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CFA Level I Equity & Fixed Income Investments Calculation Practice with Answers

Practice 50 CFA Level I Equity & Fixed Income Investments calculation questions with answers and detailed explanations. Work through CFA-style problems, review step-by-step solutions, and strengthen your understanding of equity valuation, bond pricing, yields, returns, and other essential investment calculations.

Question 1
Joseph, an investment analyst, has gathered the following data for Alpha Corporation:
Expected earnings per share $4.80
Expected dividends per share $1.90
Expected dividend growth rate 3.4% per year
If the required rate of return is 7.5%, the price/earnings multiple is:
Question 2
Monica purchased a share of Beta stock for $90.00 and sold it for $95.50. If the total return was 7.50%, the dividend paid during the holding period was:
Question 3
Jason believes the share price of Gamma stock will decrease in the short term. He has decided to sell short 500 shares at the current market price of $89. If the initial margin requirement is 35%, the amount that Jason must contribute as margin is:
Question 4
A bond with a $1,000 face value has a current yield of 4.25%. If the bond pays a 4% semiannual coupon payment, the market price of the bond is:
Question 5
Zeta Corporation provides the following information for the fiscal year (in millions):
Net income $1.5
Total sales $4.0
Beginning of year total assets $17.4
Beginning of year total liabilities $12.4
Zeta Corporation’s return on equity (ROE) is:
Question 6
Delta Investment Company has set the minimum margin requirement at 60%. The maximum leverage ratio associated with a position financed by the minimum margin requirement is:
Question 7
Nicole sold short 25 shares of Epsilon stock at a price of $98.50 per share. She also simultaneously placed a “good-till-cancelled, stop 102, limit 107 buy” order. Excluding transaction costs, Nicole’s maximum possible loss is:
Question 8
The maximum leverage ratio is 1.54 for a position financed by the minimum margin requirement. The minimum margin requirement is:
Question 9
Martin purchases an annual coupon bond with a 4.5% coupon rate. If Martin’s investment horizon is five years, and the approximate modified duration of the bond is 6.685 years. The duration gap at the time of purchase is:
Question 10
Charles purchased a share of Theta stock for $184 and sold it for $173. If a $4.25 dividend was paid during the holding period, the total return is:
Question 11
The following information relates to questions 11 – 12.
An analyst provides the following information for an index comprised of four securities:
| | Beginning of period | | End of period | |
| — | — | — | — | — |
| **Security** | **Price ($)** | **Shares** | **Price ($)** | **Shares** |
| Security A | $18.00 | 200 | $20.00 | 200 |
| Security B | $26.00 | 400 | $24.00 | 400 |
| Security C | $33.00 | 500 | $39.00 | 500 |
| Security D | $38.00 | 500 | $42.00 | 500 |
If the securities are part of a price-weighted index, the price return is:
Question 12
If the securities are part of a value-weighted index, the return is:
Question 13
Karen purchased an annual coupon bond that has a duration gap of 2.435 and pays a 2.5% coupon rate. If her time horizon is seven years, the Macaulay duration of the bond is:
Question 14
Kappa Corporation has an issue of 2.90%, $50 par value, perpetual, non-convertible, non-callable preferred shares outstanding. If the intrinsic value of a preferred share is $11.75, the required rate of return is:
Question 15
Anthony purchased 50 shares of non-dividend paying stock on margin at a price of $35 per share. The leverage ratio is 1.8. Four months later, he sold the shares for $40 per share. Ignoring transaction costs and the interest paid on the borrowed amount, the return during the four-month period is:
Question 16
Sigma stock is currently selling at $44 per share, and Thomas has $8,000 to invest in the stock. However, he can borrow an additional $8,000 from his broker, and invest $16,000 total. If the maintenance margin is 35%, a margin call will first occur when Sigma stock reaches a price of:
Question 17
Mary purchased a 5-year bond that pays a 3.5% semiannual coupon payment. The bond is priced at $97 per $100 of par value. The bond’s current yield is:
Question 18
If Lambda Corporation has a net profit margin of 12%, an asset turnover ratio of 3.1, and a financial leverage factor of 1.3, the return on equity (ROE) is:
Question 19
Omikron Corporation has an issue of 5.3%, $50 par value, perpetual, non-convertible, non-callable preferred shares outstanding. If the required rate of return is 6.25%, the intrinsic value of a preferred share is:
Question 20
The following information relates to questions 20 – 21.
An analyst provides the following information for Omega Corporation:
| | 2015 | 2016 | 2017 |
| — | — | — | — |
| **Net Income** | $500,000 | $550,000 | $700,000 |
| **Average total book value of equity** | $1.2 million | $1.3 million | $1.4 million |
Based on the information provided, the return on equity (ROE) for 2016 is:
Question 21
Based on the information provided, the return on equity (ROE) for 2017 is:
Question 22
Assuming semiannual compounding, the current price of a zero-coupon bond with a $1,000 face value, a yield-to-maturity of 8.46%, and 5 years until maturity is:
Question 23
An investment analyst provides the following information for Alpha stock:
Number of shares outstanding 500,000
Expected constant dividend $3.75 per share
Dividend growth rate (annual) 0%
If an investor’s required rate of return is 8.5%, Alpha stock’s current share price is:
Question 24
A fixed income offering has an initial principal amount of $990 and a redemption amount due at maturity of $1,000. There are 88 days between settlement and maturity. Assuming a 365-day year, the bond equivalent yield is:
Question 25
The following information relates to questions 25 – 26.
