CFA Level I Chartered Financial Analyst CFA I Exam Questions in PDF

Free CFA CFA I Dumps Questions (page: 17)

The Prudent Man Rule states that the trustee must achieve an equitable balance between current income and the ________ of principal in ________.

  1. prudent management; in money markets
  2. preservation; real terms
  3. steady growth; nominal terms
  4. preservation; nominal terms
  5. prudent management; in fixed-income securities
  6. steady growth; real terms

Answer(s): B

Explanation:

Under the Prudent Man Rule, trustees must be impartial between income beneficiaries and remainder men and must achieve an equitable balance between current income and the preservation of principal in real terms.



Standard IV (B.5), Preservation of Confidentiality states:

  1. all of these answers.
  2. none of these answers.
  3. members must release information to AIMR when the Professional Conduct Program is holding an investigation, unless there is a settlement agreement between the parties that stipulates confidentiality.
  4. if the information is confidential, even illegal activity may not be reported, because there is the issue of trust between parties.
  5. members should avoid disclosing any information received from a client except to authorized fellow employees who are also working for the client.

Answer(s): E

Explanation:

Under Standard IV (B.5), members shall preserve the confidentiality of information communicated by clients within the scope of client-member or employer-member relationship, except when the member receives information concerning illegal activity on the part of the client. When there is an investigation under PCP, members shall provide information about a client in support of the investigation. Settlement agreements with confidentiality clauses do not prohibit members from cooperating with a PCP investigation.



Since return results must be calculated on a basis that includes the effect of leverage, return results must be restated to a(n) ________ basis.

  1. margin
  2. total asset
  3. cash flow
  4. all cash
  5. multiple cash

Answer(s): D

Explanation:

Return results must be calculated on a basis that includes the effect of leverage, return results must be restated to an all-cash basis when the portfolio used leverage and the same securities could have been purchased at the same prices if the portfolio has the cash to do so. Results should be restated to an all cash basis only when the necessary restatement can be based entirely on actual transactions and can be verified in accordance with applicable account standards.



Standard II (A) deals with ________.

  1. Obligation to Inform Employer of Code and Standards
  2. None of these answers
  3. Professional Misconduct
  4. Plagiarism
  5. Use of Professional Designation
  6. Duty to Employer
  7. Disclosure of Conflicts to Employer
  8. Fundamental Responsibilities

Answer(s): E

Explanation:

Standard I deals with Fundamental Responsibilities. Standard II (A) deals with Use of Professional Designation.
Standard II (B) deals with Professional Misconduct. Standard II (C) deals with Plagiarism. Standard III (A) deals with the Obligation to Inform Employer of Codes and Standards. Standard III (B) deals with the Duty to Employer. Standard III (C) deals with Disclosure of Conflicts to Employer.



Which of the following is/are true about the PPS?

  1. Accounts of clients that are not currently under the firm's management should not be included in the presentation of the historical performance results.
    II. Compliance with PPS cannot be met on a composite-by-composite basis, only on a firm-wide basis.
    III. The PPS require that firms report, at a minimum, at least the most recent 5 years (or since inception, if less than 5 years) of performance results.
  2. III only
  3. I only
  4. I and III only
  5. II only
  6. I, II and III
  7. I and II only
  8. II and III only

Answer(s): D

Explanation:

The PPS require that firms report, at a minimum, at least the most recent 10 years (or since inception, if less than 10 years) of performance results. If this requirement cannot be met, exact reasons for this should be disclosed. Historical results should be presented as is to give a fair representation of past performance.
Dropping portfolios selectively can bias the results. Also, Compliance with PPS cannot be met on a composite- by-composite basis, only on a firm-wide basis.



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