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

Free Test Prep CFA® LEVEL 1 Dumps Questions (page: 39)

According to the AIMR-PPS, ________ accounting must be used for fixed-income and all other securities that accrue income.

  1. time-weighted
  2. LIFO
  3. accrual
  4. fixed income

Answer(s): C

Explanation:

Accrual accounting must be used for fixed-income and all other securities that accrue income. Accrued income must be included in the market value calculation of the denominator and the numerator. This is a requirement for calculation of returns.



Standard III includes which of the following?

  1. Performance Presentation
  2. All of these answers
  3. None of these answers
  4. Reasonable Basis and Representations
  5. Disclosure of Additional Compensation Arrangements
  6. Use of Professional Designation

Answer(s): E

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.



According to The Code of Ethics, members of AIMR shall: "Use reasonable care and exercise ________."

  1. each and every day
  2. none of these answers
  3. independent professional judgment
  4. optimal diversification
  5. open communications with clients

Answer(s): C

Explanation:

According to The Code of Ethics, members of AIMR shall: "Use reasonable care and exercise independent professional judgment."



Carlos recently attended a seminar on a new technique in identifying possible relative mispricings amongst stocks. Impressed by the presentation, he used the technique to suggest that two of his biggest clients rebalance their portfolios with a heavier emphasis on the stocks the technique identified as being mispriced. While presenting this suggestion to his clients, Carlos did not mention anything about the source of the ideas used. Before recommending the changes, he did not personally check the results nor did he try to find out if there were any significant caveats or assumptions associated with the methodology. He has:

  1. violated Standard II (B) - Professional Misconduct.
    II. violated Standard II (C) - Prohibition against Plagiarism.
    III. violated Standard IV (1) - Reasonable Basis & Representations.
    IV. violated Standard IV (B.1) - Fiduciary Duties.
  2. I, II and III
  3. I and III only
  4. I, II, III and IV
  5. II and III only

Answer(s): D

Explanation:

By not mentioning the sources of the results used, Carlos violated AIMR Standard II (C) related to Plagiarism.
By not exercising reasonable care in verifying the soundness of his recommendations, he violated Standard IV (A.1). However, Standard II (B) - Professional Misconduct - and Standard IV (B.1) - Fiduciary duties are not directly relevant to this situation.



Tiarera has just landed a big account for her fund and is in a joyous mood. To celebrate, she decides to go out to a bar with some of her friends and share some drinks. Tiarera, however, has a weak constitution and cannot handle alcohol very well. In fact, many times in the past, she has gotten into drunken altercations at bars. Tonight turns out to be no different; Tiarera and her friends are arrested for disorderly conduct and convicted for misdemeanor. Tiarera has

  1. has violated Standard II (B) - Professional Misconduct - because of a pattern of misconduct.
  2. not violated any AIMR standard since the arrest was for a misdemeanor, an offense not serious enough to trigger sanctions on the first occurrence.
  3. has violated Standard II (B) - Professional Misconduct - because she has been involved in a misdemeanor.
  4. not violated any AIMR standard since the arrest took place due to activities not related to her work.

Answer(s): A

Explanation:

A single instance of misdemeanor is generally not serious enough to constitute a violation of Standard II (B).
However, Tiarera has shown a pattern of professional misconduct that reflects poorly on her firm and her profession, thus violating the AIMR standard.



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