## CFA Sample Practice Questions | Level 3| Answers and Explanations

### CFA Sample Practice Questions | Level 3| Answers and Explanations

1. Which of the following is an assumption of the Black-Scholes option pricing model?

2. Which of the following is true about the efficient frontier?

3. An analyst estimates that a company's expected earnings per share (EPS) for the next year will be $5. The current price-earnings (P/E) multiple of the company's stock is 20. What is the current price of the stock?

4. What is the duration of a bond with a 5% coupon rate, 2 years to maturity, and a yield to maturity of 6%?

5. An investor purchases a stock for $30 and sells it one year later for $33. During the year, the stock paid a dividend of $1. What is the investor's total return?

6. A company has an inventory turnover of 5 and an average inventory of $1 million. What is the cost of goods sold?

7. Which of the following is a disadvantage of using passive investment strategies?

8. A bond with a duration of 7 years has a yield to maturity of 5%. If the yield to maturity increases to 6%, what is the approximate percentage change in the bond's price?

9. A company has a dividend payout ratio of 60% and a return on equity of 15%. If the company's cost of equity is 10%, what is the company's sustainable growth rate?

10. Which of the following statements about the dividend discount model is true?