1. Which of the following statements is most likely to be correct about derivatives? A. A derivative is a financial instrument that derives its value based on the performance of the underlying. B. Derivatives are standardized financial instruments and cannot be customized. C. The performance of a derivative is derived by replicating the performance of… Read More

1. Expected loss is best calculated as: A. the product of loss severity and default probability. B. the sum of loss severity and default probability. C. the product of recovery rate and default probability.   2. A subordinated bondholder recovered some value in a bankruptcy without a senior creditor getting paid in full. The most… Read More

1. Which of the following statements is least accurate? A. Investors prefer to invest in putable common shares rather than callable common shares. B. The issuing company is obligated to buy callable common shares at a predetermined price. C. Putable common shares facilitate raising capital because of their appeal to investors over callable common shares.… Read More

1. Tim observed that company XYZ’s share price reacts gradually to the public release of its annual report. With respect to efficient markets, which of the following most likely indicates the market where company XYZ trades? A. The market is weak-form efficient. B. The market is strong-form efficient. C. The market is waiting for new… Read More

1. The “Doctrine of No Surprises” states that: A. risk managers are expected to predict risks. B. the effect of the outcome of a predictable or an unpredictable event would not surprise the risk manager and the effect would have been quantified and considered in advance. C. the effect of the outcome of a predictable… Read More

  Dear Level I Students, Welcome to the first post of my new CFA Question & Answers blog. I sincerely hope that you find the material here useful. With the exam date approaching fast, one of the biggest issues facing Level I candidates is retention. “I’m learning new material but forgetting what I did two… Read More