Henry Giuliani, CFA charterholder, publishes a monthly investment newsletter. In an article on the energy sector he writes 'The energy sector is headed for a downturn. You should believe this, I am a CFA charterholder, and that implies superior ability to predict the market'. Giuliani has most likely violated the
Standards for:

• A.Responsibilities of a CFA Institute Member.
• B.Communications with Clients and Prospective Clients.
• C.Diligence and Reasonable Basis.

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Which of the following statements is (are) true with respect to the impact the choice between expensing and capitalizing will have on certain financial ratios?
I). Profit margins will be higher throughout the period for firms that capitalize certain expenditures as opposed to expensing them.
II). Reported income tends to be more stabilized throughout the period if the capitalization method is used.
III). Asset turnover ratios will be lower for firms that capitalize certain expenditures as opposed to expensing them.
IV). Debt-to-equity ratios will be lower for companies that expense costs as opposed to capitalizing them.

• A.I and II.
• B.III and IV.
• C.II and III.

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To estimate the average weight of the red-crowned woodpecker to within 2 grams at a 95% confidence level, researchers must randomly sample how many red-crowned woodpeckers? [The population can be assumed normal with a standard deviation of 13 grams.]

• A.282
• B.70
• C.163

Correct Answer: C

We work with formula for E, solving it for n, the sample size. First, a 95% level of confidence, we need z(0.025). Going to the normal table we get z(0.025) = 1.96. Now, working with the E formula we get n = 162.3076. So, the sample size needed is n = 163 (if there is a decimal part, we always go to the next whole number).

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All else equal, which one of the following actions is most apt to increase the cash balance of a firm?

• A.increasing the accounts payable turnover.
• B.increasing the accounts receivable period.
• C.reducing the cash cycle.

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What is the yield to first par call of a 20-year, 8.5% bond with a market price of $104.95, if the first par call date is in 15 years?

• A.7.93%
• B.8.20%
• C.8.50%

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