1.       Professor Harlow has 10 students in his Advanced Statistics class, and is in the process of reviewing the students’ mid-term test scores.   The resulting test score are as follows: 98%, 95%, 90%, 90%, 88%, 86%, 83%, 80%, 76%, 65%.  What is the range of the student’s score (rounded to the nearest percentage point)?

A.      33%

B.      85%

C.      90%

Ans: A

Exp: Range = highest value – lowest value = 98 -65 = 33

 

 

2.       A ___________ is the tabulation of variables observed in a given sample.  The sample’s highest and lowest values are used as a baseline, and the results in broken down into appropriate intervals or categories.

A.      Histogram

B.      Frequency distribution

C.      Frequency polygon

Ans: B

Exp: Frequency distribution breaks values into appropriate intervals with a high and low value baseline

 

 

3.       A statistician is evaluating a company’s customer satisfaction survey results and has organized the data as follows:

 

Satisfaction Rating            Occurrences

5	5
4	11
3	4
2	1
1	2

 

What is the absolute frequency of responses with a satisfaction rating of 4?

A.      23

B.      47.8

C.      11

Ans: C

Exp: Absolute frequency is the number of occurrences of a specific value in a sample

 

 

4.       An investor has been tracking the movement of one of her stocks for the past three weeks.  The  market close price of the stock is as follows:

 

Stock price per share         Occurrences

$13 – $13.99	1
$12 -$12.99	3
$11 -$11.99	10
$10 – 10.99	1

 

What is the relative frequency of the stock with a closing price of $12 - $12.99?

A.      3

B.      .2

C.      15

Ans: B

Exp: Relative frequency = Absolute frequency / Total number of occurrences in the sample

 

 

5.       Marion is an avid birdwatcher who carefully catalogs all of her avian sightings.  As part of a research project designed to estimate the number of local mating pairs in different species , she is compiling her data to present to the local Wildlife Rescue Center.  Her findings are cataloged below:

 

Species                 # of Sightings

Wren	15
Woodpecker	3
Egret	8
Bluejay	3
Cardinal	1

 

What is the absolute frequency of wren sightings?  What is the relative frequency of bluejay sightings?

A.      .5, .1

B.      15, 3

C.      15, .1

    

Ans: C

Exp: Absolute frequency is the number of occurrences of a specific value in a sample.  Relative frequency = Absolute frequency / Total number of occurrences in the sample

 

 

6.       A local political party office is preparing a marketing campaign for the coming election year.  In order to help them determine how to best design their ads to target the key voting demographic, they want to analyze the voting public.  Based on exit polls that asked vote age at the last election, the office has compiled the following results:

 

        Voter Age (in yrs)      # of Voters

18-24	4
25-31	15
32-38	28
39- 45	25
46- 52	19
53-59	7
60+	2

 

What is the cumulative absolute frequency of the 39-45 year old voter age interval? 

A.      72

B.      25

C.      4

Ans: A

Exp: Cumulative absolute frequency is the sum of the absolute frequencies for all intervals up to and including the one being evaluated

 

 

7.       The population mean of a given sample is the expected value of a random variable.  It can be calculated by ________.

A.      Taking the average of all the items in the sample

B.      Adding up all the values in a sample, then dividing by the number of each value

C.      Determining the value most frequently appearing in the sample

Ans: B

Exp: Population mean = Sum of all values in the sample / Number of each value

1.      Beatrice Arnold, a CFA Institute Designated officer, is conducting an inquiry related to professional conduct. Which of the following incidents are least likely to have prompted such an inquiry?

A.    A written complaint received by the Professional Conduct staff about a member or candidate’s professional behavior.

B.     Self-disclosure by the member or candidate on their annual Professional Conduct Statement of involvement in civil litigation, criminal investigation, or a written complaint.

C.     The routine background check of a CFA member or candidate revealed criminal investigation.

ANS: C

  EXP:  The routine background check is a effective way to investigate a criminal. And its  prompt such an inquiry.

 

2.      After thoroughly investigating the member, Beatrice Arnold decides that the best course of action is to impose disciplinary sanctions on the member. Which sequence best describes a possible outcome of this event?

