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EduPristine>Blog>General #CFA Questions and Answers

General #CFA Questions and Answers

October 21, 2013

 

Hey everyone! This blog deals with general questions on #CFA. There are questions with the answers right here!

To all potential CF Analysts – it is like a treat for you! This will aid your preparation and will also help you gauge what your level of preparation is. That in turn will enable you to judge how much more time and effort you need to put into your exam prep! These answers have aided my preparation enormously and I hope it helps you too.

So without further ado, let’s look at some of these questions with their answers!

Question:

Monetary policy is not used to redistribute wealth. But doesn’t QE help borrowers and hurt savers?

Answer:
Fiscal policy affects aggregate demand and the distribution of wealth. But it does not always hurt borrowers and help savers.
It is the situation of contractionary monetary policy where the interest rates are high to reduce the borrowings and increase the savings to reduce the impact of high inflation.
But if the monetary policy is expansionary in Ills situation interest rates are low and people induce to take more borrowings.

 

Do these answers shed light upon some doubts that you might have? Read more and be enlightened!

 

Question:

Hello everyone. I have finished most of the Schweser notes. I have read all the summaries, and done a practise test of the concept checker quizzes, in addition to many Bank quizzes. I am on my second practice test, and I have found cornarig information regarding the riskiness of asset classes
One area of the book says this is the order (riskiest to least risky) small cap stocks, large cap stocks, long term corporate bonds long term government bonds TBils Another area has this for the order, swapping long term corporate bonds and long term govt bonds small cap stocks large cap stocks, long term govt bonds long term corporate bonds. TBills Could someone please clarify?

Answer:
If the country risk and special specification is not given Then surely the answer is Long term corporate bond is more nskier than long term government bond

 

Like what you are reading? Keep going!

 

Question:

Totally confused at the moment.
Interest and taxes paid have been deducted from net income, they are then added back when calculating CFO, why are they then added back again in the int coverage ratio??

Answer:
You can only make adjustments for the actual cash in or out And here My adjustments in interest expense need to be asjusted in calulation of CFO.
otherwise Interest and taxes are cash iternflepriciation and amortization are examples of non- cash items.

 

Question:

Why is treasury stock subtracted from stockholders equity?
Thanks!

Answer:: It’s stock that the company has bought back, reducing the (effective) number of shares outstanding.
11tink of it this way –
• Common Stock, $100 par, 1,000.000 million shares authorized, 500,000 shares outstanding means that the company owes capital back to, say, 5,000 people (at 100 shares apiece) • Treasury Stock. 200.000 shares means ‘Ha ha! No we don’t! We only owe capital back to 3,000 people (at 100 shares apiece)! Made ya look!’

 

Question:

So, if in a question I have it that goes something Ike ‘Xyz has 5000 outstanding and Treasury stock =2000’ Does that mean outstanding are equal to 3k only/

Answer:
No. It means total no of shares is 7000 In which 5000 is outstanding and 2000 may have come from a repurchase or buyback from shareholders or it may have never been issued to the public in the first place

 

So, if anyone has any further doubts, you can post your questions on the EduPristine forum!

To read more such posts, just follow the link!

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