the floating-rate payer. C. The net payment is $18,750 from the floating-rate payer to the fixed-rate payer. Solution: A 5*(8%*180/%*180/360)=16,010. Q63-8 A portfolio manager entered into a swap with a dealer. The swap's notional principal is $100 million, payments are to be made semiannually, and the swap allows netting of payments. The dealer agrees to pay a fixed annual rate of 4 percent while the asset manager agrees to pay the return on a stock index. The index value at initiation of the swap is 280. If the value of the stock index six months after initiation of the swap is 250, the payment from the dealer to the asset manager would be closest to: A. $2 million. B. $9 million. C. $13 million. Solution: C The loss on the stock index means that the dealer must also pay the negative amount to the asset manager in addition to the fixed rate on the notional principal. The amount that the dealer would pay is approximately $13 million: ($100,000,000) () / 2 = $2,000,000 for the fixed payment The negative return on the stock index computed as follows is (250/280) - 1 = , for a dollar payment of (100,000,000j = $10,≈11 million for the stock index. The dealer must pay roughly $2 million plus $11 million. Q64-8 ★★A portfolio manager enters into an equity swap with a swap dealer. The portfolio manager pays the return on the Value index and, in return, receives the return on the Growth index.(Mock 83-93,真题一个类型，就是把Value和Growth换成了Small 和 Large Cap) The swap's notional principal is $50 million and the payments will be made semiannually. The levels of the equity indices are as follows: Index Level at Start of Swap Level 6 Months Later Value Index 5,460 5,350 Growth 1,190 1,200 The neItndex payment due after 6 months is closest to: A. $587,158 582 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. $1,007,326 C. $1,427,494 Solution: C The portfolio manager pays the Value Index return, which had a loss, and receives the Growth Index, which had a gain during the period. Therefore, the portfolio manager will receive a cash flow from the swap dealer. . Value Index payment:[(5,350/5,460)-1} x$50,000,000=-$1,007,326 Growth Index payment: [(1,200/1,190)-1]x$50,000,000=$420,168 Net payment to portfolio manager= $420,168-$(-1,007,326)=$1,427,494 Q65-8 A company borrows $15 million from a bank for one year at LIBOR, currently at %, plus 50 basis points. At the same time, the company enters a one-year, plain vanilla interest rate swap to pay the fixed rate of % and receive LIBOR. Payments are made on the basis of 180 days in the settlement period. Floating payments are made on the basis of 360 days in a year, and fixed payments are made on the basis of 365 days in a year. LIBOR is % on the first settlement date. The company's total interest expense for the loan and the swap for the first settlement period is closest to: (2014 Mock 98-116) A. $425,856. B. $444,606. C. $388,356. Solution: A The company pays the swap dealer the fixed rate of %, pays the bank LIBOR of % (as set at the beginning of the period) plus %, and receives LIBOR from the swap dealer. Fixed payment: ($15,000,000)()(180/365) = $388,356 Floating payment: ($15,000,000)( + – )(180/360) = $37,500 Net interest expense: $425,856 R26-8 Swap的计算  Plain vanilla interest rate swap: 一方支付浮动利率，另一方支付固定利率，net payment（在期初确定）, there is no need to exchange notional principal and only the net interest is paid by the party who owes it. netfixedratepayment (swaprate L tt 1 ) υ υ 360NP 如果这个值为正，fixed payer owes a net payment to the floating-rate party. The party of receipt of positive amount will face credit risk. R27-8 currency swap: 开始和结束交换货币，期间支付full interest payment（每个期末交货货币） R28-8 equity swap: 一方支付固定或浮动利率，另一方支付股票收益(以股票的收益率作为 583 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 浮动利率），net payment（在期末确定）. R29-8 Unique features about equity swap:  Payments can be floating on both sides.  The fixed payer may actually pay more than fixed rate if the equity return is negative over the period.  Equity swap payments are not known until the end of the period, while the interest swap payments are known and paid at the beginning of the period. Swaption: an option to enter into a swap. It can also be used to offset a swap. 584 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 9-Alternative Investments P1-9 Traditional investment VS altertive investment Q1-9 Compared to alternative investments, traditional investments tend to:(NotesB5-252-2) A. be less liquid. B. be less regulated. C. require lower fees. Solution: C Traditional investments typically require lower fees, are more regulated, and are more liquid than alternative investments. Q2-9 Compared to managers of traditional investments, managers of alternative investments are likely to have fewer restrictions on: (NotesB5-252-1) A. holding cash. B. buying stocks. C. using derivatives. Solution: C Traditional managers can hold cash and buy stocks but may be restricted from using derivatives. Q3-9 Relative to traditional investments, alternative investments are best characterized as having: （2013下午mock—110） A. greater liquidity. B. higher correlations. C. more unique legal and tax considerations. Solution: C because alternative investments are more likely characterized as having unique legal and tax considerations because of the broad range and complexity of the investments. Q4-9 ★Adding alternative investments to a portfolio of traditional investments will most likely result in a new combined portfolio with returns and standard deviation that are, respectively: （2013下午mock—111） Returns Standard Deviation A. lower lower B. higher lower C. higher higher Solution: B because the risk/return profile of the overall portfolio will potentially improve. The overall risk will most likely drop, and the overall return will most likely rise. Q5-9 Which of the following is least likely to be considered an alternative investment?（2014 原版书P268-1） 585 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. Real estate B. Commodities C. Long-only equity funds Solution: C Long-only equity funds are typically considered traditional investments and real estate and commodities are typically classified as alternative investments. Q6-9 ★An investor is seeking an investment that can take long and short positions, may use multi-strategies, and historically exhibits low correlation with a traditional investment portfolio. ‘The investor’s goals will be best satisfied with an investment in:（2014 原版书P268-2） A. real estate. B. a hedge fund. C. a private equity fund. Solution: B Hedge funds may use a variety of strategies (event-driven, relative value, macro and equity hedge), generally have a low correlation with traditional investments, and may take long and short positions. Q7-9 ★Relative to traditional investments, alternative investments are least likely to be characterized by: （2014 原版书P268-3） A. high levels of transparency. B. limited historical return data. C. significant restrictions on redemptions. Solution: A Alternative investments are characterized as typically having low levels of transparency. Q8-9 An investor is most likely to consider adding alternative investments to a traditional investment portfolio because: （2014 原版书P268-5） A. of their historically higher returns. B. of their historically lower standard deviation of returns. C. their inclusion is expected to reduce the portfolio’s Sharpe ratio. Solution: A The historically higher returns to most categories of alternative investments compared with traditional investments result in potentially higher returns to a portfolio containing alternative investments. The less than perfect correlation with traditional investments results in portfolio risk (standard deviation) being less than the weighted average of the standard deviations of the investments. This has potential to increase the Sharpe ratio in spite of the historically higher standard deviation of returns of most categories of alternative investments. 586 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q9-9 Alternative investment funds are typically managed: （2014 原版书P268-4） A. actively. B. to generate positive beta return. C. assuming that markets are efficient. Solution: A There are many approaches to managing alternative investment funds but typically these funds are actively managed and aim to generate positive alpha return. R1-9 理解其他类投资与传统投资的不同之处，并掌握其他类投资的特性  Less liquidiy of assets held  More specialization by investment managers  Less regulation and transparency  More problematic and less available historical return and volatility data  Different legal issues and tax treatments R2-9 理解其他类投资的分类，尤其重视hedge funds与private equity funds  Hedge funds  Private equity funds  Real estate  Commodities  Other R3-9 掌握其他类投资在整个投资组合中的优点  The primary motivation for adding alternative investments to a portfolio is to reduce portfolio risk based on the less-than-perfect correlation between alternative asset returns and traditional asset returns.  