An analyst provides the following information for an index comprised of four securities:
| **Security** | **Beginning of Period Price ($)** | **End of Period Price ($)** |
| — | — | — |
| Security A | $38.00 | $46.00 |
| Security B | $29.00 | $33.00 |
| Security C | $50.00 | $53.00 |
| Security D | $80.00 | $86.00 |
If the securities are part of an equal-weighted index, the return of the index is:
Question 26
If the securities are part of a price-weighted index, the price return of the index is:
Question 27
For the next three years, the annual dividends of Zeta stock are expected to be $1.50, $1.60, and $1.70. The stock price is expected to be $14.00 at the end of three years. If the required rate of return is 8%, the estimated price per share is:
Question 28
Beta Inc. provides the following information for the fiscal year:
Net income $660,000
Number of shares outstanding 40,000
Price per share $19.50
Total assets $3,250,000
Total liabilities $2,980,000
Beta Inc.’s book value is:
Question 29
An investment analyst provides the following information for Epsilon stock:
Number of shares outstanding ——-‘1,200,000
Expected next dividend $3 per share
Dividend growth rate (annual) 4%
If an investor’s required rate of return is 12%, then Epsilon stock’s current share price is:
Question 30
Gamma Inc. provides the following information for the fiscal year:
Gross income $2,300,000
Net income $950,000
Number of shares outstanding 250,000
Price per share $9.10
Average total book value of equity $3,260,000
Total liabilities $2,980,000
Gamma Inc.’s return on equity (ROE) is:
Question 31
A bond has a market price of $910 and a face value of $1,000. The bond pays an 11% semiannual coupon payment and matures in 6 years. The bond’s yield-to-maturity is:
Question 32
Delta Inc. has issued a floating-rate note with a coupon rate equal to the three-month Libor + 40 basis points. Interest payments are made at the end of March, June, Septem- ber, and December. At the end of June and the end of September, the three-month Libor is 2.1% and 2.2%, respectively. The coupon rate for the interest payment made at the end of September is:
Question 33
The following information relates to questions 33 – 34.
Theta Inc. provides the following information at their annual shareholder meeting:
Net sales $425,000
Average total assets $200,000
Average shareholders’ equity $180,000
Effective tax rate 35%
Based on the information provided, Theta Inc.’s asset turnover is:
Question 34
Based on the information provided, Theta Inc.’s financial leverage factor is:
Question 35
If comparable bonds are yielding 12.6%, then the current price of a $1,000 face value bond that pays a 10% semiannual coupon payment and matures in 8 years is:
Question 36
An investment analyst provides the following information about Kappa Inc.:
Number of shares outstanding 800,000
Earnings retention rate 35%
Dividend growth rate 4.5%
Effective Tax Rate 30%
Kappa Inc.’s return on equity (ROE) is:
Question 37
If an inverse floater’s coupon rate will decrease by 125 bps when the reference rate
increases by 100 bps, the coupon leverage is:
Question 38
The following information relates to questions 38 – 39.
Lambda Inc. has an outstanding loan of $250,000. The scheduled principal and interest payments are $800 and $12,000, respectively. The actual payment made by Lambda Inc. during the first month is $35,000.
Based on the information provided, the single monthly mortality rate (SMM) is:
Question 39
Based on the information provided, the conditional prepayment rate (CPR) is:
Question 40
Deborah purchased a bond with a face value of $1,000 and a coupon rate of 4.5%. Her effective tax rate is 25%. If the risk-free rate is 4%, and coupon payments are made semiannually, the periodic interest payment is:
Question 41
If comparable bonds are yielding 9.8%, the intrinsic value of a bond with a $1,000 face value, an 8% semiannual coupon, and 4 years until maturity is:
Question 42
The following information relates to questions 42 – 44.
Omikron Inc. provides the following information at their annual shareholder meeting:
Shares outstanding 910,000
Market price per share $32.12
Total shareholders’ equity $14,614,600
Effective tax rate 30%
Based on the information provided, Omikron Inc.’s market value of equity is:
Question 43
Based on the information provided, Omikron Inc.’s book value of equity per share is:
Question 44
Based on the information provided, Omikron Inc.’s price-to-book ratio is:
Question 45
Sigma Inc. has an effective tax rate of 25%, a dividend payout ratio of 60%, and an asset
turnover of 1.8. The company’s earnings retention rate is:
Question 46
The following information relates to questions 46 – 48.
A convertible bond is issued with a par value of $10,000. The bond is currently priced at $9,500, and the underlying share price is $200.
The conversion ratio of the bond is:
Question 47
The conversion value of the bond is:
Question 48
The conversion condition for the bond is:
Question 49
The IRR ofa bond with a current price of $945, a face value of $1,000, an 8% semiannual coupon, and 2 years until maturity is:
Question 50
Assuming semiannual compounding, the IRR of a zero-coupon bond with a $1,000 face value, a current market price of $810, and 4 years until maturity is: