Q1. Jorge Fernandez, CFA, is an equity analyst at a brokerage company.

He suspects
his colleague is trading on shares prior to his research reports being distributed to
clients. When Fernandez asks his colleague about it, he is told to mind his own
business. To comply with the Standard relating to knowledge of law, Fernandez
should most likely:

A. report his suspicions to his supervisor.

B. continue to observe his colleague's trades.
C. discuss his colleague's trades with other analysts at the firm.

Q2. A member works in a country where there is no regulation relating to investment

performance standards. In the absence of any regulatory guidance, the member is
required to communicate investment performance information to her clients in
accordance with:

A. the GIPS standards.

B. the Code and Standards.
C. stricter of the GIPS standards and the Code and Standards.

Q3. Lucie Hilbert, CFA, offers premium services to clients for an additional fee. She
offers the premium services only by email to all of her clients. One client, who
previously inquired about premium services, does not receive the offer due to a
technical problem with the client's email system. One week later Hilbert makes an
investment in an IPO on behalf of her clients. The issue is oversubscribed, so she
excludes her sister, a regular fee-paying client of Hilbert's firm, to free up shares for
other clients. Has Hilbert most likely violated the Standards?

A. No
B. Yes, the Standard relating to fair dealing
C. Yes, the Standard relating to communication with clients and prospective
clients

Q4. Joyce La Valle, CFA, is a portfolio manager at a global bank. La Valle has been
told she should use a specific vendor for equity investment research that has been
approved by the bank's headquarters. Because La Valle is located in a country
different from the bank's headquarters, she is uncomfortable with the validity of the
research provided by this vendor when it applies to her country and would like to use
a local vendor on whom she has already conducted due diligence. Which research
vendors) should La Valle use to avoid violating the Standards?

A. The local research vendor

B. The bank-approved research vendor
 C. Both the local and the bank-approved research vendors.

Q5. Raymond Tam, CFA, manages a fund with a mandate to invest in local equities.
To improve returns for fund investors, he sells options on some of the stocks held in
the fund. Three months later, the options expire and the fund reports higher returns.
Tam does not mention the options in his next client update. Tam has violated the
Standard(s)
relating to:

A. fair dealing only.

B. communication with clients and prospective clients only.
C. both fair dealing and communication with clients and prospective clients.

Q6. Jonas Balsys, CFA, has a prospective client, Edith Clancy, who mentions that she
donates to environmental causes.
Balsys mentions Clancy to a friend who works for an environmental agency. The next
week, Balsys prepares an IPS for Clancy. Clancy does not disclose information about
assets outside of her ESG investments. Balsys prepares the IPS based on the partial
information provided by Clancy and enters into a formal agreement with her. Balsys
has most likely violated the Standard relating to:

A. suitability.
B. preservation of confidentiality.
C. diligence and reasonable basis.

Q7. According to the guidance provided by the Standards, which of the following is
not among the recommended procedures for compliance with the Standard relating to
independence and objectivity?

A. Create a restricted list

B. Prohibit the acceptance of gifts
C. Appoint a senior compliance officer with oversight responsibilities

Q8. A member receives referral fees for recommending third-party services to clients.
Before entering into an agreement with a new client, which of the following is the
member required to disclose to the new client?

A. Flat fees only

B. Benefits received in soft dollars only
C. Both flat fees and benefits received in soft dollars

Q9. Which of the following is a key concept relating to the GIPS standards? The GIPS
standards:
 A. address every aspect of performance measurement.
B. require firms to adhere to certain calculation methodologies to allow for
comparability across firms.
C. require the inclusion of all discretionary and non-discretionary segregated
accounts in at least one composite.

Q10. John Clark, CFA, starts a new job and re-creates a research report on a company
he covered at his previous employer. He uses information gathered directly from the
covered company. He also uses his personal notes taken while working at his previous
employer. Has Clark violated the Standard relating to record retention?

A. No
B. Yes, because he uses information he gathered directly from the covered
company
C. Yes, because he uses his personal notes taken while working at his previous
employer

Q11. Trust is most likely the foundation of the financial industry because:

A. financial products and services are often tangible and verifiable.

B. investors rely on the specialized knowledge of investment professionals.
C. global financial markets and their participants are highly regulated by effective
laws.

Q12. Edo Ronde, CFA, an analyst for a hedge fund, One World Investments, is
attending a key industry conference for the microelectronics industry. At lunch in a
restaurant adjacent to the conference venue, Ronde sits next to a table of conference
attendees and is able to read their name tags. Ronde realizes the group includes the
president of a publicly traded company in the microelectronics industry, Fulda
Manufacturing, a company Ronde follows. Ronde overhears the president complain
about a production delay problem Fulda's factories are experiencing. The president
mentions that the delay will reduce Fulda earnings more than 20% during the next
year if not solved. Ronde relays this information to the portfolio manager he reports to
at One World explaining that in a recent research report he recommended Fulda as a
buy. The manager asks Ronde to write up a negative report on Fulda so the fund can
sell the stock. According to the CFA Institute Code of Ethics and Standards of
Professional Conduct Ronde should least likely:

A. revise his research report.

B. leave his research report as it is.
C. request the portfolio manager not act on the information.
 Q13. According to the GIPS standards, which of the following statements is most
accurate? Verification:

A. ensures the accuracy of composite presentations.

B. is required to maintain compliance with the GIPS standards.
C. tests whether a firm has complied with composite construction requirements on
a firm-wide basis.

