_cfa_level_1__mock_exam_1_(pm)_answer

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1、Question 1 James Cox, CFA, is employed by a London investment banking firm. Firm policy states that employees must pay for their own meals and entertainment if they go out socially with vendors or prospective vendors of the company. Thomas Wheelwright, a representative of a major securities informat

2、ion service, invites Cox out for a dinner. Wheelwright insists on paying for the evening. If Cox allows Wheelwright to pay for the dinner, Cox has violated: A)company policy but not the Code and Standards. B)both company policy and the Code and Standards. C)company policy but not the Code and Standa

3、rds as long as the firm receives full disclosure of Coxs potential conflict of interest. D)neither company policy nor the Code and Standards because the social engagement was not directly related to company business. The correct answer was B) both company policy and the Code and Standards. While acc

4、epting a simple dinner is likely not a violation of the Standards, Standard IV(A) Duties to Employers - Loyalty requires that firm policies be followed. Thus Cox would violate both company policy, designed to minimize potential conflicts involving employees and vendors, and the Standards. This quest

5、ion tested from Session 1, Reading 2-I, LOS B. Question 2 Sandra Fellows, CFA, received a telephone call from one of her clients at Boston Financial offering her the free use of the clients vacation home on Cape Cod the following summer. The client stated that the offer was given in appreciation for

6、 their many years of working together. To be in compliance with the Code and Standards, Fellows: A)may accept the offer only if her supervisor is informed and gives consent. B)may accept the offer without disclosure because the benefit is not contingent upon performance. C)must decline the offer. D)

7、may accept the offer but must inform her employer of the gift. The correct answer was D) may accept the offer but must inform her employer of the gift. To comply with Standard I(B) Independence and Objectivity and Standard IV(B) Additional Compensation Arrangements, any benefit or compensation a mem

8、ber receives from a client that is in addition to employer-paid compensation or benefits must be disclosed to the members employer. Since the offer is not contingent on future performance, written permission is not required. (See Example 7 for Standard I(B) in the Standards of Practice Handbook.) Th

9、is question tested from Session 1, Reading 2-IV, LOS B. Question 3 Lunar Investment Management is a subsidiary of a larger company, Galaxy Financial. Lunars CEO, Travis Howry, would like to have Lunar present GIPS-compliant performance data and has taken the steps necessary to ensure that Lunars per

10、formance presentation is compliant. He asks Galaxys President, Don Wiggins, about Galaxys interest in presenting GIPS-compliant performance data. Wiggins informs Howry that Galaxy is not interested. Lunar may: A)not claim compliance because compliance must be made on a company-wide basis. B)claim pa

11、rtial compliance if Lunars performance presentations are in compliance but disclose that Galaxys are not and in what ways. C)claim compliance as long as Lunar is advertised as a distinct business entity, separate from Galaxy. D)not claim compliance unless Galaxys ownership of Lunar is less than 50%.

12、 The correct answer was C) claim compliance as long as Lunar is advertised as a distinct business entity, separate from Galaxy. Lunar can claim compliance as long as it has met the reporting requirements necessary and is held out to clients (advertised) as a distinct business entity. Partial complia

13、nce is not allowed. Ownership percentage is not an issue here. This question tested from Session 1, Reading 4, LOS b Question 4 Sally Fiedler, CFA, is a portfolio manager for Asipre Investments, Inc. In her spare time Fiedler intends to manage the small endowment fund for her childrens private day s

14、chool. She believes it will only take a couple of hours each weekend and she will receive a discount on tuition for her two children. According to Standard IV(B) Additional Compensation Arrangements, Fiedler: A)must inform her employer of the arrangement but need not get permission as the time commi

15、tment is small. B)must inform her employer and get permission, either verbal or written. C)must inform her employer of all the details of this arrangement and receive written permission. D)need not inform her employer because it will be on her own time and there is no actual compensation received. T

16、he correct answer was C) must inform her employer of all the details of this arrangement and receive written permission. Standard IV(B), Additional Compensation Arrangements requires that employees who perform independent practice for compensation (of any type) must inform their employer of all the