Survivorship bias: the upward bias of returns if data only for currently existing firms is included  Backfill bias: bias introduced by including the previous performance data for firms recently added to a benchmark index. P2-9 Hedge fund Q10-9 ★An investor who chooses a fund of funds as an alternative to a single hedge fund is most likely to benefit from: (NotesB5-252-4) A. lower fees. B. higher returns. C. more due diligence. Solution: C A fund of funds manager is expected to provide more due diligence and better redemption terms. Funds of funds charge an additional layer of fees. Investing in fund of funds may provide more diversification but may not necessarily provide higher returns. Q11-9 ★An investor may prefer a single hedge fund to a fund of funds if he seeks: （2014 原 587 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 版书P268-6） A. due diligence expertise. B. better redemption terms. C. a less complex fee structure. Solution: C Hedge funds of funds have multi-layered fee structures, while the fee structure for a single hedge fund is less complex. Funds of funds presumably have some expertise in conducting due diligence on hedge funds and may be able to negotiate more favorable redemption terms than could an individual investor in a single hedge fund. Q12-9 ★Diversification benefits from adding hedge funds to an equity portfolio may be limited because: (NotesB5-252-7) A. correlations tend to increase during periods of financial crisis. B. hedge fund returns are less than perfectly correlated with global equities. C. hedge funds tend to perform better when global equity prices are declining. Solution: A Adding hedge funds to traditional portfolios may not provide the expected diversification to an equity portfolio because return correlations tend to increase during periods of financial crisis. Q13-9 It is most likely easiest for a research analyst to value the holdings of a: (MOCK92-101) A. hedge fund that follows a short bias strategy. B. REIT invested only in high-rise office buildings. C. private equity firm concentrating in management buy-in LBOs. Solution: A A is correct because a short bias strategy involves positions in traded equities and, moreover, many equities that are liquid enough to be shorted. Valuation can be accomplished using market prices and bid-ask quotes. Valuation of the REIT requires subjective appraisal using a variety of techniques, none of which reflect a market price for the property being appraised. Valuation of firms acquired in LBOs (leveraged buyouts) requires appraisals or estimates because market pricing is no longer available after the firm is taken private. Q14-9 For a hedge fund investor, a benefit of investing in a fund of funds is least likely the: （2013上午mock—112） A. multilayered fee structure. B. higher level of due diligence expertise. C. ability to negotiate better redemption terms. Solution: A because funds of funds typically have a multilayered fee structure that may dilute the returns to the investor. 588 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q15-9 Hedge funds are similar to private equity funds in that both:（2014 原版书P268-7） A. are typically structured as partnerships. B. assess management fees based on assets under management. C. do not earn an incentive fee until the initial investment is repaid. Solution: A Private equity funds and hedge funds are typically structured as partnerships where investors are limited partners (LP) and the fund is the general partner (GP). The management fee for private equity funds is based on committed capital whereas for hedge funds the management fees are based on assets under management. For most private equity funds, the general partner does not earn an incentive fee until the limited partners have received their initial investment back. Q16-9 ★A hedge fund invests primarily in distressed debt. Quoted market prices are available for the underlying holdings but they trade infrequently. Which of the following will the hedge fund most likely use in calculating net asset value for trading purposes? （2014 原版书P269-9） A. Average quotes B. Average quotes adjusted for liquidity C. Bid prices for short positions and ask prices for long positions Solution: B Many practitioners believe that liquidity discounts are necessary to reflect fair value. This has resulted in some funds having two NAVs—for trading and reporting. The fund may use average quotes for reporting purposes but apply liquidity discounts for trading purposes. Q17-9 An alternative investments fund that employs leverage and takes long and short positions in securities is most likely a: （2013上午mock—109） A. hedge fund. B. venture capital fund. C. leveraged buyout fund. Solution: A Hedge funds invest in securities and may take long and short positions. They may also employ leverage. Q18-9 ★A hedge fund uses derivative positions to take a long position in the Japanese yen and a short position in the euro. The classification of this hedge fund is most likely a(n): (2014 Mock 102-91) A. event-driven fund B. macro strategy fund C. quantitative directional fund. Correct answer: B Macro strategy funds invest based on expected shifts of global economies, primarily in currency 589 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 and interest rate derivatives. Quantitative directional funds take long and short positions in equities based on technical analysis. Event-driven funds seek to profit from investment strategies based on specific corporate events and one-time transactions. R4-9 了解对冲基金的收益目标（绝对和相对），投资策略，并能理解四种策略中的子策略，潜在收益与风险、估值方式、尽职调查的要点  return objective:  absolute basis: eg,10%  relative basis: eg, return 5% above a specific benchmark return  lockedup period: a time after initial investment during which withdrawals are not allowed  notice period: the amount of time a fund has after receiving a redemption request to fulfill the request  fund of fund: an investment company that invests in hedge funds  an additional layer of fees beyond the fees charged by the individual hedge funds in the portfolio  strategies  Event-driven strategies  Merger arbitrage: long the stock of the company being acquired, and short the stock of the acquiring company.  Distressed/restructuring: focus on the securities of companies either in bankruptcy or perceived to be near to bankruptcy.  Activist shareholder: purchase sufficient equity to influence a company's policies or direction.  Special situations: focus on companies that are currently engaged in restructuring activities other than merger/acquisitions and bankruptcy.  Relative value strategies  Fixed income convertible arbitrage: market neutral (zero beta) strategies that seek to exploit a perceived mispricing between a convertible bond and its component parts.  Fixed Income Asset Backed: take advantage of mispricing across different asset backed securities.  Fixed Income General: focus on the relative value within the fixed income markets.  Volatility: use options to go long or short market volatility  Multi-Strategy: looks for investment opportunities wherever they might exist.  Macro strategies 590 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Equity hedge strategies  Market Neutral: Maintain a net position that is neutral with respect to market risk. The intent is to profit from individual securities movements while hedging against market risk.  Fundamental Growth: fundamental analysis to identify companies expected to exhibit high growth and capital appreciation.  Fundamental value: buy equity securities believed to be undervalued based on fundamental analysis  Quantitative Directional: technical analysis to identify companies that are under- and overvalued.  Short Bias: varies its net short exposure based upon market expectations, going fully short in declining markets.  Potential benefits and risks  Different hedge fund strategies have the best returns during different time periods.  In periods of financial crisis, the correlation of returns between global equities and hedge funds tends to increase, which limits hedge funds’ effectiveness as a diversifying asset class.  Valuation  Based on market values for traded securities in portfolios, but must use model values for non-traded securities.  due diligence  investment strategy  investment process  source of competitive advantage  historical returns  valuation and returns calculation methods  longevity  amount of assets under management  management style  key person risk  reputation  growth plans  systems risk management  appropriateness of benchmarks 591 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P3-9 Private equity Q19-9 A private equity fund is considering purchasing a radio broadcaster that had an EBITDA of $200 million. In the past year, three radio broadcasting companies were sold for 8x EBITDA, 10x EBITDA, and 9x EBITDA. Based on this information, the maximum value the private equity fund is most likely to assign to the broadcaster is: 2014 原版书P243-example 7 A.$1,600 million. B.$1,800 million. C.$2,000 million. Solution: C. The maximum value the private equity fund is most likely to assign is that using the highest multiple (10 x $200 million = $2,000 million). The minimum value the seller may be willing to accept is that using the lowest multiple. Of course, in negotiations, growth prospects, risk, size, current market conditions, etc. will be considered. Q20-9 ★Angel investing capital is typically provided in which stage of financing? 2014 原版书P269-10 -stage. B. Formative-stage. C. Mezzanine-stage. Solution: B. Formative-stage financing occurs when the company is still in the process of being formed and encompasses several financing steps. Angel investing capital is typically raised in this early stage of financing. Q21-9 ★A private equity valuation approach that uses estimated multiples of cash flows to value a portfolio company is the: (NotesB5-252-8) A. asset-based approach. B. discount cash flow approach. C. market/comparable approach. Solution: C The market/comparable approach uses market or private transaction values of similar companies to estimate multiples of EBITDA, net income, or revenue to use in estimating the portfolio company’s value. Q22-9 ★Which attributes would a private equity firm most likely consider when deciding if a company is particularly attractive as a leveraged buyout target? （2013下午mock-113） A. Sustainable cash flow B. Efficiently managed companies C. Market value exceeds intrinsic value 592 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: A because private equity firms look for companies with strong cash flow and that have a significant amount of physical assets. These physical assets can be used as security and borrowed against. Q23-9 ★With respect to venture capital, the term “mezzanine-stage financing” is used to describe the financing: (2014 Mock 102-94) A. to prepare for an initial public offering B. to initiate commercial manufacturing C. that supports product development and market research. Solution: A Mezzanine-stage venture capital financing provides capital diring the period prior to an initial public offering. R5-9 了解PE的投资策略，了解PE的费用结构、退出策略、潜在收益与风险、估值方式、尽职调查的要点  strategies  Leveraged buyouts (LBOs): acquire companies with a significant percentage of the purchase price financed through debt. LBO的两种形式：MBO和MBI  Management buyout(MBO): the existing management team is involved in the purchase  Management buy-ins(MBI): an external management team will replace the existing management team  Venture capital(VC): invest in private companies with high growth potential.  