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CFA Institute Exam CFA-Level-I Topic 1 Question 8 Discussion

Actual exam question for CFA Institute's CFA-Level-I exam

Question #: 8
Topic #: 1

[All CFA-Level-I Questions]

Ted McGovern works in the economics branch of a government bank regulator. When he arrives at work this morning and checks his voicemail, he has a message from the Regional Director asking him to calculate the expected rate of return for a stock market series. More detailed information will be forthcoming in an e-mail. Fortunately, McGovern still has his CFA Program study guides in his office and finds the correct formulas. McGovern logs on to the computer network and downloads an attachment that contains the following estimates:

Overall Assumptions:

Index Estimates â€“ Bull Market:

Index Estimates â€“ Bear Market:

The expected return on the index is closest to:

A67.4%.

B39.4%.

C30.8%.

D98.2%.

Show Suggested Answer

Suggested Answer: C

by Lajuana at Sep 19, 2024, 05:00 PM

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Glory

2 months ago

I'm feeling a bit bearish on this one. 30.8% sounds about right to me. Time to break out the CFA study guides, just like good ol' Ted.

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Nieves

1 months ago

I'm leaning towards 67.4%, but I'll double-check the calculations.

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Viola

1 months ago

I think it's closer to 39.4%, but I could be wrong.

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Ramonita

2 months ago

I agree, 30.8% seems like a reasonable estimate.

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Carey

2 months ago

Whoa, 98.2%? That's more like a bull market on steroids! I'm going with the more realistic answer, B.

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Antonio

1 months ago

Let's go with B then. It seems like the safer bet.

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Leah

1 months ago

Yeah, I also think B is the better choice. 98.2% does sound too good to be true.

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Dahlia

2 months ago

I agree, 98.2% seems too high. I think B, 39.4%, is more realistic.

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Margarett

2 months ago

I see your point, but I still think A) 67.4% makes more sense based on the estimates provided.

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Halina

2 months ago

I disagree, I believe the correct answer is C) 30.8%.

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Marylin

2 months ago

Hmm, let's see. The expected return on the index is closest to 39.4%. Gotta love those bear market estimates, am I right?

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Elza

1 months ago

C) Definitely, those bear market estimates can be tough to swallow.

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Rebbecca

1 months ago

B) Yeah, I agree. 39.4% sounds more realistic.

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Carman

2 months ago

A) 67.4% seems too high for a bear market.

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Margarett

3 months ago

I think the answer is A) 67.4%.

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