A.    Member accepts sanction > Attends hearing before panel of CFA Institute members > Member is condemned by peers

B.     Member rejects sanction > Attends hearing before panel of CFA Institute members > Panel decides, upon review, that no disciplinary actions are necessary

C.     Member rejects sanction > Designated officer issues a cautionary letter

 

ANS: B

  EXP:  The valuable sequence is:- Member rejects sanction > Attends hearing before panel of CFA Institute members > Panel decides. And that will be more effective.

 

3.      There are six components of the Code of Ethics that CFA Institute members and candidates are to follow. Which of the following is not one of these components?

A.    Place the integrity of the investment profession and the interests of clients above their own personal interests.

B.     Promote the integrity of, and uphold the rules governing, capital markets

C.     Practice, and encourage fellow members and candidates to practice, effective time management

ANS: C

  EXP: Practice, and encourage fellow members and candidates to practice, effective time management

 

4.      Which of the following Standards of Professional Conduct includes the ethical responsibility to not knowingly make any misrepresentations regarding investment analysis, recommendations, actions, or other professional activities?

A.    Professionalism

B.     Duties to Clients

C.     Duties to Employers

ANS: A

  EXP: Professionalism is Standards of Professional Conduct.

 

 

5.      If a member of the CFA Institute were to engage in a practice that distorted prices and artificially inflated trading volume with the intent to mislead market participants, which of the following Standards of Professional Conduct would be violated?

A.    Conflicts of Interest

B.     Professionalism

C.     Duties to Clients

 

ANS: D

  EXP: Integrity of Capital Markets would be violated if a member of the CFA Institute were to engage in a practice that distorted prices.

 

6.      Who should the ethical CFA Institute member work hardest to benefit, according to the Standards of Professional Conduct?

A.    The member and his/her family

B.     The client

C.     The employer

ANS: B

  EXP: A client should work hardest to benefit, according to the Standards of Professional Conduct.

 

 

7.      Which of the following should not be considered when determining the suitability of an investment for a particular client?

A.    The client’s entire investment portfolio

B.     The client’s financial situation

C.     The potential financial gain of the employer

 

ANS: C

  EXP: The potential financial gain of the employer should not be considered when determining the suitability of an investment for a particular client.

 

 

8.      Harold Dole is a CFA Institute member acting in an advisory role to a prospective client. Under which circumstances should he disclose information about the client?

A.    The information disclosed could potentially harm another client

B.     The information  concerns illegal activities on the part of the client

C.     The information is believed to be untrue and is therefore not confidential

ANS: B

  EXP: For illegal activities on the part of the client , should be disclosed information.

 

9.      Regarding additional compensation arrangements, when is it appropriate to accept gifts, benefits, compensation, or consideration that competes with a member’s employer?

A.    When written consent is obtained from all parties involved

B.     When it is in the best interest of the member to do so

 

ANS: A

  EXP: When written consent is obtained from all parties involved, it is appropriate to accept gifts, benefits, compensation, or consideration.

 

10.  Members of the CFA Institute should make reasonable efforts to detect and prevent violations of applicable laws, rules, regulations, and the Code and Standards by whom, according to the Standards of Professional Conduct?

A.    Anyone under their supervision

B.     Themselves

C.     Themselves and anyone under their supervision or authority

 

ANS: C

  EXP: Members of the CFA Institute should make reasonable efforts to detect and prevent violations of applicable laws, rules, regulations, and the Code and Standards by Themselves and anyone under their supervision or authority.

 

11.  Bill Hodge’s firm advertises its performance by showing a 10 year composite of its client’s accounts. Hodge discovered that this composite excludes some less than favorable accounts in order to inflate the appearance of the firm’s performance. If Hodge is asked to distribute this information in order to get new clients, what should he do?

A.    Refuse to distribute inaccurate information, as it is a violation of the CFA Institute’s Code and Standards.

B.     Distribute the inaccurate information, because as long as he did not compile the information, it is not a violation of the Code and Standards.

