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

Free CFA CFA I Dumps Questions (page: 44)

When complying with Standard IV (B.3) - Fair Dealing, a change of recommendation from "sell" to "buy" is considered:

  1. none of these answers.
  2. material only if so specified prior to the recommendation by the client.
  3. not material.
  4. material only if so specified prior to the recommendation by the investment manager.
  5. generally material.

Answer(s): E

Explanation:

In general, a material change in a firm's recommendation is one that could be expected to affect the investor's judgment or motivate an informed buyer or seller to take an investment action. Hence, a change of recommendation from "sell" to "buy" is generally material.



According to the AIMR-PPS, assets assigned to subadvisors that are not part of the firm

  1. are not to be included in total firm assets and their performance record is, therefore, not part of the firm's performance record.
  2. are included in total firm assets at the investment manager's discretion and information regarding their inclusion should be included in the disclosures.
  3. are to be included in total firm assets, however, because they are subadvisors, their performance record is not part of the firm's performance record.
  4. are to be included in total firm assets, hence, their performance record is part of the firm's performance record.

Answer(s): A

Explanation:

Total firm assets are defined to include all discretionary and nondiscretionary assets. Assets assigned to subadvisors that are not part of the firm are not to be included in total firm assets and their performance record is, therefore, not part of the firm's record.



Tessmer is a hard-working employee working in the sales department of a large bank. In this capacity, Tessmer is allowed to have an expense account to be used to entertain clients and cover business expenses. Over the past 3 months, Tessmer's expenses have almost doubled, a large part coming from expenses attributed to "business expense." While his manager, Janus Lace, is suspicious about this and believes that Tessmer is using the account for personal expenses, he has no proof of this. All of Tessmer's reimbursement bills appear to be in order. Tessmer has:

  1. violated the AIMR standard on Professional Misrepresentation.
  2. violated the AIMR standard on Reasonable Costs.
  3. not violated any AIMR standard.
  4. violated the AIMR standard on Professional Misconduct.

Answer(s): C

Explanation:

There is no evidence that Tessmer is misusing his expense account. The increase may simply be due to an increased professional activity. There is a chance that Tessmer is altering his bills but that needs to be investigated in some depth by Janus Lace, with a detailed examination of the results accruing from increased expenses. If Tessmer is found guilty of falsifying records, he would be in violation of Standard II (B) - Professional Misconduct. Without such evidence, charges of violation cannot be leveled against anyone.



The financial analyst may ________.

  1. not accept gifts from issuers of securities under any circumstances
  2. accept modest gifts
  3. accept any gift, as long as it is disclosed
  4. none of these answers

Answer(s): B

Explanation:

According to Standard IV (A.3) - Independence and Objectivity - modest gifts that do not exceed $100 and entertainment are acceptable, but special care should be taken by member analysts and investment managers to resist lavish gifts such as tickets, favors, job referrals and so on, which may be tied in with subtle pressures for favors possibly detrimental to clients.



The Performance Presentation Standards maintain that composites should cover a minimum of ________ years, or present the entire record of the firm, if shorter.

  1. ten
  2. eight
  3. seven
  4. two
  5. five

Answer(s): A

Explanation:

A 10 year performance record (or a record for the period since firm inception if inception is less than 10 years) must be presented.



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