Test Prep CFA® Level I Chartered Financial Analyst CFA® LEVEL 1 Exam Questions in PDF

Free Test Prep CFA® LEVEL 1 Dumps Questions (page: 16)

According to the AIMR-PPS, systems incompatibilities

  1. causes distortion of performance presentation and needs to be disclosed.
  2. are one reason for which a firm may not claim compliance for all assets.
  3. cannot be used as a reason for not claiming compliance for all assets.
  4. render a firm unable to claim compliance with the PPS, thus the firm should ensure compatibility.

Answer(s): C

Explanation:

Systems incompatibilities cannot be used as a reason for not claiming compliance for all assets (i.e., a firm cannot make the claim of compliance for only those assets that are measured and monitored on compatible systems).



Argus is a large-accounts money manager with a high-profile hedge fund. He manages all his accounts in a very efficient manner and all his clients are satisfied with his performance. Argus has one character flaw, though. He is given to making sexually inappropriate comments in mixed company, touching female employees in inappropriate ways and cracking adult jokes loudly. This makes many of the other employees uncomfortable in his presence. Argus

  1. none of these answers.
  2. has violated AIMR standard on professional incompetence.
  3. has violated AIMR standard on professional conduct.
  4. has not violated any AIMR standard since he has kept his clients satisfied and the professional misbehavior is an internal matter to be handled by his superiors.

Answer(s): C

Explanation:

Standard II (B) is designed to address professional behavior and personal integrity. The behavior should not put the firm at risk in any way or reflect adversely on the profession. Argus's behavior leaves his firm open to sexual harassment lawsuits and in general, reduces the productivity and comfort zone of female employees. Hence, he is in violation of Standard II (B) - Professional Misconduct.



When dealing with charitable organizations, the fiduciary must consider all of the following, except:

  1. general economic conditions.
  2. the charity's present and anticipated financial requirements.
  3. investigation of supervisory activities once violation is known to have occurred.
  4. long and short-term institutional needs in carrying out the charitable purpose.
  5. expected total return on its investments.
  6. trends in security price levels.

Answer(s): C

Explanation:

As fiduciaries for charitable organizations, members must consider: long and short-term institutional needs in carrying out the charitable purpose, the charity's present and anticipated financial requirements, expected total return on its investments, trends in security price levels and general economic conditions. Investigation of violations involving supervisors is a compliance procedure under Standard III (E), not under Standard IV (B.1), which deals with Fiduciary Duties.



According to the Prudent Investor Rule, the trustee must:

- adhere to loyalty, impartiality and ________
- maintain overall portfolio risk at a reasonable level
- 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

  1. commitment
  2. none of these answers
  3. prudence
  4. diversification
  5. supervisors

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.



Standard III includes which of the following?

  1. Reasonable Basis and Representations
  2. Preservation of Confidentiality
  3. All of these answers
  4. Performance Presentation
  5. Use of Professional Designation
  6. None of these answers

Answer(s): F

Explanation:

Standard III deals with Obligation to Inform Employer of Code and Standards, Duty to Employer, Disclosure of Conflicts to Employer, Disclosure of Additional Compensation Arrangements and Responsibilities of Supervisors.



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