C.     Distribute the inaccurate information, but submit a letter of complaint to the employer.

 

ANS: A

  EXP: He should refuse to distribute inaccurate information, as it is a violation of the CFA Institute’s Code and Standards.

 

12.   Karen James is a US citizen, works for an investment advisor based in the US, and works in a country where investment managers are prohibited from participating in IPOs for their own accounts. What should she do regarding IPOs for her own account?

A.    Participate in IPOs for her own account, as she is a US citizen and must follow the strictest US laws.

B.     Refrain from participating in IPOS for her own account, as she is required to follow the laws where her firm is based, the Code and Standards, as well as the laws in the country where she is doing business.

C.     Participate in IPOs for her own account, as her firm is based in the US and she is obligated to follow the laws of the country where her firm is based, not where she does business.

 

ANS: B

 EXP: She should Refrain from participating in IPOS for her own account, as she is required to follow the laws where her firm is based, the Code and Standards, as well as the laws in the country where she is doing business.

 

 

13.  Michelle Green is an investment analyst. In researching a company that she follows, she has interviewed the company management. Is this an appropriate source?

A.    No. She should be conducting research among their suppliers and customers instead.

B.     No. Information from the company management is bound to be biased.

C.     Yes. As long as this potentially biased information is balanced with information from other sources, including the company’s customers, suppliers, and competitors.

 

ANS: C

  EXP: The appropriate source is As long as this potentially biased information is balanced with information from other sources, including the company’s customers, suppliers, and competitors.

 

 

14.  Greg Marshall, an analyst, is preparing some issuer-paid research. In order to avoid potential conflict and maintain ethical standards, what would his preferred method of payment be?

A.    Flat fee, regardless of conclusions or recommendations.

B.     Variable fee, depending on the conclusions of the research.

C.     Variable fee, depending on the depth of the research to be decided by the issuer.

ANS: A

  EXP: His preferred method of payment are flat fee, regardless of conclusions or recommendations.

 

15.  Ron Prater and Mike Richards, two analysts who work for different employers, have been invited by a company they are both researching to tour some of their factories across the nation. The company has chartered group flights from site to site and arranged for accommodations with a chain of hotels that are near each site for a total of four nights. Ron Prater takes advantage of this offer, while Mike Richards insists on paying for his airfare and hotel, in-keeping with his own firm’s policies. Who is right?

A.    Mike is more ethical in this situation, as he is not taking anything that might compromise his independence or objectivity.

B.     They are both behaving ethically, as they are following their firm’s separate guidelines. As long as they are both careful to remain objective and cautious about the possible perceived compromise of integrity, there is no problem with the actions of either Ron or Mike.

C.     Ron is more ethical, as he is not putting his own comfort ahead of the benefit of his firm.

 

ANS: B

  EXP: Right answer is that they are both behaving ethically, as they are following their firm’s separate guidelines. As long as they are both careful to remain objective and cautious about the possible perceived compromise of integrity, there is no problem with the actions of either Ron or Mike.

 

 

16.  Gary Taylor is an equity analyst with Bronson Brokerage. He has concluded that the stock of Mark’s Markets is overpriced. Given the good relationship between the investment-banking division of Bronson Brokerage and Mark’s Markets, what should he include in his research report?

A.    He should include any and all information relevant, regardless of the positive or negative implications for his firm and for Mark’s Markets. Objectivity is of the utmost importance.

B.     He should include all of the favorable information, but very little of the unfavorable. While objectivity is important, Gary must also think about the benefit to his firm.

C.     He should spin the negative information to sound more positive, but still include it. Objectivity is important, but as long as he is not directly dishonest, he is still behaving ethically.

 

ANS: A

  EXP: He should include any and all information relevant, regardless of the positive or negative implications for his firm and for Mark’s Markets. Objectivity is of the utmost importance.

 

 

17.  Harold Kilmer’s boss instructed him to assume coverage of a stock and maintain a buy rating. If Harold were to do so, would this be ethical?

