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

Free Test Prep CFA® LEVEL 1 Dumps Questions (page: 87)

When formulating an investment policy for a client, which of the following falls under "investor objectives?"

  1. proxy voting
  2. none of these answers
  3. return objectives
  4. time horizon
  5. liquidity needs
  6. investable funds

Answer(s): C

Explanation:

Return objectives are considered under "investor objectives." Liquidity needs, time horizon and proxy voting are considered under "investor constraints."



Standard II (B) deals with ________.

  1. None of these answers
  2. Plagiarism
  3. Use of Professional Designation
  4. Fundamental Responsibilities
  5. Professional Misconduct
  6. Obligation to Inform Employer of Code and Standards
  7. Duty to Employer
  8. Disclosure of Conflicts to Employer

Answer(s): E

Explanation:

Standard I deals with Fundamental Responsibilities. Standard II (A) deals with Use of Professional Designation.
Standard II (B) deals with Professional Misconduct. Standard II (C) deals with Plagiarism. Standard III (A) deals with the Obligation to Inform Employer of Codes and Standards. Standard III (B) deals with the Duty to Employer. Standard III (C) deals with Disclosure of Conflicts to Employer.



Standard III (B) is known as ________.

  1. Interactions with Clients and Prospects
  2. Preservation of Confidentiality
  3. None of these answers
  4. Fair Dealing
  5. Investment Process
  6. Duty to Employer
  7. Prohibition against Use of Material Nonpublic Information
  8. Professional Misconduct

Answer(s): F

Explanation:

Standard IV (A) deals with the Investment Process. Standard III (B) deals with Duty to Employer. Standard IV (B.3) deals with Fair Dealing. Standard IV (B) deals with Interactions with Clients and Prospects. Standard V (A) deals with Prohibition against Use of Material Nonpublic Information. Standard IV (B.5) deals with Preservation of Confidentiality. Standard II (B) deals with Professional Misconduct.



The allocation of shares in oversubscribed IPOs to investment managers for their personal account is a perk that is most clearly a violation of Standard ________.

  1. II (B) - Professional Misconduct
  2. IV (A.3) - Independence and Objectivity
  3. None of these answers
  4. IV (B.6) - Prohibition against Misrepresentation
  5. IV (B.8) - Disclosure of Referral Fees

Answer(s): B

Explanation:

External sources may try to influence the investment process by offering analysts and portfolio managers a variety of perks. Corporations may be seeking expanded research coverage; issuers and underwriters may wish to promote new securities offerings; brokers typically want to increase commission business. The perks may include gifts, invitations to lavish functions, tickets and so on. One type of perk that has gained particular notoriety is the allocation of shares in oversubscribed IPOs to investment managers for their personal accounts.
This practice is a violation under Standard IV (A.3).



Tomonaga Olawando is a research analyst currently doing research on Cleebok Shoes, a footwear manufacturer infamous for its exorbitantly priced shoes. Tomonoga has been interviewing Pollyanna Givens, a senior vice president with the public relations division. Pollyanna has told him that the investment community has underestimated the payoffs from Cleebok's plan to outsource shoe production to Mexico, thus cutting productions costs significantly. She told him her estimate puts thecost savings close to $600 million, as against the figure of $370 million quoted by a few active analysts. In his report, Tomonaga states that the extra savings of $230 million a year will raise the stock price by 26% over the next year and hence, represents a great buy.
Tomonaga has

  1. not violated any code of ethics.
    II. has violated Standard IV (1) - Reasonable Basis & Representations.
    III. has violated Standard IV (2) - Research Reports.
    IV. has violated Standard IV (B.2) - Portfolio Investment Recommendations and Actions.
  2. III only
  3. II and III only
  4. II, III and IV only
  5. I only

Answer(s): B

Explanation:

By taking an opinion of a person and representing as a fact in his research report, Tomonaga has violated Standards IV (A.1) and IV (A.2).



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