Formative stage: 包含angel investing, seed stage和early stage三个阶段  Later stage  Mezzanine-stage financing  Development capital (=minority equity investment): provision of capital for business growth of restructuring.  Distressed investing: buying the debt of mature companies in financial difficulties.  Structure and fees  Committed capital: the amount of capital provided to the fund by investors  Management fee: typically 1%~3% of committed capital  Incentive fee: 20% of profits, but are not earned until after the fund has returned investors’ initial capital  Exit strategies  Trade Sale: sell a portfolio company to a competitor or another strategic buyer  IPO: sell all or some shares of a portfolio company to the public 593 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Recapitalization: the company issued debt to fund a dividend distribution to equity holders  Secondary Sale: sell a portfolio company to another private equity firm or a group of investors  Write-off/Liquidation: reassess and adjust to take losses from an unsuccessful outcome  Potential benefits and risks  Diversification Benefits  Greater risk  Survivorship bias  Backfill bias  valuation  Market / comparable approach: value a company or its equity using multiples  Discounted cash flow approach  FCFF and WACC  company value  FCFE and Ke  company's equity value  Simple approach: income or cash flow divided by a capitalization rate  Asset-based approach  arrives at the value of the company to the equity holders  assumes that the company value = Asset – liabilities  Can be valued by using fair values or liquidation values  Due diligence  Manager’s experience  Valuation methods used  Fee structure P4-9 Real estate Q24-9 A real estate property valuation would least likely use a(n): (NotesB5-253-9) A. income approach. B. asset-based approach. C. comparable sales approach. Solution: B The three approaches to valuing a property are income, comparable sales, and cost. An asset-based approach can be used for real estate investment trusts, but not for valuing individual real estate properties. 594 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q25-9 ★Which of the following investments most likely provides an investor with indirect, equity exposure to real estate? （2013上午mock-113） A. Real estate investment trusts. B. Real estate limited partnerships. C. Commercial mortgage backed securities. Solution: A Real estate investment trusts (REITS) provide investors with indirect, equity real estate exposure. Real estate investment partnerships are a form of direct real estate equity investment. Commercial mortgage backed securities (CMBS) provides investors with indirect, debt investment opportunities in real estate. Q26-9 An investor seeks a current income stream as a component of total return, and desires an investment that historically has low correlation with other asset classes. The investment most likely to achieve the investor’s goals is:（2014 原版书P268-8） A. timberland. B. collectibles. C. commodities. Solution: A Timberland offers an income stream based on the sale of timber products as a component of total return and has historically generated returns not highly correlated with other asset classes. Q27-9 ★Investors in alternative assets who seek liquidity are most likely to invest in: (2014 Mock 101-120) A. hedge funds. B. real estate investment trusts. C. private equity. Solution: B Real estate investment trusts are publicly traded and thus provide liquidity. Q28-9 Chip Jergen, CFA, is an asset manager who wishes to allocate a percentage of his portfolio to alternative investments. Jergen invests in a security that represents a proportional claim to cash flows from a pool of loans. In which category of alternative investments has Jergen most likely invested? (2014 Mock 102-92) A. Real estate. B. Commodities. C. Private equity. Solution: A One of the ways to invest in real estate is by purchasing residential or commercial mortgage-backed securities. 595 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 R6-9 掌握房地产投资的形式、潜在收益与风险、估值方法与尽职调查的要点  forms  Residential property  Commercial real estate  REIT Investing  MBS  Timberland and Farmland  potential benefits and risks  performance measure  appraisal index  use estimates of value (appraisals) as inputs to the indices  rely on comparable sales and cash flow analysis techniques  understate volatility  repeat sales index  use changes in prices of properties to construct the indices  sample selection bias  REIT indices  use the prices of publicly traded shares of REITs to construct the indices  More frequently traded, more reliable is the index  Real estate returns are highly correlated with global equity returns but less correlated with global bond returns.  Real estate valuation  Comparable sales approach  Income approach  Cost approach  REITS valuation  Income based approach  Asset based approach  Due diligence  Global and national economic factors  Local market conditions  Interest rate level  Variation in the abilities of managers to select and manage properties 596 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Changes in regulation P5-9 Commodities Q29-9 ★If a commodity’s forward curve is in contango, the component of a commodities futures return most likely to reflect this is:（2014 原版书P269-11） A. spot prices. B. the roll yield. C. the collateral yield. Solution: B Roll yield refers to the difference between the spot price of a commodity and the price specified by its futures contract (or the difference between two futures contracts with different expiration dates). When futures prices are higher than the spot price, the commodity forward curve is upward sloping, and the prices are referred to as being in contango. Contango occurs when there is little or no convenience yield. Q30-9 ★If an investor uses derivatives to make a long investment in commodities, the return earned on margin is best described as:（2013上午mock-110） A. price return. B. collateral yield. C. convenience yield. Solution: B Collateral yield is the return on cash used as margin on derivatives used to gain commodity exposure. Q31-9 ★★The most likely impact of adding commodities to a portfolio of equities and bonds is to: （2013上午mock-111） A. increase risk B. enhance return. C. reduce exposure to inflation. Solution: C Over the long term, commodity prices are closely related to inflation and, therefore, including commodities in a portfolio of equities and bonds will reduce its exposure to inflation. Q32-9 The return on a commodity index is likely to be different from returns on the underlying commodities because: （2013上午mock-112） A. assets are not marked to market. B. data are subject to survivorship bias. C. indices are constructed using futures contracts. Solution: C 597 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Since commodity indices are constructed using commodity futures and not the underlying commodities there can be differences between commodity index returns and the returns of the underlying commodities. Q33-9 ★. farmers have become concerned that the future supply of wheat production will exceed demand. Any hedging activity to sell forward would most likely protect against which market condition? （2013下午mock—109） A. Contango B. Full carry C. Backwardation Solution: C because when a commodity market is in backwardation, the futures price is below the spot price because market participants believe the spot price will be lower in the future. When futures prices are above spot prices, the market is said to be in contango. Q34-9 ★If the price of a commodity futures contract is below the spot price, it is most likely that the: (2014 Mock 100-118) A. convenience yield exceeds storage costs. B. cost of carry exceeds the convenience yield. C. roll yield is negative. Solution: A The convenience yield must exceed the cost of carry to arrive at a futures price below the spot price because the futures price is approximately equal to the spot price [(1 + r) + Storage cost – Convenience yield] and the cost of carry is defined as interest cost plus storage cost. Given that interest cost is always positive, the convenience yield must also exceed storage costs to arrive at a futures price below the spot price. R7-9 掌握大宗商品的投资形式、潜在收益与风险及与定价相关的概念  Forms  Futures, forwards, options and swaps  Commodity ETF  Equities that are directly linked to a commodity  Managed futures funds  Individual managed accounts  Specialized funds in specific commodity sectors  potential benefits and risks  Potential for returns 598 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Portfolio diversification  Inflation protection  pricing futures price spot price(1+r) + storage costs - convenience yield Convenience yield: the value of having the physical commodity for ues over the period of the futures contract.  