A.    Only if the stock maintained a buy rating objectively. Harold’s opinion must remain objective and independent.

B.     If Harold’s boss offers him a raise in order to bias his information, this is acceptable.

C.     Because Harold’s boss instructed him to be dishonest in order to maintain the buy rating, Harold can not ethically assume coverage of the stock.

 

ANS: A

  EXP: Ethical is  if the stock maintained a buy rating objectively. Harold’s opinion must remain objective and independent.

 

 

18.  Melanie Jones, a money manager, received a gift of significant value from a client as a reward for her performance in the prior period. Melanie does keep the gift, but notifies her employer. Is this an ethical violation?

A.    No. As long as Melanie notifies her employer, she can receive gifts for any reason.

B.     No. As long as Melanie notifies her employer and the gifts are for the prior period and not contingent on future performance or client benefit, this is not an ethical violation.

C.     Yes. Melanie should not be receiving gifts of significant value from clients.

 

ANS: B

 EXP: No thats not ethical violation ,As long as Melanie notifies her employer and the gifts are for the prior period and not contingent on future performance or client benefit, this is not an ethical violation.

 

 

 

19.  Grant Parker, a money manager, was promised a gift of significant value from a client contingent on the performance of the coming period. Would Grant be committing an ethical violation if he were to accept?

A.    Yes. Grant should not accept gifts from a client, regardless of value or performance.

B.     No. As long as Grant does not tell his employers of the gift and compromise their integrity, this is not an ethical violation.

C.     No. If Grant secures the permission of his employer and does not act to the detriment of his other clients in pursuit of the gift, this is not an ethical violation.

ANS: C

  EXP: No. If Grant secures the permission of his employer and does not act to the detriment of his other clients in pursuit of the gift, this is not an ethical violation.

 

20.  An analyst enters into a contract to write a research report on a company, paid for by the company itself. Which method of payment would be ethical?

A.    N one. An analyst can not ethically take money from a company in exchange for a research report on the same company.

B.     A flat-fee plus a bonus for each new investor the report attracts to the security. It would be unethical for the company to fail to compensate the analyst for the profit based on the report.

C.     A flat fee only. It would be unethical to take compensation such that full compensation depends on the outcome of the report.

 

ANS: C

  EXP: Ethical method of payment is  A flat fee only. It would be unethical to take compensation such that full compensation depends on the outcome of the report.

 

334. Lucy notes that X is uniformly distributed between 2 and 12. How does she calculate the probability that X will be between 4 and 8?

A. (8 + 4) / (12 + 2) = 12/ 14 = 85.7%
B. (8 – 2) / (12 - 2) = 6 / 10 = 60%
C. (8 – 4) / (12 - 2) = 4 / 10 = 40%
ANS: C
EXP: (8 – 4) / (12 - 2) = 4 / 10 = 40% .Thus Lucy calculates the probability that X will be between 4 and 8.


335. Lucy notes that X is uniformly distributed between 2 and 12. How does she calculate the probability that X will be between 6 and 7?

A. (7 + 6) / (12 + 2) = 13/ 14 = 92.8%
B. (7 – 2) / (12 - 2) = 5 / 10 = 50%
C. (7 – 6) / (12 - 2) = 1 / 10 = 10%
ANS: C
EXP: (7 – 6) / (12 - 2) = 1 / 10 = 10% .Thus Lucy calculates the probability that X will be between 6 and 7.


337. Margaret notes that X is uniformly distributed between 1 and 11. How does she calculate the probability that X will be between 2 and 10?

A. (10 + 2) / (11 + 1) = 12/ 12 = 100%
B. (10 – 2) / (11 - 1) = 8 / 10 = 80%
C. (10 – 1) / (11 - 2) = 9 / 9 = 100%
ANS: B
EXP: (10 – 2) / (11 - 1) = 8 / 10 = 80% .Thus Margaret calculates the probability that X will be between 2 and 10.

431. What result indicates a perfect negative correlation between the variables Ri and Rj?

A. Corr(Ri, Rj) = 0
B. Corr(Ri, Rj) = -1.0
C. Corr(Ri, Rj) = 0.5
ANS: B
EXP: Corr(Ri, Rj) = -1.0 indicates a perfect negative correlation between the variables Ri and Rj.


