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  1. Home
  2. CFA Certification
  3. CFA-Level-I Exam
  4. CFA.CFA-Level-I.v2022-03-26.q499 Dumps
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Question 71

Automatic stabilizers in the economy smooth business cycles by:

Correct Answer: A
During recessions, unemployment insurance and other transfer payments increase, and thus consumption does not fall by as much. During period when income is high (and thus there are possibly inflation concerns), more taxes are collected because taxes are proportional to income. Thus consumption does not increase as much and does not put as much inflationary pressure on the economy.
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Question 72

On May 1, 1997 Bluefish Co. bought 100 bonds (face value $1,000 and stated interest 10%) of
Hawkeye Inc., interest payable semiannually on July 1, and January 1. The bond price was 920 excluding accrued interest. Due to short-term nature of the investment Bluefish put this in marketable debt securities section of its current assets. At the end of 1997 the interest revenue from this investment on income statement should be:

Correct Answer: C
100 x $1,000 x 0.1 x 8/12 = $6,667.
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Question 73

Economic analysis suggests that patent laws, which can often be used to limit the entry of potential competitors into an industry,

Correct Answer: A
Patents provide inventors with an incentive to conduct research and development in the pursuit of new products and innovations. The incentive is that if the inventor creates a desirable product, he or she will have a monopoly in its production for 17 years.
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Question 74

A portfolio with 10 stocks has a weighted average return of 5.5% and a variance of 25. What is the
8 5% confidence interval for the weighted average?

Correct Answer: C
The variance is 25, which corresponds to a standard deviation of 5%. The 85% confidence interval is given by: X-bar +- 1.44s = 5.5 +- 1.44 x 5.
2
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Question 75

Which type of demand for money will tend to fall as the perceived risk in other financial assets falls?

Correct Answer: C
Speculative balances will tend to be directly related to the perceived risk of other financial assets.
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