CFA Level I Chartered Financial Analyst CFA I Dumps in PDF

Free CFA CFA I Real Questions (page: 64)

Which of the following is NOT one of the goals of AIMR-PPS?

  1. Enforce a single standard on the various performance presentations through a mandatory adoption of the PPS.
  2. None of these answers.
  3. Bolster the notion of self-regulation and enhance the professionalism in the industry.
  4. Improve the service offered to investment management clients.

Answer(s): A

Explanation:

The PPS are voluntary standards and are not necessarily binding on AIMR members. AIMR, of course, encourages adoption of these standards. The Standards have been designed to meet the following four goals: - achieve greater uniformity and compatibility amongst the various performance presentations; - improve the service offered to investment management clients; - enhance the professionalism in the industry; - bolster the notion of self-regulation.



In allowing a claim of being in compliance with the PPS, AIMR requires that the compliance be on a "firmwide" basis. Which of the following does not qualify as "a firm" in this requirement?

  1. A subset of assets managed in one or more base currencies.
  2. An entity registered with the appropriate regulatory authority.
  3. A subsidiary or a division of a parent organization.
  4. None of these answers.

Answer(s): A

Explanation:

The entire subset of a firm's assets which are managed in one or more bases currencies must be included in the definition of "a firm" as far as PPS is concerned. For example, an organization cannot claim a proper subset of the assets it manages in Netherlands as "a firm" and claim compliance for that subset. It must include the entire portfolio managed in the Netherlands Guilders.



According to the Prudent Investor Rule, the trustee must: - adhere to loyalty, impartiality and prudence - maintain overall portfolio risk at a reasonable level - provide for reasonable ________ of trust investments - act with prudence in deciding whether and how to delegate authority to experts and in selecting and supervising agents - be cost conscious when investing

  1. supervision
  2. commitment
  3. diversification
  4. none of these answers

Answer(s): C

Explanation:

Modern Portfolio Theory dictates that trustees consider a portfolio in its entirety and not just on an investment- by-investment basis. As a fiduciary, therefore, the trustee must: - adhere to fundamental fiduciary duties of loyalty, impartiality and prudence. - maintain overall portfolio risk at a reasonable level - the trade-off between risk and return is the fiduciary's central concern. - provide for reasonable diversification of trust investments. - act with prudence in deciding whether and how to delegate authority to experts and in selecting and supervising agents. - be cost conscious when investing.



________ measures, which relate to the total variability of actual returns (i.e. beta), indicate the risk of having returns different from that particular benchmark or index.

  1. Index
  2. Absolute
  3. Volatility
  4. Risk

Answer(s): C

Explanation:

It is very important not to confuse risk with volatility. The type of risk that volatility measures represent are only one of many risks.



Marmella is a corporate associate with an investment banking firm, Corpfins. She recently put together a business proposal which would allow Corpfins to take on White Papers Inc., a producer of premium printing paper, as a business client for all its underwriting needs. In this proposal, Marmella has promised that her team will provide full research coverage for White Papers, with the clause that the team will not be the first on the street to release a "sell" recommendation. Marmella has

  1. violated Standard IV (3) - Independence and Objectivity.
  2. violated Standard IV (A.1) - Reasonable Basis and Representations.
  3. not violated the AIMR code of ethics.
  4. violated Standard II (B) - Professional Misconduct.

Answer(s): A

Explanation:

By agreeing to a clause that prevents her from releasing an objective research report under all circumstances, Marmella has violated Standard IV (A.3) - Independence and Objectivity - because not only is there an appearance of impropriety and conflict of interest, but the contract clearly hinders Marmella's judgment.



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