Contango: futures price>spot price  Backwardation: futures price<spot price  Sources of commodities futures returns  Roll yield: the yield due to a difference between the spot price and futures price  Positive for a market in backwardation  Negative for a market in contango  Collateral yield: the interest earned on collateral required to enter into a futures contract  Change in spot prices: the total price return is a combination of the change in spot prices and the convergence of futures prices to spot prices over the term of the futures contract. P6-9 Fee structure of hedge funds Q35-9 ★United Capital is a hedge fund with $250 million of initial capital. United charges a 2% management fee based on assets under management at year end, and a 20% incentive fee based on returns in excess of an 8% hurdle rate. in its first year, United appreciates 16%. Assume management fees are calculated using end-of-period valuation. The investor’s net return assuming the performance fee is calculated net of the management fee is closest to: （2014 原版书P269-12） A. %. B. %. C. %. Solution: B The net investor return is %, ca1culated as: - End of year capital = $250 million x = $290 million Management fee = $290 million x 2% = $ million Hurdle amount 8% of $250 million = $20 million; Incentive fee = ($290 — $250 — $20 — $) million x 20% = $ million Total fees to United Capital = ($ + $) million = $ million 599 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Investor net return: ($290 — $250 — $) / $250 = % Q36-9 ★A high water mark of£150 million was established two years ago for a British hedge fund. The end-of-year value before fees for last year was £140 million. This year’s end-of-year value before fees is £155 million. The fund charges “2 and 20.” Management fees are paid independently of incentive fees and are calculated on end-of-year values. What is the total fee paid this year? (NotesB5-253-10) A. £ million. B. £ million. C. £ million. Solution: B Management fee is £155 million × = £ million. Incentive fee is (£155 million — £150 million) × = £ million. Total fee is £ million + £ million = £ million. Q37-9 ★High-water marks are typically used when calculating the incentive fee on hedge funds. They are most likely used by clients to: （2013下午mock—114） A. avoid prime brokerage fees. B. claw back the management fees. C. prevent paying twice for the same performance. Solution: C because high-water marks prevent clients from paying twice for the same performance. When a hedge fund’s value drops, the manager will not receive an incentive fee until the value of the fund returns back to its previous level. Q38-9 ★High Plains Capital is a hedge fund with a portfolio valued at $475,000,000 at the beginning of the year. One year later, the value of assets under management is $541,500,000. The hedge fund charges a % management fee based on the end-of-year portfolio value, and a 10% incentive fee. If the incentive fee and management fee are calculated independently, the effective return for a hedge fund investor is closest to: （2013上午mock—114） A. %. B. %. C. %. Solution: A The management fee = $541,500,000 × = $8,122,500 The incentive fee = ($541,500,000 - $475,000,000) × = $6,650,000 Total fees = $14,772,500 The effective return=(541,500,000—14,772,500-475,000,000)/475,000,000=% 600 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Q39-9 A hedge fund begins the year with $120 million and earns a 25% return for the year. The fund charges a % management fee on end-of-year fund value and a 15% incentive fee on the return, net of the management fees, that is in excess of a 6% fixed hurdle rate. A fund investor’s return for the year, net of fees, is closest to: (MOCK92-99) A. %. B. %. C. %. Solution: B B is correct because the $120 million grows by 25% to $150 million = $120 million × (1 + ). The management fee is $ million = $150 million × , leaving $ million, net of the management fee, or an increase of $ million over the beginning value of $120 million. The 6% hurdle rate requires an increase of $ million = $120 million × , so the fund has earned $ million = $ million - $ million over the hurdle rate, net of the management fee. The incentive fee is 15% of this, or $ million = $ million × , leaving an increase in fund assets, net of management and incentive fees, of $ million = $ million- $ million. The investor’s return, net of fees, is $ / $120 million = %. Q40-9 ★Capricorn Fund of Funds invests GBP 100 million in each of Alpha Hedge Fund and ABC Hedge Fund. Capricorn FOF has a "1 and 10" fee structure. Management fees and incentive fees are calculated independently at the end of each year. After one year, net of their respective management and incentive fees, the investment in Alpha is valued at GBP80 million and the investment in ABC is valued at GBP140 million. The annual return to an investor in Capricorn, net of fees assessed at the fund of funds level, is closest to(2014 原版书269-13) A. % B. % C. % Solution: A First, note that "1 and 10" refers to a 1% management fee, and a 10% incentive fee. End of year capital = GBP140 million + GBP80 million = GBP220 million Management fee = GBP220 million x 1% = million Incentive fee = (GBP220 - GBP200) million x 10% = GBP2 million Total fees to Capricorn = ( + GBP2) million = million Investor net return: (GBP220 - ) / GBP200 = % Q41-9 ★★The following information is available about a hedge fund: Initial fund assets $100 million Fund assets at the end of the period (before fees) $110 million Management fee based on assets under management 2% Incentive fee based on the return 20% Soft hurdle rate 8% 601 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 No deposits to the fund or withdrawals from the fund occurred during the year. Management fees are calculated using end-of-period valuation. Management fees and incentive fees are calculated independently. The net-of-fees return of the investor is closest to: (2014 Mock 99-120) A. %. B. %. C. %. Solution: C The soft hurdle rate is surpassed, because the return of the fund is 10%. For that reason, the full fee, based on the full performance, is due. Management fee: 2% of $110 million = $ million. Incentive fee: 20% of $10 million = $2 million. Total fees: $ million. Therefore, the fund assets at the end of the period after fees are $ million. The return for the investor is %. R8-9 掌握hedge funds的管理费用结构  Management fee  Based on capital under management.  Attractive to portfolio managers because the management fee alone will generate significant revenue if assets under management are large.  Earned irrespective of returns.  Incentive fee  Based on profits net of (or before) management fee  Only earned if the return exceeds a hurdle rate  High water mark ϒhighest value reported  The hedge fund must recover past losses and return to previous high water mark before any additional incentive fee is earned.  Protect clients from paying twice for the same performance.  “2 and 20” means 2% management fee and 20% incentive fee for hedge funds.  FOFs may charge extra 1% management fee and 10% incentive fee.  Negotiable terms  Fees, notice and lockup periods are negotiable with potential investors.  longer investment periods, lower fees. 602 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P7-9 Risk management of alternative investments Q42-9 ★An analyst wanting to assess the downside risk of an alternative investment is least likely to use the investment’s:（2014 原版书P26--14） A. Sortino ratio. B. value at risk (VaR). C. standard deviation of returns. Solution: C Downside risk measures focus on the left side of the return distribution curve where losses occur. The standard deviation of returns assumes that returns are normally distributed. Many alternative investments do not exhibit close-to-normal distribution of returns, which is a crucial assumption for the validity of a standard deviation as a comprehensive risk measure. Assuming normal probability distributions when calculating these measures will lead to an underestimation of downside risk for a negatively skewed distribution. Both the Sortino ratio and the value-at-risk measure are both measures of downside risk. R9-9 掌握其他类投资的风险管理与尽职调查  Risks management  Standard deviation of returns may be a misleading measure of risk.  Use of derivatives introduces operational, financial, counterparty, and liquidity risk.  Performance for some alternatives investment categories is primarily determined by management expertise and execution.  Hedge fund and private equity funds are much less transparent than traditional investments.  Many alternative investments are illiquid.  When calculating optimal allocations, indices of historical returns and standard deviations may not be good indicators of future returns and volatility.  Correlations vary across periods and are affected by events.  Due diligence  Organization  Portfolio management  Operations and controls  Risk management  Legal review 603 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 604 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 10-Portfolio P1-10 Different Types of investors & Investment Products Q1-10 In general, which of the following institutions will most likely have a high need for liquidity and a short investment time horizon? A. Banks B. Endowments C. Defined benefit pension plans Solution: A Banks have a short term horizon and high liquidity needs. Q2-10 ★Which of the following types of institutions is most likely to have a long investment time horizon and a high level of risk tolerance? （Mock83-15） A. A bank B. An endowment C. An insurance company Solution: B Endowments have a long investment time horizon and a high level of risk tolerance (Exhibit 14) Q3-10 ★★Which of the following institutional investors will most likely have the longest time horizon?(原版书R43-5) A. Defined benefit plan. B. University endowment. C. Life insurance company. Solution: B Most foundations and endowments are established with the intent of having perpetual lives. Although defined benefit plans and life insurance companies have portfolios with a long time horizon, they are not perpetual. Q4-10 ★★Which of the following investment products is most likely to trade at their net asset value per share?(原版书R43-12) A. Exchange traded funds. B. Open–end mutual funds. C. Closed–end mutual funds. Solution: B Open–end funds trade at their net asset value per share, whereas closed–end funds and exchange traded funds can trade at a premium or a discount. Q5-10 ★★Which of the following financial products is least likely to have a capital gain distribution? (原版书R43-13) A. Exchange traded funds. 