CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

Which of the following is (are) NOT true?

I. The Herfindahl index is always smaller than or equal to 1.
II. The N firm concentration ratio is always smaller than or equal to one.
III. The reciprocal of the Herfindahl index indicates the equivalent number of firms in the industry.
IV. If the Herfindahl index of industry A is larger than that of industry B, A's concentration ratio must be larger than B's.
V. If the concentration ratio of industry A is larger than that of industry B, A's Herfindahl index must be larger than B's.
Correct Answer: IV and V

There is no direct relationship between the two ratios.

User Contributed Comments 8

User Comment
Bududeen very tricky
JepTang Yep!! i was choosing between the 2 also.
jpducros good question
frants54 Sometimes you learn more from the questions than from the study material itself
robbiecow Second frants54 on that one!
chesschh If you get this right, cosider yourself a genious
tkluge24 I think III could be viewed as being incorrect as well...it would need to specify that all firms have equivalent market share?? no??
chen511 III I think it's the original sentence in the material.
You need to log in first to add your comment.