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

Free CFA CFA I Dumps Questions (page: 86)

The ________ assumption must be disclosed if results are presented after taxes.

  1. tax rate
  2. trade
  3. composite
  4. selection
  5. settlement-date

Answer(s): A

Explanation:

To be in compliance with the PPS, a firm's presentation of its investment performance must disclose the tax rate information.



Performance results for a portfolio need to be presented with cash, ________ equivalents, or substitute assets.

  1. composite
  2. multiple
  3. cash
  4. average

Answer(s): C

Explanation:

Returns from cash and cash equivalents held in portfolios must be included in return calculations and the cash and cash equivalents must be included in the portfolio amount (total assets) on which the return is calculated.



According to the AIMR-PPS, plan sponsors, consultants and software vendors

  1. are exempt from any of the Standards.
  2. are directly responsible for ensuring the companies they employ are in compliance with the Standards.
  3. are held accountable to the Standards in the same way as AIMR Members, Charterholders and Candidates.
  4. cannot make a claim of compliance unless these entities actually manage the assets for which they are making the claim of compliance.

Answer(s): D

Explanation:

Plan sponsors, consultants and software vendors cannot make a claim of compliance unless these entities actually manage the assets for which they are making the claim of compliance. These groups can claim to endorse the Standards and/or require that the investment management firms they employ, from which they solicit information, or to which they sell be in compliance with the Standards.



Sunil Vaskar is an employee of Glamorgan, a reputable investment banking firm. Glamorgan is a major underwriter for an equity issued by a private firm, Raindrop Waterworks. Sunil has accidentally discovered that the preliminary prospectus issued by Raindrop contains material overstatements about the scope of its businesses and future earning potential. Sunil:

  1. must report his findings to his supervisor and consult his legal department.
  2. must sever all connections with Glamorgan and dissociate himself from its activities.
  3. need not do anything because the prospectus has been distributed and is, in any case, preliminary.
  4. must report the case to the SEC since there has been a violation of laws governing equity issues.

Answer(s): A

Explanation:

Standard I requires that suspected violation of laws be reported to appropriate supervisory people in the firm. It is also advisable to consult the legal department and dissociate oneself from the illegal activity. Sunil has to dissociate himself from the underwriting process involving Raindrop but he does not have to sever connections with his employer, Glamorgan.



Stewart has been hired by Goodner Industries, Inc., to manage its pension fund. Stewart's fiduciary duty is owed to:

  1. the management of Goodner.
  2. the participants and beneficiaries of Goodner's pension plan.
  3. the shareholders of Goodner.
  4. each of these answers equally.

Answer(s): B

Explanation:

Under Standard IV (B.1), Fiduciary Duties, members who manage a company's pension funds owe a fiduciary duty to the participants and benefits of the plan, not the management of the company or the company shareholders.



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