605 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. Open–end mutual funds. C. Closed–end mutual funds. Solution: A Exchange traded funds do not have capital gain distributions. If an investor sells shares of an ETF (or open–end mutual fund or closed–end mutual fund), the investor may have a capital gain or loss on the shares sold; however, the gain (or loss) from the sale is not a distribution. Q6-10 Which of the following pooled investments is most likely characterized by a few large investments? (原版书R43-15) A. Hedge funds. B. Buyout funds. C. Venture capital funds. Solution: B Buyout funds or private equity firms make only a few large investments in private companies with the intent of selling the restructured companies in three to five years. Venture capital funds also have a short time horizon; however, these funds consist of many small investments in companies with the expectation that only a few will have a large payoff (and that most will fail) R1-10 Characteristics of Different Types of investors： R2-10 Mutual funds and other forms of pooled investments  Mutual funds: open-end fund and closed-end funds, Money market funds, Bond funds, Stock funds.  Exchange-traded funds (ETFs)  Separately managed account专款理财账户  Hedge funds：Long/short funds, Equity market-neutral funds, Event-driven funds, Fixed-income arbitrage, Convertible bond arbitrage funds, Global marcro funds (speculate on interest rate and currency） 606 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Buyout funds (private equity funds)与管理技能有关  Venture capital funds 与管理技能有关  The key to a DC plan is that the employee accepts the investment risk and is responsible for ensuring that there are enough funds in the plan to meet his or her needs upon retirement. R3-10 Comparison between Mutual funds and hedge funds  an investor investing in an index mutual fund buys the fund shares directly from the fund and all investments are settled at the net asset value. In the case of an ETF, however, investors buy the shares from other investors just as if they were buying or selling shares of stock.  Expenses are lower for ETFs but, unlike mutual funds, investors do incur brokerage costs.  All purchases and redemptions in a mutual fund take place at the same price at the close of business. ETFs are constantly traded throughout the business day, and as such each purchase or sale takes place at the prevailing market price at that time.  For ETF, dividends are paid out to the shareholders, whereas index mutual funds usually reinvest the dividends. Hence, there is a direct cash flow from the ETF that is not there with the index mutual fund. Depending on the investor, this cash flow may or may not be desirable.  the minimum required investment in an ETF is usually smaller. Investors can purchase as little as one share in an ETF, which is usually not the case with an index mutual fund.  ETFs are often cited as having tax advantages over index mutual funds.  The main disadvantage of an SMA is that the required minimum investment is usually much higher than is the case with a mutual fund.  Hedge fund strategies generally involve a significant amount of risk, driven in large measure by the liberal use of leverage and complexity. More recently, it has also involved the extensive use of derivatives.  A key difference between hedge funds and mutual funds is that the vast majority of hedge funds are exempt from many of the reporting requirements for the typical public investment company. P2-10 Investment Objectivity Q7-10 Regarding an individual’s investment policy statement, which of the following is least appropriate as the investment objective? The portfolio seeks: A. current income in the form of dividends and interest. B. 12% annual returns with above-average market risk. C. to match the performance and risk characteristics of the S&P 500 Index. Solution: A The investment objective must be expressed in terms of both risk and return and current income from dividends and interest represents only the investor’s return objective. It does not include any reference to risk tolerance or risk limits as provided in the other alternatives. Q8-10 ★★With respect to the formation of portfolios, which of the following statements is most accurate?（原版书R43-3） 607 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. Portfolios affect risk less than returns. B. Portfolios affect risk more than returns. C. Portfolios affect risk and returns equally. Solution: B As illustrated in the reading, portfolios reduce risk more than they increase returns. Q9-10 ★The timing of payouts for property and casualty insurers is unpredictable ("lumpy") in comparison with the timing of payouts for life insurance companies. Therefore, in general, property and casualty insurers have: （原版书R46-14） A. lower liquidity needs than life insurance companies. B. greater liquidity needs than life insurance companies. C. a higher return objective than life insurance companies. Solution: B The unpredictable nature of property and casualty (P&C) claims forces P&C insurers to allocate a substantial proportion of their investments into liquid, short maturity assets. This need for liquidity also forces P&C companies to accept investments with relatively low expected returns. Liquidity is of less concern to life insurance companies given the greater predictability of life insurance payouts. R4-10 Investment objectives：  Risk objective: 1) measures of absolute risk include the variance or standard deviation of returns and value at risk. 2) relative risk objectives, which relate risk relative to one or more benchmarks perceived to represent appropriate risk standards. However, for banks, the return of asset must be higher than that of liability.  return objectives may be stated on an absolute or a relative basis: 1) the client may want to achieve a particular percentage rate of return, for example, X percent, a nominal rate of return or be expressed in real (inflation-adjusted) terms. 2) the return objective can be stated on a relative basis, for example, relative to a benchmark return; 3) Some institutions also set their return objective relative to a peer group or universe of managers. This objective can be problematic  when limited information is known about the investment strategies  or the returns calculation methodology being used by peers,  the impossibility of all institutions being "above average."  Furthermore, a good benchmark should be investable P3-10 Portfolio Management Process Q10-10 The final step in the portfolio management process is most likely to include: A. investment research B. portfolio construction C. evaluation of portfolio performance 608 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: C The final step in the portfolio management process includes evaluating portfolio performance. Evaluation of investor’s investment knowledge, investment research, and portfolio construction are part of the first three steps in the process. Q11-10 An important reason for constructing an investment policy statement is that it: A. Minimizes the costs of portfolio construction. B. Ensures that managers outperform the performance benchmark. C. Includes a performance benchmark to judge manager performance. Solution: C An investment policy statement identifies a benchmark portfolio that will be used to judge the performance of the portfolio manager. Q12-10 ★With respect to the portfolio management process, the asset allocation is determined in the(原版书R43-8) A. planning step. B. feedback step. C. execution step. Solution: C The client's objectives and constraints are established in the investment policy statement and are used to determine the client's target asset allocation, which occurs in the execution step of the portfolio management process. Q13-10 ★Which of the following best describes the underlying rationale for a written investment policy statement (IPS)?(原版书R46-2) A. A written IPS communicates a plan for trying to achieve investment success. B. A written IPS provides investment managers with a ready defense against client lawsuits. C. A written IPS allows investment managers to instruct clients about the proper use and purpose of investments. Solution: A A written IPS is best seen as a communication instrument allowing clients and portfolio managers to mutually establish investment objectives and constraints. Q14-10 ★The section of the investment policy statement (IPS) that provides information about how policy may be executed, including investment constraints, is best described as the: (原版书R46-4) A. Investment Objectives. B. Investment Guidelines. C. Statement of Duties and Responsibilities. Solution: B 609 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 The major components of an IPS are listed in Section of the reading. Investment Guidelines are described as the section that provides information about how policy may be executed, including investment constraints. Statement of Duties and Responsibilities "detail[s] the duties and responsibilities of the client, the custodian of the client's assets, the investment managers, and so forth." Investment Objectives is "a section explaining the client's objectives in investing." Q15-10 ★Which of the following is least likely to be placed in the appendices to an investment policy statement (IPS)? (原版书R46-5) A. Rebalancing Policy. B. Strategic Asset Allocation. C. Statement of Duties and Responsibilities. Solution: C The major components of an IPS are listed in Section of the reading. Strategic Asset Allocation (also known as the policy portfolio) and Rebalancing Policy are often included as appendices to the IPS. The Statement of Duties and Responsibilities, however, is an integral part of the IPS and is unlikely to be placed in an appendix. Q16-10 ★Tactical asset allocation is best described as: (原版书R46-19) A. attempts to exploit arbitrage possibilities among asset classes. B. the decision to deliberately deviate from the policy portfolio. C. selecting asset classes with the desired exposures to sources of systematic risk in an investment portfolio. Solution: B Tactical asset allocation allows actual asset allocation to deviate from that of the strategic asset allocation (policy portfolio) of the IPS. Tactical asset allocation attempts to take advantage of temporary dislocations