SECTION ONE (Compulsory)：Answer all ten questions in this section. Each question carries 1 mark.
　　1. Multiple-choice questions: from the following four options, select a correct and fill in its labeling the brackets. (A total of 10 points)
　　1. Chu Wang, CFA, gathered the following data to estimate the implied growth rate of dividends for Shenghai Toys Co. to use as an input for valuing the company’s common stock.
　　Return on Assets 10%
　　Profit Margin 5%
　　Total Assists CNY 50 million
　　Debt Ration 40%
　　Payout Ration 25%
　　Wang’s estimate of Shenghai Toys’ implied growth rate would be closest to: ()
　　A. 4.17%.
　　B. 6.25%.
　　C. 12.50%.
　　D. 18.75%.
　　2. If market interest rates rise, the price of a callable bond, compared to an otherwise identical option-free bond, will most likely: ()
　　A. Increase by less than the option-free bond.
　　B. Decrease by less than the option-free bond.
　　C. Decrease by more than the option-free bond.
　　D. Decrease by the same amount as the option-free bond.
　　3. Strongsville Fabricators Inc. uses the FIFO method of inventory valuation. Assuming a rising costs environment and other factors held constant, Strongsville’s price-to-earnings and price-to-book multiples relative to those for another company that uses the LIFO method of inventory valuation would be: ()

　　A. Answer A.
　　B. Answer B.
　　C. Answer C.
　　D. Answer D.
　　4. Economic growth is measured by a positive change in which of the following? ()
　　A. The money supply.
　　B. The Producer Price Index.
　　C. The Gross Domestic Product.
　　D. The balance of payments.
　　5. Five years ago, the DCA Corporation issued 20-year bonds with a coupon rate of 12%. If the investors’ required rate of return (IRR) on these bonds is currently 9%, the bonds will be priced: ()
　　A. Below par.
　　B. Above par.
　　C. Above and below par.
　　D. At par.
　　E. As perpetuity.
　　 6. Which of the following is NOT true? ()
　　 A. If interest rates rise, it is good for bondholders.
　　B. The Fed just cut interest rates
　　C. For a straight bond, the coupon rate goes up as interest rates drop.
　　D. Inflation leads to lower bond prices.
　　E. The more compounding periods, the higher the amount of interest you must pay if you are the issuer of a bond.
　　7. Karen, CFA, is the investment manager of a corporate pension plan. Under ERISA, she owes her fiduciary duty to: ()
　　A. The plan sponsor.
　　B. The firm’s shareholders.
　　C. The plan participants and beneficiaries.
　　D. None of the above.
　　8. Which of the following statements concerning the AIMR Performance Presentation Standards about the calculation of composite returns is true? ()
　　A. Asset weighting within composites is not required using beginning of period weights.
　　B. Portfolios no longer under management should be included in historical composites.
　　C. Model results may be presented if they conform to the portfolio’s investment strategy and objectives.
　　D. All of the above.
　　9. When calculating the risk premium for equity market using historical returns, which of the following is most accurate? ()
　　A. Geometric mean returns should be used because they are more applicable to multi-period time horizons.
　　B. Geometric mean returns should be used because they are more applicable to single time horizons.
　　C. Arithmetic mean returns should be used because they are more applicable to single time horizons.
　　10. Vivian, CFA, a research analyst assigned to Double Limited, has been recommending the stock’s purchase in her quarterly report. Vivian has recently married and just discovered her husband’s trust account owns several million dollars worth of Double Limited. The stock makes up more than 50 percent of the trust’s value but less than 5 percent of Double Limited’s outstanding shares. According to AIMR Standards of Professional Conduct, Vivian should: ()
　　A. Take no action because the stock is not in her name.
　　B. Disclose her interest in the stock at the time of her next report.
　　C. Cease including Double Limited stock in her report.
　　D. Take no action because the holding is less than 5 percent of the outstanding shares.

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