Financial Institute CFA Level I Chartered Analyst® CFA Level 1 Exam Questions in PDF

Free Financial CFA Level 1 Dumps Questions (page: 88)

The AIMR-PPS recommend that both ________ and ________ risks be presented in conjunction with composite returns.

  1. absolute; unsystematic
  2. total; market
  3. external; internal
  4. unsystematic; systematic

Answer(s): B

Explanation:

Total risk relates to the variability of actual (absolute) returns not relative to the market. Market (systematic) risk relates to the volatility of returns relative to the market or some other benchmark.



Dayon Grimley has been working as a Tech Sector analyst with an advisory firm for the past 3 years. Recently, he read an analytical report by Sam Swetson about the trends and research developments in the computer chips industry. The report was an in-depth analysis of how the industry had developed, where it seemed to be headed and what impact the developments could have on the growth of the entire industry. In a footnote, Sam had speculated about a secret, ultra-fast chip rumored to be under development by Chipcorn, Inc. Dayon decided to pursue this line of research and called up a highly placed official at Chipcorn. While the official did not confirm or deny the existence of the ultra-fast chip, he did reveal enough for Dayon to conclude that the development was, in fact, in the final stages and the chip could be out in the market in as little as 3 months. He quickly modified Sam's report, with a separate section on the super-chip and recommended that his clients increase the weighting on tech stocks by 20%. The report made no mention about his interview with Chipcorn official nor Sam Swetson's report. Dayon has:

  1. violated Standard II (C) - Prohibition against Plagiarism.
    II. violated Standard II (B) - Professional Misconduct.
    III. violated Standard IV (1) - Reasonable Basis & Representations.
    IV. violated Standard V (A) - Prohibition against Use of Material Nonpublic Information.
  2. II and IV only
  3. II and IV only
  4. I and IV only
  5. I and III only

Answer(s): C

Explanation:

By not properly acknowledging Sam's report, Dayon violated Standard II (C) - Prohibition against Plagiarism.
Also, since the information about the super-chip was non-public and obviously material, Dayon violated Standard V (A) - Prohibition against Use of Material Nonpublic Information.



Standard V (B) deals with ________.

  1. None of these answers
  2. Priority of Transactions
  3. Preservation of Confidentiality
  4. Performance Presentation
  5. Prohibition against Use of Material Nonpublic Information
  6. Disclosure of Conflicts to Clients and Prospects
  7. Prohibition against Misrepresentation
  8. Disclosure of Referral Fees

Answer(s): D

Explanation:

Standard V (B) - Performance Presentation - states that members shall not make any statements that misrepresent the investment performance that they or their firm have accomplished or can expect to achieve.



Standard III (E) - Responsibilities of Supervisors points out that when violations do occur, ________ procedures may be inadequate.

  1. compliance
  2. none of these answers
  3. legal
  4. fiduciary duty

Answer(s): A

Explanation:

If a member has adopted reasonable procedures and taken steps to institute an effective compliance program, then the member may not be in violation of Standard III (E). The fact that violations do occur may indicate, however, that the compliance procedures are inadequate. Furthermore, a member may be in violation of Standard III (E) if he or she knows that the procedures designed to detect and prevent violations are not being followed.



In a pension plan, the duty of a fiduciary is to the ________.

  1. Board of Directors
  2. none of these answers
  3. plan sponsor
  4. immediate supervisor
  5. plan participants and their beneficiaries

Answer(s): E

Explanation:

In a pension plan, the duty of the fiduciary is to the plan participants and their beneficiaries rather than to the plan sponsor that has the power to hire and fire the investment manager. If urged to make investments that might be of direct benefit to a sponsoring community or to the community at large, the manager must ensure that such investments are legal and do not impair the integrity of the funds in question or the financial security of the participants/beneficiaries.



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