from the market conditions and assumptions that drove the policy portfolio decision. Q17-10 ★Investing the majority of the portfolio on a passive or low active risk basis while a minority of the assets is managed aggressively in smaller portfolios is best described as: (原版书R46-20) A. the core–satellite approach. B. a top–down investment policy. C. a delta–neutral hedge approach. Solution: A The core–satellite approach to constructing portfolios is defined as "investing the majority of the portfolio on a passive or low active risk basis while a minority of the assets is managed aggressively in smaller portfolios." Q18-10 ★★Which of the following is not the major component of an investment policy statement (IPS)? (2012年6月考题回顾) 610 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. Investment Constraints B. Client’s risk tolerance C. Strategic asset allocation Solution: C Many IPS include the following sections:  Introduction – Describes the client  Statement of purpose – The intentions of the IPS  Statement of duties and responsibilities – of the client, the asset custodian, and the investment managers  Procedures – Related to keeping the IPS updated and responding to unforeseen events  Investment objectives – The client’s investment needs, specified in terms of required return and risk tolerance  Investment constraints – Factors that may hinder the ability to meet investment objectives; typically categorized as time horizon, taxes, liquidity, legal and regulatory, and unique needs  Investment guidelines – For example, whether leverage, derivatives, or specific kinds of asset are allowed  Evaluation and review – Related to feedback on investment results  Appendices R5-10 Component of IPS  Introduction, This section describes the client.  Statement of Purpose. This section states the purpose of the IPS.  Statement of Duties and Responsibilities. This section details the duties and responsibilities of the client, the custodian of the client's assets, and the investment managers.  Procedures. This section explains the steps to take to keep the IPS current and the procedures to follow to respond to various contingencies.  Investment Objectives. This section explains the client's objectives in investing.  Investment Constraints. This section presents the factors that constrain the client in seeking to achieve the investment objectives.  Investment Guidelines. This section provides information about how policy should be executed (., on the permissible use of leverage and derivatives) and on specific types of assets excluded from investment, if any.  Evaluation and Review. This section provides guidance on obtaining feedback on investment results.  Appendices: (A) Strategic Asset Allocation (B) Rebalancing Policy. Many investors specify a strategic asset allocation (SAAJ, also known as the policy portfolio, which is the baseline allocation of portfolio assets to asset classes in view of the investor's investment objectives and the investor's policy with respect to rebalancing asset class weights.  portfolio management process: planning（理解顾客的需求和IPS）很重要 P4-10 Asset classes Q19-10 Returns on asset classes are best described as being a function of: (原版书R46-17) 611 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. the failure of arbitrage. B. exposure to the idiosyncratic risks of those asset classes. C. exposure to sets of systematic factors relevant to those asset classes. Solution: C Strategic asset allocation depends on several principles. As stated in the reading, "One principle is that a portfolio's systematic risk accounts for most of its change in value over the long run." A second principle is that, "the returns to groups of like assets... predictably reflect exposures to certain sets of systematic factors." This latter principle establishes that returns on asset classes primarily reflect the systematic risks of the classes. Q20-10 ★★In defining asset classes as part of the strategic asset allocation decision, pairwise correlations within asset classes should generally be: (原版书R46-18) A. equal to correlations among asset classes. B. lower than correlations among asset classes. C. higher than correlations among asset classes. Solution: C As the reading states, "an asset class should contain homogeneous assets . . . paired correlations of securities would be high within an asset class, but should be lower versus securities in other asset classes." Q21-10 ★In a strategic asset allocation, assets within a specific asset class are least likely to have: (Mock84-120) A. low paired correlations. B. high paired correlations. C. low correlations with other asset classes. Solution: A In a strategic asset allocation, assets within a specific asset class will have high paired correlations and low correlations with assets in other asset classes. P5-10 Investment constraints Q22-10 Which of the following constraints would most likely appear in the unique needs and preferences section of a trusts Investment policy statement? The portfolio is: A. subject to the prudent-man standard. B. subject to income taxes of 40%. C. prohibited from investing in tobacco companies. Solution: C Unique needs and preferences include the prohibition of certain investments. The investment constraints of liquidity, tax concerns, and legal and regulatory factors adequately address the portfolio’s other constraints. 612 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P6-10 Expected Return and Expected Standard Deviation Q23-10 ★★An analyst gathered the following information about a portfolio comprised of two assets: （Mock83-116） Asset Weight % Expected Return E(R) Expected Standard Deviation E(σ) X 60 11% 5% Y 40 7% 4% If the covariance of returns for the two assets equals , then the expected return and expected standard deviation of the portfolio are closest to: Expected Return Expected Standard Deviation A. % % B. % % C. % % Solution: C The expected return of the portfolio is the weighted average return of the two assets = x 11% + x 7% = %. The expected standard deviation of the portfolio is calculated as: = W12s12 W 22s22 2W1W2 R1,2s1s2 = [( x ) + ( x ) + (2 x x x x x )] = [ + + ] = [] = ≈ % Q24-10 ★★The correlation between assets in a two–asset portfolio increases during a market decline. If there is no change in the proportion of each asset held in the portfolio or the expected standard deviation of the individual assets, the volatility of the portfolio is most likely to: (原版书R44-31) A. increase. B. decrease. C. remain the same. Solution: A Higher correlations will produce less diversification benefits provided that the other components of the portfolio standard deviation do not change (., the weights and standard deviations of the individual assets). Q25-10 ★★The portfolio of a risk–free asset and a risky asset has a better risk–return trade–off than investing in only one asset type because the correlation between the risk–free asset and the risky asset is equal to(原版书R45-2) A. – . B. . C. . 613 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B portfolio of the risk–free asset and a risky asset or a portfolio of risky assets can result in a better risk–return trade–off than an investment in only one type of an asset, because the risk–free asset has zero correlation with the risky asset. Q26-10 A portfolio includes two assets A and B. We have got the following information about this portfolio: （2012年12月考题回顾） A B Weight 70% 30% Standard deviation correlation The portfolio’s standard deviation is closest to : A. B. C. Solution: A ς22222p w1 1ς w 22 ς2 w1 w212 ς1 ς Υ,2 22 22 υ 0υ.17 0υ.065 0.υ55 υ ς0 Q27-10 A fund manager now held a portfolio. The expected return of current portfolio is 16%, and the standard deviation is 10%. He plans to add a new asset to this portfolio. The expected return of new asset is 16%, and the standard deviation is 20%. The correlation of the new asset and the current portfolio is . How will it affect the risk of the current portfolio, if the manager adds the new asset to the current portfolio? （2012年12月考题回顾） A. Beneficial B. No-effect C. Determination Solution: A When the correlation is smaller than 1, the original portfolio will be diversified by adding a new asset. Its risk will decrease. Q28-10 A portfolio includes two assets. The portfolio’s standard deviation equals to the weighted average mean of the two assets’ standard deviation. The correlation of these two assets is closest to: （2012年12月考题回顾） A. -1 614 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. 0 C. 1 Solution: C ςp w12 12ς w 22 ς2 w1 w212 1ς,2 ς ΥWhen the correlation = 1, ς22 p w1 1ς w 22 ς2 w1 w212 ς (ςw 1 1w2 2 ς)2 w1 ς1 w 22 ς ς 常考计算： R6-10 An individual investment:  Expected Return ER n()PiRi P1R1P2R2LPnR ƒ n i1 Variance of Return Var s ƒ 2n[RE R2i-()]Pii 1  Standard Deviation of Return n SDsƒ [R i-E(R)]2Pii 1 R7-10 A Portfolio:  Expected Return En(R)= ƒWiR ii=1 Standard deviation n ƒn ns222PsPwisiƒwi wƒjCovi,ji 1 i1 j1  Covariance：Using expectation data Co1,2 nvƒP i[Ri,1-E(R1)][Ri,2-E(R 2)]i1 Using historical data： Cov 1n1,2n ƒ[Rt,1-R1][Rt,2-R2]-1t 1  2s2 sN N- 1 PCov Variance of returns for a portfolio of two risky assets:  ςP2 w222211 w 2ς22 w1 w2 1ς2 1ς2 Υ 615 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 P7-10 Markowitz Assumptions Q29-10 Markowitz portfolio theory is most accurately described as including an assumption that: A. Risk is measured by the range of expected returns. B. Investors have the ability to borrow or lend at the risk-free rate of return. C. Investor utility curves demonstrate diminishing marginal utility of wealth. Solution: C MPT assumes investors maximize one-period expected utility, and their utility curves demonstrate diminishing marginal utility of wealth. Q30-10 ★★Evidence of risk aversion is best illustrated by a risk–return relationship that is:（原版书R44-16） A. negative. B. neutral. C. positive. Solution: C Historical data over long periods of time indicate that there exists a positive risk–return relationship, which is a reflection of an investor's risk aversion. Q31-10 ★★With respect to utility theory, the most risk–averse investor will have an indifference curve with the: （原版书R44-18） A. most convexity. B. smallest intercept value. C. greatest slope coefficient. Solution: C The most risk–averse investor has the indifference curve with the greatest slope. R8-10 The Markowitz assumptions are: 1) Returns distribution: Each investment can be measured by a probability distribution of expected returns over a given horizon 2) Utility maximization: Investor intends to maximize their expected utility over time horizon 3) Risk is variability: Risk is measured in terms of variance (standard deviation) of expected returns 4) Risk/return: Investors make their decision based on expected return and the risk 5) Risk aversion: Investors prefer less risk and given the same risks by given the same returns P8-10 Efficient Frontier & CAL Q32-10 The optimal portfolio on the efficient frontier is likely to be: A. more risky for investors with flatter utility curves. 