CFA Domain 7: Equity Investments (Quiz 1) Welcome to your CFA Practice Quizzes. Note: We designed Two (2) parts of practice quizzes for this Domain. Each part has 20 questions. CFA Domain 7: Equity Investments. (Quiz 1) Please click NEXT to start your Free CFA Practice Quizzes right away. Best of Luck! 1. Active management is most likely to outperform passive management on a risk-adjusted basis when markets are: informationally and operationally efficient. informationally efficient and operationally inefficient. informationally inefficient and operationally efficient. None 2. A trader has BRL 20,000 and wants to buy on margin to obtain a large stock position. If the local brokerage firm has an initial margin requirement of 0.25, then the maximum total value of stocks that can be purchased is closest to: BRL 26,667 BRL 60,000 BRL 80,000 None 3. "A limit order book contains the following information for a stock: The market bid-ask quote is most likely:" 15.20 bid, 15.27 ask 15.20 bid, 15.33 ask 15.25 bid, 15.27 ask None 4. Once a security market index has been established, rebalancing is most likely a concern for a(n): price-weighted index. equal-weighted index. market-cap-weighted index. None 5. An investor uses ¥90,000 equity to purchase 100 shares of a stock at a leverage ratio of 2.5. If the maintenance margin is 25%, then the trigger price for a margin call (in ¥) is closest to: 800 1,688 1,800 None 6. "An analyst has gathered the following information about a market-capitalization-weighted index: The price return of the index is closest to:" 33% 35% 55% None 7. Voting rights attached to sponsored depository receipts most likely belong to: the depository bank. the investor of the depository receipts. the company that the depository receipts were issued for. None 8. An industry that is in the mature life-cycle stage most likely exhibits: low barriers to entry. interdependence among companies. growth rates significantly higher than GDP growth. None 9. An individual regularly deposits base salary earnings into a savings account but invests all bonuses in a passive, broad market index fund. The individual views the base salary as a safety net to support current consumption while wanting to capture the market return with bonuses. Based on this information, the behavioral bias best exhibited by the individual's behavior is: loss aversion. conservatism. mental accounting. None 10. Which of the following best describes an aggregate fixed-income index? The index includes: all bonds outstanding regardless of type, maturity, or credit quality. only exchange-traded bonds regardless of type, maturity, or credit quality. a representative sample of bonds regardless of type, maturity, or credit quality. None 11. Which of the following statements best describes a feature of callable common shares? Callable common shares give: investors the right to purchase shares of common stock. issuers the right to buy back shares of common stock from investors. investors the right to sell shares of common stock back to the issuer. None 12. An industry is characterized by excess capacity, frequent price wars, and technological substitutions. This industry is most likely in which of the following life-cycle stages? Mature Decline Shakeout None 13. A high-growth stock soars 300% over a two-year period. After conducting due diligence, an investor buys the stock, which subsequently underperforms the market by 40% over a short period of time. The investor believes the market is pricing the stock irrationally and continues to hold it. Based on the information provided, which of the following biases is best exemplified by the investor's behavior? Risk aversion Overconfidence Mental accounting None 14. When considering multiplier models for evaluating public companies, which of the following factors is most likely an advantage of using the enterprise value/EBITDA ratio, compared to using the P/E ratio? Ability to find appropriate comparable companies Comparing companies with different capital structures Ease of obtaining an accurate value for the multiple's numerator None 15. An investor buys 5,000 shares of a stock for $25 per share, on 40% margin. If the maintenance margin requirement is 20%, then the investor will receive a margin call at a price closest to: $18.75 $20.00 $25.00 None 16. "An analyst gathers the following information about the stock of a company and its industry: The company's justified forward price-to-earnings (P/E) ratio is the same as the industry average. The company's dividend payout ratio is closest to:" 40% 60% 80% None 17. A company that primarily produces toothpaste is most likely classified in which of the following sectors? Health care Consumer staple Consumer discretionary None 18. "An analyst has gathered the following information about a company: Using the two-stage dividend discount model, the terminal value of the high-growth stage is closest to:" €35.29 €36.35 €38.47 None 19. The two-stage dividend discount model is most appropriate for a company expecting: high growth for a specified number of years, then higher growth. constant growth for a specified number of years, then high growth. high growth for a specified number of years, then lower, long-term growth. None 20. Which of the following best describes a characteristic of preference shares? They cannot be callable or putable. Their regular dividends are fixed at issuance. They legally obligate the issuer to make regular dividend payments. None 1 out of 20 Time is Up! Time's up