17、details, including compensation and the duration of the agreement, and receive written permission from their employer before proceeding. This question tested from Session 1, Reading 2-IV, LOS A. Question 5 Ralph Reed, CFA, is a portfolio manager at Parker Management, a U.S. equities manager. When cl

18、ients inquire about fixed income portfolio management, Reed refers them to Ann Foster, who refers clients seeking U.S. equities management to Reed. For clients with an interest in international equities, Reed refers them to Global Advisors and receives $1,000 for each referral that opens an account

19、with them. Which of the following best describes the action Reed must take regarding clients he refers to Parker or to Global? A)If a referred client opens an account with Parker or with Global, Reed must disclose the arrangement with Parker or amount of the referral fee he receives from Global. B)A

20、t the time he makes a referral to one of these advisors, Reed must disclose the amount of the referral fee from Global, but not the arrangement with Parker. C)At the time he makes the referral, Reed must disclose the arrangement with Parker, the arrangement with Global, and the amount of the referra

21、l fee he receives from Global. D)At the time he makes a referral, Reed must disclose that he will receive a referral fee from Global, but not the amount or the arrangement with Parker. The correct answer was C) At the time he makes the referral, Reed must disclose the arrangement with Parker, the ar

22、rangement with Global, and the amount of the referral fee he receives from Global. Standard VI(C) Referral Fees requires that members who expect to receive anything of value from making a referral disclose that fact and the amount and nature (one-time payment, ongoing fee) of any referral fee so tha

23、t clients can make their own determination of how the referral arrangement may affect the members objectivity. This question tested from Session 1, Reading 2-VI, LOS C. Question 6 Kevin Blank, CFA, is a representative for Campbell Advisors. In a meeting with a prospective client, the client inquires

24、 about investing in bonds denominated in Mexican pesos. Blank assures the client that Campbell can help him with Mexican fixed income investing. In fact, Blank had heard that his colleague, Jon Woller, might have had experience in Mexican bonds. The following day Blank learns that Woller had, in fac

25、t, no such experience. Blank does not correct his earlier statement and the prospective client invests with Campbell. Blank has: A)only violated the Code and Standards when he learned that his statement was incorrect and did not contact the prospect to explain his error. B)violated the Code and Stan

26、dards, both when he misrepresented the qualifications of his firm and later, when he learned the truth and failed to contact the prospective client and correct his earlier statement. C)not violated the Code and Standards because Blank did not intentionally mislead the prospect. D)not violated the Co

27、de and Standards because Blanks statements were verbal and not in writing. The correct answer was B) violated the Code and Standards, both when he misrepresented the qualifications of his firm and later, when he learned the truth and failed to contact the prospective client and correct his earlier s

28、tatement. Standard I(C), prohibits members from making statements, orally or in writing, that misrepresent the services that they or their firms are capable of providing. Even though Blanks statement was not deliberately false, he did not know whether it was true or not, and this made the statement

29、misleading. Once it was evident that the statement was false, Blank had a duty to contact the prospect and correct the misrepresentation, but did not do so. This question tested from Session 1, Reading 2-I, LOS C. Question 7 Joey Balder, CFA, was approached by the management of Flagship Investment M

30、anagers about becoming Flagships Southtown branch supervisor. Balder is reluctant to accept the position because certain compliance procedures have not been adopted in that branch. To comply with the Standards, Balder should most appropriately: A)discuss his concerns with management and tell them he

31、 will not accept the position unless and until he is given authority over compliance procedures. B)accept the position on condition that the procedures be adopted immediately. C)accept the position and use his best efforts to get the procedures implemented as soon as possible. D)decline in writing t

32、o accept the supervisory position until the firm adopts appropriate procedures. The correct answer was D) decline in writing to accept the supervisory position until the firm adopts appropriate procedures. Standard IV(C) Responsibilities of Supervisors requires that if a member cannot discharge comp

33、liance responsibilities because of a poor compliance system, the member should decline in writing to accept supervisory responsibility until the firm adopts an adequate system. This question tested from Session 1, Reading 2-IV, LOS C. Question 8 Which of the following is least likely required of mem