616 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 B. more risky for investors with steeper utility curves. C. the same for all investors irrespective of their utility curves. Solution: A A less risk-averse investor’s highest utility, given the low slope of his utility curve, is likely to touch the efficient frontier at a point that would represent a portfolio with higher risk and more expected return. Q33-10 ★Compared to the efficient frontier of risky assets, the dominant capital allocation line has higher rates of return for levels of risk greater than the optimal risky portfolio because of the investor's ability to(原版书R44-39) A. lend at the risk–free rate. B. borrow at the risk–free rate. C. purchase the risk–free asset. Solution: B The CAL dominates the efficient frontier at all points except for the optimal risky portfolio. The ability of the investor to purchase additional amounts of the optimal risky portfolio by borrowing (., buying on margin) at the risk–free rate makes higher rates of return for levels of risk greater than the optimal risky asset possible. Q34-10 ★With respect to the mean–variance theory, the optimal portfolio is determined by each individual investor's: (原版书R44-40) A. risk–free rate. B. borrowing rate. C. risk preference. Solution: C Each individual investor's optimal mix of the risk–free asset and the optimal risky asset is determined by the investor's risk preference. Q35-10 ★★Two individual investors with different levels of risk aversion will have optimal portfolios that are:（原版书R44-25） A. below the capital allocation line. B. on the capital allocation line. C. above the capital allocation line. Solution: B The CAL represents the set of all feasible investments. Each investor's indifference curve determines the optimal combination of the risk–free asset and the portfolio of all risky assets, which must lie on the CAL. Q36-10 ★★With respect to capital market theory, an investor's optimal portfolio is the combination of a risk–free asset and a risky asset with the highest: (原版书R45-3) 617 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 A. expected return. B. indifference curve. C. capital allocation line slope. Solution: B Investors will have different optimal portfolios depending on their indifference curves. The optimal portfolio for each investor is the one with highest utility; that is, where the CAL is tangent to the individual investor's highest possible indifference curve. R9-10 Portfolio and efficient frontier  Minimum-variance portfolio: the portfolio that have the lowest standard deviation of all portfolios with a given expected return are known as minimum-variance portfolios. Together they make up the minimum-variance frontier.  Those portfolios that have the greatest expected return for each level of risk make up the efficient frontier. The portfolio on the efficient frontier that has the least risk is the global minimum-variance portfolio.  An investor's utility function represents the investor's preferences in terms of risk and return..  Indifference curve: plots combinations of risk(standard deviation) and expected return among which an investor is indifferent.  CAL: The line of possible portfolio risk and return combinations given the risk-free rate and the risk and return of a portfolio of risky assets is referred as capital allocation line.  CML: under the assumption of homogeneous expectations, the risk and return combination given the risk-free rate and the risk and return of market portfolio of all risky assets is referred as capital market line. P9-10 CML Q37-10 An investor whose portfolio is located on the capital market line to the left of the market portfolio most likely has: A. Lower unsystematic risk than the market portfolio. B. Higher unsystematic risk than the market portfolio. C. Less than 100 percent of his wealth invested in the market portfolio. Solution: C A portfolio that is on the CML to the left of the market portfolio is a lending portfolio with part of the investor’s wealth invested in the risk-free asset (loaned at the risk-free rate). Q38-10 ★A portfolio on the capital market line with returns greater than the returns on the market portfolio represents a(n)(原版书R45-9) A. lending portfolio. B. borrowing portfolio. C. unachievable portfolio. 618 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B As one moves further to the right of point M on the capital market line, an increasing amount of borrowed money is being invested in the market portfolio. This means that there is negative investment in the risk–free asset, which is referred to as a leveraged position in the risky portfolio. R10-10 CML 1) CML好于马可维茨有效前沿； 2) CML斜率越大，单位风险回报越高。 R11-10 在CML线上，如果投资组合要获得比市场组合更高的收益，必须怎么样？应该是使用杠杆作用，采用无风险借款。 R12-10 Market portfolio的含义： 1) Is the tangent point where the CML touches the Markowitz efficient frontier? 2) Consists of every risky assets 3) The weights on each asset are equal to the percentage of the market value of the asset to the market value of the entire market portfolio. 4) The greater the slope, the higher is the risk aversion of the investor as a greater increment in return is required to accept a given increase in risk. P10-10 SML Q39-10 The following table shows date for the stock of JKU end a market-index. Expected return of JKU E(Rjku) 15% Expected return of market index RM 12% Risk free rate RFR 5% Standard deviation of market index returns 0 15% Covariance coefficient between JKU and market index CovJKUM How is the price of the stock? A. Overvalued B. Undervalued C. Properly valued Solution: B βJKU= CovJKU,M / σ2M = / (^2) = E(RJKU) = RFR + βJKU × (RM – RFR) = + 1 × ( – ) = required rate of return of JKU is 12% and the expected return of JKU is 15%; therefore, JKU is undervalued relative to the 619 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Security Market Line (SML). The risk-return relationship lies above the SML. Q40-10 The risk-free rate is 6% and the expected market return is 15%. An investor sees a stock with a beta of selling for $25 that will pay a $1 dividend next year. If he thinks the stock will be selling for $30 at year end, he thinks it is: A. Overpriced, so buy it. B. Overpriced, so short it. C. Underpriced, so buy it. Solution: C Required rate=6+(15-6) =% Return on stock= (30-25+1)/25=24% Based on risk, the stock plots above the SML and is under-priced, so buy it. Q41-10 In the context of capital market theory and the capital asset pricing model (CAPM), the average investor is least likely to be compensated for assuming risk that can be: A. Reduced by diversification. B. Related to interest rate volatility. C. Related to changes in macroeconomic variables. Solution: A Unsystematic risk (risk that can be diversified away) is not rewarded. Systematic risk is the risk for which investors are compensated. Systematic risk is that part of total risk that is correlated with the market and related to changes in macroeconomic variables (such as changes in interest rate volatility). Standard deviation of returns of the market portfolio is a measurement of systematic risk Q42-10 An unsystematic risk is most likely to be defined as a/an: A. Undiversifiable risk. B. Unique risk. C. Market risk. Solution: B A systematic risk can also be called un-diversifiable risk and market risk. An unsystematic risk can also be called diversifiable risk, unique risk and firm-specific risk. Q43-10 An analyst gathers the following information Expected Expected Correlation Security Annual Return Standard Deviation between Security (%) (%) and the Market Security 1 11 25 Security 2 11 20 Security 3 14 20 620 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Market 10 15 Which security has the least amount of market risk? A. Security 1. B. Security 2. C. Security 3. Solution: B Security 2 has the lowest beta value; 0 2,m υΥcompared to Securitυy 1 and 3 with beta val20 .7 2ς0%ues of and , .93 ςm15% respectively. Q44-10 ★★With respect to the pricing of risk in capital market theory, which of the following statements is most accurate? (原版书R45-13) A. All risk is priced. B. Systematic risk is priced. C. Nonsystematic risk is priced. Solution: B Only systematic risk is priced. Investors do not receive any return for accepting nonsystematic or diversifiable risk. Q45-10 ★★Interest rate risk is belong to: (2012年6月考题回顾) A. Systematic risk B. Unsystematic risk C. Total risk Solution: A Systematic risk is correlated with the market and related to changes in macroeconomic variables such as changes in interest rate volatility. Q46-10 Which one is not the systematic risk? (2012年12月考题回顾) A. New drug development test B. The change of inflation rate C. The change of bank reserve rate Solution: A New drug development test is the unsystematic risk. Unsystematic risk is also called unique or firm-specific risk that could be eliminated by diversification. Q47-10 With respect to capital market theory, which of the following assumptions allows for 621 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 the existence of the market portfolio? All