CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

Which statement is true?

I. Companies try to get funding for their projects as all of them are worth funding.
II. In financial markets, investors determine which projects obtain capital and which projects don't.
A. I only
B. II only
C. Neither is true
Explanation: I is false. Not all of these projects are worth funding. The financial system makes sure that only the best projects obtain scarce capital funds.

II is true. Investors determine capital allocation directly by choosing which securities they will invest in. They will buy those equities that they believe have the best prospects relative to their prices and risks.

User Contributed Comments 3

User Comment
pulkitm Investors dont determine.. its the financial intermediaries like banks, portfolio managers, etc who determine.
Noblebao the word project there is a trap. projects are not directly linked with savers but rather investors. i think the mention of risk here is a determinant
ecapocas This’ll question is a cheap shot. It depends on whether you think the comma means financial markets are the entire context or not.
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