34、bers and candidates by the CFA Institute Code of Ethics? A)Encourage others to practice in a professional manner. B)Disclose to clients and prospects the basic principles of their investment processes. C)Strive to improve the competence of other investment professionals. D)Place client interests abo

35、ve their own. The correct answer was B) Disclose to clients and prospects the basic principles of their investment processes. Disclosing the basic characteristics of their investment processes is a requirement of Standard V(B) Communication with Clients and Prospective Clients. The other choices are

36、 all drawn from the Code of Ethics. This question tested from Session 1, Reading 1, LOS b, (Part 1) Question 9 Abner Flome, CFA, is writing a research report on Paulsen Group, an investment advisory firm. Abners brother-in-law holds shares of Paulsen and Abner has recently interviewed for a position

37、 with Paulsen and expects a second interview. According to the Standards, Abners most appropriate action is to disclose: A)his brother-in-laws holding of Paulsen and the job offer to his supervisor and in the research report if he writes it. B)his brother-in-laws holding of Paulsen to his supervisor

38、 and in the research report if he writes it. C)neither his brother-in-laws holdings nor the job offer to his supervisor or in the report if he writes it. D)the fact that he is being considered for a job at Paulsen to his supervisor and in the research report if he writes it. The correct answer was D

39、) the fact that he is being considered for a job at Paulsen to his supervisor and in the research report if he writes it. The job offer creates a potential conflict of interest and Abner must disclose it. Standard VI(A)Disclosure of Conflicts does not require disclosure of his brother-in-laws owners

40、hip of Paulsen stock. This question tested from Session 1, Reading 2-VI, LOS A. Question 10 James Copley, a pension fund manager and a CFA charterholder, has an agreement with a brokerage firm to give him lower transactions costs on his personal brokerage in exchange for directing the pension funds

41、trades to the brokerage firm. Copley is most likely violating which of the following Standards? A)Standard III(A), Loyalty, Prudence, and Care. B)Standard III(B), Fair Dealing. C)Standard V(A), Diligence and Reasonable Basis. D)Standard V(B), Communication with Clients and Prospective Clients. The c

42、orrect answer was A) Standard III(A), Loyalty, Prudence, and Care. According to Standard III(A), Loyalty, Prudence, and Care, Copley is violating his fiduciary duty by benefiting, potentially at the expense of his clients, from the lower transactions cost on his personal trades. Members must act for

43、 the benefit of their clients and place their clients interests before their own. This question tested from Session 1, Reading 2, LOS a, b, c Question 11 Recommended procedures to comply with Standard III(B) Fair Dealing are least likely to include: A)limiting the number of people privy to recommend

44、ations and changes. B)shortening the time frame between initiation and dissemination of recommendation changes. C)publishing personnel guidelines for pre-dissemination that prohibit those who know about a pending recommendation from discussing or acting on it. D)requiring investment committee approv

45、al for all recommendation changes. The correct answer was D) requiring investment committee approval for all recommendation changesRequiring investment committee approval for all recommendation changes is not among the recommended procedures for compliance with Standard III(B) Fair Dealing. This que

46、stion tested from Session 1, Reading 2-III, LOS B. Question 12 Sue Johnson, CFA, has an elderly client with a very large asset base. The client intends to start divesting her fortune to various charities. Johnson is on the Board of a local charitable foundation. Johnson most appropriately: A)can mak

47、e this known to the charitable foundation so that they can solicit the client, since it is the clients wish to divest assets to charities in the future. B)should solicit the client herself, along with other Board members, to obtain a larger contribution. C)must not discuss anything regarding her cli

48、ent and her clients intentions with the charitable foundation without permission. D)can discuss her clients situation with the charitable foundation as long as she informs other local charities of her clients intentions. The correct answer was C) must not discuss anything regarding her client and he

49、r clients intentions with the charitable foundation without permission. To comply with Standard III(E), Preservation of Confidentiality, Johnson must not discuss with her charitable foundation anything regarding her client and her clients intentions. It does not matter that her client intends to giv