investors: (原版书R45-37) A. are price takers. B. have homogeneous expectations. C. plan for the same, single holding period. Solution: B Market portfolio assumes that all investors have homogeneous expectations. Q48-10 With respect to the security market line, if two risky assets have the same covariance with the market portfolio but have different estimated rates of return, the most accurate conclusion is that the two risky assets have: A. The same amount of systematic risk, and both assets are properly valued. B. Different amounts of systematic risk, and both assets are properly valued. C. The same amount of systematic risk, and at least one of the assets is either overvalued or undervalued. Solution: C Beta is the covariance of an asset with the market portfolio divided by the variance of the market portfolio. The variance of the market portfolio is the same for all assets, so if the covariance with the market portfolio is the same, the assets must have the same beta (amount of systematic risk), should plot at the same place on the SML, and have the same required rate of return. If the estimated rates of return for the two assets are different, at least one of them is not properly valued and will not plot on the SML. Q49-10 ★With respect to capital market theory, correctly priced individual assets can be plotted on the: （原版书R45-24） A. capital market line. B. security market line. C. capital allocation line. Solution: B The security market line applies to any security, efficient or not. The CAL and the CML use the total risk of the asset (or portfolio of assets) rather than its systematic risk, which is the only risk that is priced. Q50-10 ★Analysts who have estimated returns of an asset to be greater than the expected returns generated by the capital asset pricing model should consider the asset to be:（原版书R45-35） A. overvalued. B. undervalued. C. properly valued. Solution: B If the estimated return of an asset is above the SML (the expected return), the asset has a lower 622 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 level of risk relative to the amount of expected return and would be a good choice for investment (., undervalued). Q51-10 ★With respect to capital market theory, which of the following statements best describes the effect of the homogeneity assumption? Because all investors have the same economic expectations of future cash Bows for all assets, investors will invest in: （原版书R45-36） A. the same optimal risky portfolio. B. the Standard & Poor's 500 Index. C. assets with the same amount of risk. Solution: A The homogeneity assumption refers to all investors having the same economic expectation of future cash flows. If all investors have the same expectations, then all investors should invest in the same optimal risky portfolio, therefore implying the existence of only one optimal portfolio (., the market portfolio) Q52-10 Information about three stocks is provided below: Stock Expected Return Beta Booraem Inc. % Heisen Inc. % Gutmann Inc. % If the expected market return is % and the average risk-free rate is %, according to the capital asset pricing model (CAPM) and the security market line (SML), which of the three stocks is most likely overvalued? (Mock84-119) A. Heisen Inc. B. Booraem Inc. C. Gutmann Inc. Solution: B Booraem Inc. is overvalued because it lies below the SML. The expected return, %, is less than the required return. According to the CAPM, the required return for Booraem Inc. is or %: = + ( – ). Q53-10 A return-generating model that provides an estimate of the expected return of a security based on factors such as earnings growth and cash flow generation is best described as a: (Mock85-119) A. market factor model. B. fundamental factor model. C. macroeconomic factor model. 623 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Solution: B A return generating model based on factors such as earnings growth and cash flow generation is a fundamental factor model. Q54-10 What is the beta represent in the SML map? A. unsystematic risk B. systematic risk C. market risk Solution: B In the SML, beta can be viewed as a standardized measure of systematic risk. Q55-10 Beta can be viewed as: A. a measure of unsystematic risk. B. covariance of an asset with the market portfolio. C. correlation coefficient with the market portfolio. Solution: B Beta is a standardized measure of risk because it relates this covariance to the variance of the market portfolio. Q56-10 The slope of the security characteristic line is an asset's: A. beta. B. excess return. C. risk premium. Solution: A The security characteristic line is a plot of the excess return of the security on the excess return of the market. In such a graph, Jensen's alpha is the intercept and the beta is the slope. Q57-10 With respect to capital market theory, the average beta of all assets in the market is: （原版书R45-21） A. less than . B. equal to . C. greater than . Solution: B The average beta of all assets in the market, by definition, is equal to . Q58-10 Which one is not the assumption of CAPM? （2012年12月考题回顾） A. Investors are risk averse B. All investors plan using the same time period 624 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 C. Investors have different expectations of security returns Solution: C The capital asset pricing model (CAPM) requires several assumptions:  Investors are risk averse, utility maximizing, and rational.  Markets are free of frictions like costs and taxes.  All investors plan using the same time period.  All investors have the same expectations of security returns.  Investments are infinitely divisible. Prices are unaffected by an investor’s trades. SML曲线需掌握的公式和概念： R13-10 Systematic risk and Unsystematic risk 1) Systematic risk: the risk that cannot be eliminated by diversification, which is measured by beta. 2) Unsystematic risk: the risk that is eliminated by diversification. 3) Since unsystematic risk can be eliminated through diversification, only systematic risk is compensated. R14-10 CML&SML CML SML E(Ri) RFR iΕ[E(Rmkt)R F R]E(R RFR ς[E (R) RFRP)Pm kt]ςmktUnsystematic risk has been diversified Apply for all investments 包含无风险资产的有效前沿 在均衡市场中，所有的证券均在证券市场线上 Sharp ratio:Rp R the excess returns per unit of total portfolio risk. f ςpSharp ratio is the slope of the CML, while the slope of the SML is [E(Rmkt- RFR)]. R15-10 Return generate model: E(Ri)-Rf=βi1×E(factor1)+βi2×E(factor2)+βi3×E(factor3)+...+βi3×E(factor3) R16-10 Expected security returns depend only on systematic risk as measured by beta: E(Ri) Rf b i[E (Rmkt )-Rf]R17-10 SML曲线应用：  Undervalued Estimated return > Required return from the SML Investors should buy.  Overestimated Estimated return < Required return from the SML Investors should sell. 625 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值  Properly valued Estimated return = Required return from the SML Investors are indifferent between buying or selling  风险容忍度升高时，风险溢价降低，SML：clockwise rotation。 P11-10 Performance measures Q59-10 ★Which of the following performance measures is consistent with the CAPM?(原版书R45-32) A. M–squared. B. Sharpe ratio. C. Jensen's alpha. Solution: C Jensen’s alpha adjusts for systematic risk, and M-squared and the Sharpe Ratio adjust for total risk. Q60-10 ★★Which of the following performance measures does not require the measure to be compared to another value? (原版书R45-33) A. Sharpe ratio. B. Treynor ratio. C. Jensen's alpha. Solution: C The sign of Jensen’s alpha indicates whether or not the portfolio has outperformed the market. If alpha is positive, the portfolio has outperformed the market; if alpha is negative, the portfolio has underperformed the market. Q61-10 ★★Which of the following performance measures is most appropriate for an investor who is not fully diversified? (原版书R45-34) A. M–squared. B. Treynor ratio. C. Jensen's alpha. Solution: A M-squared adjusts for risk using standard deviation (., total risk). Q62-10 ★★Portfolio managers who are maximizing risk–adjusted returns will seek to invest less in securities with: (原版书R45-40) A. lower values for nonsystematic variance. B. values of nonsystematic variance equal to 0. C. higher values for nonsystematic variance. Solution: C 626 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 Since managers are concerned with maximizing risk–adjusted returns, securities with greater nonsystematic risk should be given less weight in the portfolio. Q63-10 A portfolio manager earned a rate of return of %. The beta of the portfolio is . If the risk-free rate of return is % and the market return is %, Jensen’s alpha for the portfolio is closest to: (Mock 85-120) A. %. B. %. C. %. Solution: A Jensen’s alpha=RP-[Rf+ PΕm= — [ + ×( — )] = (R-Rf)] R18-10 Evaluate relative portfolio performance (risk-adjusted returns)  SharpeR R ratio=P ςfP The Sharpe ratio for any portfolio along the CML is the same. CALsRCMLPslope RM2Rlopef Rf RPς1 Rf ς Eς1(R )P2P2RP2RMMRP1P1Rf ςP1 ςP2 ςM ς  The M-squared (M2) measure produces the same portfolio rankings as the Sharpe ratio but is stated in percentage terms.  可以用斜率及截距算出两条直线的方程，将σM带入，两式相减得出M 2 (R-R)sMpfs-(RM-Rf)p 627 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任 金程教育 专业·领先·增值 E(R) P ςMςP(Rp Rf)M2RMMRPPRf ςP ςM ς  Treynor measure & Jensen’s alpha (systematic risk) R Treynor measure=P Ε (RP R f)∆ PRf P(RMR )f ΕPE(R)Slope= treynor measure for Portfolio P PRSML P MRMJensen’s Ralpha f Ε ΕP1  与Sharpe Ratio一起，仅适用于非完全分散化的组合；两者的结论是一致的。不能直接做判断，仅用于排序。但是，Jensen’s Alpha和Treynor ratio仅用于完全分散化的组合，Jensen’s Alpha可以直接做判断。 P12-10 Investment objectives: risk and return Q64-10 An individual investor’s ability to take risk is higher than average level. His willingness to take risk is lower than average level. How about his risk tolerance, comparing with the average level? （2012年12月考题回顾） A. Higher than average level B. Lower than average level C. Same with the average level Solution: B When assigning an overall risk tolerance, the prudent approach is to use the lower of ability to take risk and willingness to take risk. 628 此预测为考点预测，考题仅为复习参考 内部使用资料，严禁传播，否则追究法律责任