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

Free Test Prep CFA® LEVEL 1 Dumps Questions (page: 49)

When formulating an investment policy for a client, all of the following fall under the category of "investor constraints," except:

  1. risk tolerance
  2. liquidity needs
  3. expected cash flows
  4. regulatory and legal circumstances
  5. time horizon
  6. tax considerations
  7. investable funds
  8. investor preferences, circumstances and unique needs

Answer(s): A

Explanation:

Risk tolerance is considered under "investor objectives," not "investor constraints."



When presenting the components of total return for a real estate portfolio, the recognition of income at ________ level, rather than at the operating level, is preferred.

  1. risk
  2. purchase
  3. realized
  4. investment
  5. composite

Answer(s): D

Explanation:

This is recommended under the AIMR-PPS for presenting investment performance results.



The financial analyst is allowed to breach client confidentiality if the information concerns ________ activities that the client is engaged in.

  1. personal
  2. confidential
  3. insider
  4. none of these answers
  5. illegal

Answer(s): E

Explanation:

Standard IV (B.5) states that "Members shall preserve the confidentiality of information communicated by clients, prospects, or employers concerning matters within the scope of the client -member relationship, unless the member receives information concerning illegal activities on the part of the client."



When complying with Standard IV (B.3) - Fair Dealing, there are certain points one should be sure to address when establishing compliance procedures.
Which of the following points is NOT mentioned in the Standards of Practice Handbook?

  1. Get as many people involved within the firm that a recommendation is going to be disseminated.
  2. Shorten the time frame between decision and dissemination.
  3. Disclose levels of service.
  4. Establish control over trading activity.
  5. Simultaneous dissemination.
  6. Publish personnel guidelines for predissemination.
  7. Establish systematic account review.

Answer(s): A

Explanation:

Members have an obligation to ensure that their firms establish compliance procedures requiring all employees who disseminate investment recommendations or actions to treat clients fairly. The number of people privy to an investment recommendation should be limited. The amount of time that lapses between the decision and the dissemination of the recommendation should be shortened. Guidelines must be established to prohibit persons who have prior knowledge from discussing a pending recommendation. Trading activities should be monitored and controlled. Supervisors should review accounts on a regular basis to ensure that no client is being given preferential treatment.



According to the AIMR-PPS, performance results of a past firm or affiliation

  1. must always be linked to the historical records of the new firm to show a fair and true representation of results.
  2. none of these answers.
  3. may or may not be linked to the historical records of new firm or affiliation, it is left to the discretion of the investment manager and that information should be disclosed.
  4. must not be used to represent the historical record of a new affiliation or a new firm identity.

Answer(s): D

Explanation:

Performance results of a past firm or affiliation must not be used to represent the historical record of a new affiliation or a new firm entity. This is a requirement for presentation of results.



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