432. What does a perfect positive correlation between the variables Ri and Rj indicate?

A. A movement in one random variable results in a proportional positive movement in the other relative to its mean.
B. A movement in one random variable results in an exact opposite proportional movement in the other relative to its mean.
C. Prediction of Ri cannot be made on the basis of Rj using linear methods.
ANS: A
EXP: A perfect positive correlation between the variables Ri and Rj indicates a movement in one random variable results in a proportional positive movement in the other relative to its mean.


76. Josh’s drives to work every morning along a busy highway. He has a big meeting with his boss first thing in the morning and doesn’t want to be late. If there is a 25% chance that Josh will sleep through his alarm clock, a 40% chance that Josh will get stuck in traffic during his drive, and a 10% chance that both events will occur, what is the probability that Josh will be late?
A. 75%
B. 65%
C. 55%
Ans: C
Exp: Use the addition rule that one or more of the events will occur. P(A) = P(A) +P(B)-P(AB)


77. Suzanne is researching a cure for a tropical disease and has been struggling to keep her samples uncontaminated. There is a 10% chance that she will forgot to wash her test tube and cross-contaminate the sample, a 18% chance that bacteria will leech into her work, and a 33% chance that her assistant will trip and shatter the sample on the floor. What is the probability that Suzanne’s work will not become contaminated?
A. 61%
B. 39%
C. 55%

Ans: B
Exp: Use the addition rule that one or more of the events will occur, then subject this from the total probability. P(NOT A) = 1 – [P(A) +P(B)-P(AB)]


78. Isabella’s birthday is coming up and she really wants a kitten for her present. She knows that she has a 50% chance of convincing her dad to buy her a pet, and a 35% chance of convincing her mom to let her buy a pet. What are the chances that she can get them both to agree to a kitten?
A. 85%
B. 17.5%
C. 15%
Ans: B
Exp: Use the joint probability rule that both events will occur. P(A/B) = P(AB) / P(B)


79. The unconditional probability of an event can be calculated using the formula P(A) = P(A/S) x P(S) + P(A/SC) x P(SC). This equation calculates the likelihood that 3 or more situations are ___________.
A. Random
B. Dependent
C. Conditional
D. Exclusive
Ans: D
Exp: Unconditional probability calculates the possibility of deals with 3 or more exclusive events


80. An expected value is the sum of all possible values for a random variable x by occurrence probability. The formula used to compute the expected value is ___________.
A. E(X) = ∑ xj P(x=xj)
B. E(X) = ∑ x P(x=xj)
C. E(X) = ∑ x/j P(x=xj)
Ans: A
Exp: Expected value is computed using the formula E(X) = ∑ xj P(x=xj)


81. Albert is conducting a survey that evaluates individuals’ favorite weekend hobbies. Some of the participants stated enjoy going camping in the mountains. Reading was also a popular choice. Albert wants to evaluate the relationship between liking camping and reading. To do this, he needs to calculate ____________.
A. The exclusivity of the two events
B. The dependence of the two events
C. The covariance of the two events
Ans: C
Exp: Covariance measure the relationship between 2 or more events

82. Covariance is a measure of how much two variables chance in relation to each other. The stronger the relationship between the variable, the greater their covariance. To measure covariance, you would use which of the following equations?
A. Cov(x,y) = E((x-µ)(y-v))
B. Cov(x,y) = E((x+µ)(y-v))
C. Cov(x,y) = E((x-µ)(y+v))
Ans: A
Exp: The formula for covariance is Cov(x,y) = E((x-µ)(y-v))


83. A permutation is all of the possible orders or combinations of a series of objects. Which of the following variables are necessary to compute a permutation problem?
A. Number of elements available for selection
B. Number of elements to be selected and order of the elements
C. Number of elements available for selection and the order of the elements
D. Number of the elements available for selection and the number of elements to be selected
Ans: D
Exp: Permutation use the formula P(n,r) = n! / [r!(n-r)!] where n = number of elements and r = elements available to be selected