50、e money to charities in the near future. This question tested from Session 1, Reading 2-III, LOS E. Question 13 When sending research recommendations to clients, members and candidates must: A)send recommendations only to those clients for whom the investments are suitable. B)not send recommendation

51、s without including the underlying analysis and basic investment characteristics. C)disclose the average performance of prior securities recommendations. D)keep records of all the data and analysis that went into creating the report. The correct answer was D) keep records of all the data and analysi

52、s that went into creating the report. Standard V(C) Record Retention requires members to maintain records of the data and analysis they use to develop their research recommendations. Recommendations may be brief, in capsule form, or simply a list of buy/sell recommendations. Members must make more c

53、omplete information on recommended stocks available to clients. A list of recommendations may be sent without regard to suitability, including both safe income stocks and aggressive growth stocks, for example. This question tested from Session 1, Reading 2-V, LOS C. Question 14 Alan Powers, CFA, is

54、a trader with Rogers Securities. His sister works for Potter Steel and has told him that Potters earnings, which will be released two days from now, are significantly less than expectations. Powers receives a buy order for the firms account for a block of Potter shares. According to Standard II(A) M

55、aterial Nonpublic Information, Powers most appropriate action is to: A)ask his compliance officer to place Potter stock on the firms restricted list because he has material nonpublic information. B)enter the trade without mentioning the coming earnings disappointment. C)not enter the trade and infor

56、m only the firms head of trading that he cannot execute a buy because he is in possession of material non public information. D)not enter the trade because of his duty to his employer, but remain silent on the reason until the earnings report is publicly announced. The correct answer was B) enter th

57、e trade without mentioning the coming earnings disappointment. Standard II(A) Material Nonpublic Information requires members and candidates not to act or cause others to act based on material nonpublic information. As a general rule, if a member acts as he would if he did not possess the informatio

58、n, he will not violate this Standard. This question tested from Session 1, Reading 2-II, LOS A. Question 15 Which of the following is least likely one of the eight major sections of the Global Investment Performance Standards (GIPS)? A)Private equity. B)Calculation methodology. C)Input data. D)Repor

59、ting requirements. The correct answer was D) Reporting requirements. Reporting requirements is not one of the eight major sections of the Global Investment Performance Standards (GIPS). Specific reporting requirements are included in many of the individual sections, which include Private Equity, Cal

60、culation Methodology, and Input Data. This question tested from Session 1, Reading 4, LOS d Question 16 Windsong Management has hired John Simmons, who received his CFA charter in 2005, and Lucy Wainwright, who passed the Level 2 exam and has registered to take the Level 3 Exam. These two individual

61、s form Windsongs Great Lakes Group. Which of the following business cards is consistent with the Standards of Professional Conduct? A)Windsong Management Great Lakes Group John Simmons, CFA Lucy Wainwright, Level 2 CFA B)Windsong Management Great Lakes Group John Simmons, CFA Lucy Wainwright C)Winds

62、ong Management Great Lakes Group John Simmons, Chartered Financial Analyst, 2005 Lucy Wainwright, Level 3 CFA Candidate D)Windsong Management Great Lakes Group John Simmons, Chartered Financial Analyst Lucy Wainwright, CFA Candidate The correct answer was C)Windsong ManagementGreat Lakes GroupJohn S

63、immons, Chartered Financial Analyst, 2005Lucy Wainwright, Level 3 CFA Candidate No designation exists for someone who has passed Level 1, Level 2, or Level 3 of the exam, except to indicate that a candidate is registered for the next exam and at which level. The CFA mark must be the same font and si

64、ze as the members name with no extra emphasis such as boldface. This question tested from Session 1, Reading 2-VII, LOS B. Question 17 When calculating firm assets for the purposes of a GIPS-compliant performance presentation, Acme Investment Management should include: A)all fee-paying discretionary accounts only. B)all fee-paying, discretionary and non-discretionary accounts only. C)all fee-paying and non-fee-paying discretionary and non-discretionary accounts. D)all fee-paying and non-fee-paying discretionary accounts only. The correct answer was C) all fee