Q14. Feng Liu, CFA, is an investment manager. Liu organizes nonviolent

demonstrations on weekends to fight climate change. After repeated demonstrations,
Liu is arrested and convicted for obstructing public transit which is considered an act
of civil disobedience in her country. Has Liu violated the Standards?

A. No
B. Yes, Liu has violated the Standard relating to loyalty
C. Yes, Liu has violated the Standard relating to misconduct

Q15. According to the Standard relating to loyalty, prudence, and care, a member with
control of client assets should submit to each client an itemized statement of their
security holdings and transactions at least:

A. quarterly.
B. semi-annually.
C. annually.

Q16. According to the Standard relating to loyalty, members must:

A. subordinate any personal obligations to their work.

B. place the interests of their employer below the interests of clients.
C. refrain from entering into an independent business while still employed.

Q17. Preeta Singh, a CFA candidate, is an asset manager employed by a fund

management company, which manages very large segregated pension funds. In her
spare time outside of working hours, Singh likes to provide strategic planning
consulting services to small companies to help grow their businesses. Singh is paid for
the consulting services and has also provided her employer information about these
outside activities. Has Singh violated the Standards?

A. No
B. Yes, the Standard relating to loyalty
C. Yes, the Standard relating to additional compensation arrangements

Q18. Which of the following is consistent with the Standards?

 ○ Statement 1: "An IPS should address the client's return requirements."
○ Statement 2: "Personal data such as age and occupation are required to provide
investment advice."
○ Statement 3: "Clients are primarily responsible for determining if investments
are suitable for them if they are in an advisory relationship with members."
A. Statement 1 only
B. Statement 1 and Statement 2 only
C. Statement 1, Statement 2, and Statement 3

Q19. Teresa Avila, CFA, is a micro cap investment analyst at a hedge fund. The fund
requires Avila to hold any securities she recommends for the fund in her own account
as well. Because Avila has such a small account, whenever she
trades for her own portfolio she combines the transactions with those of the hedge
fund so she is sure to have her account aligned with the fund. Has Avila most likely
violated any CFA Institute Standards of Professional Conduct?

A. No
B. Yes, the Standard relating to misconduct
C. Yes, the Standard relating to priority of transactions

Q20. Upon receiving notification that he passed his Level III CFA exam, Paulo
Garcia updates his educational background on his social media site by adding
"completed the CFA course." Does Garcia most likely violate the Standards?

A. No
B. Yes, because it could imply he has obtained the charter.
C. Yes, because he doesn't describe the certification process.

Q21. Milene Fontes, CFA, takes over coverage of a company because the original
analyst left the firm before finishing the research report. She adds her own thorough
analysis and publishes the report in her name only. Has Fontes violated the Standards?

A. No
B. Yes, by using the original analyst's work in the report
C. Yes, by not attributing the report to the original analyst

Q22. According to the Standard relating to responsibilities of supervisors, a member

who works as a department head managing large numbers of employees must:

A. have in-depth knowledge of the Code and Standards.

B. personally evaluate the conduct of all employees in his department on a
continuing basis.
 C. make reasonable efforts to ensure all employees at his firm comply with
applicable laws and regulations.

Q23. Vai Rajan, CFA, a well-known analyst, issues a buy recommendation on a

small-cap stock. Rajan shares his recommendation with the public two days after he
shares the recommendation with his clients. The public dissemination leads to a
significant increase in the stock price. Lise Genzo, CFA, one of Rajan's clients, buys a
large position in the stock. Genzo sells the entire position for a profit after the
recommendation is disseminated to the public.
Her action leads to a significant decline in the stock price. Do the actions of the two
members comply with the Standard relating to market manipulation?

A. Yes
B. No, only Rajan's action is compliant
C. No, only Genzo's action is compliant

Q24. Ann Collins, CFA, manages a fund for Kreet Investments (KI). KI provides a
retirement plan for employees offering a choice of ten large diversified mutual funds.
The choices include two funds managed by KI employees. Collins
changes her personal investment allocation to the two funds managed by her
colleagues without disclosing the change to Kl or to her clients. Has Collins violated
the Standard relating to avoid or disclose conflicts?

A. No
B. Yes, by failing to disclose the allocation change to K
C. Yes, by failing to disclose the allocation change to her clients

Q25. According to the GIPS standards, a firm must:

A. attain compliance for a minimum of seven years to initially claim compliance

with the GIPS standards.
B. include terminated composites on its list of composite descriptions for at least
seven years after the composite termination date.
C. update GIPS reports provided to prospective clients to include information
through the most recent annual period within 12 months of that annual period
end.

Q26. Harbor Asset Management (HAM) manages both domestic and global portfolios
for its clients. HAM includes the following statements in its promotional materials:

○ Statement 1: All investment consultants retained by HAM endorse the GIPS

standards.
 ○ Statement 2: All domestic portfolios managed by HAM are in compliance with
the GIPS standards.
○ Statement 3: The objective of the GIPS standards is to eliminate the need for
in-depth due diligence by prospective investors.

Which of HAM's statements is most consistent with the GIPS standards?

A. Statement 1
B. Statement 2
C. Statement 3

Q27. Vanraj Shah has just finished taking the Level I| CFA exam for the second time.
To protect the integrity of the exam, Gupta is careful not to discuss the exam questions
with other candidates. Shah calls his friend, a member, and contrasts his two attempts
by highlighting that there were many calculation questions on derivatives in the first
instance and none in the second. Later, in a public blog on investment education, Shah
shares his strong disagreement regarding CFA Institute shifting to computer-based
testing. Shah has violated the Standard(s) relating to:

A. conduct as participants in CFA Institute programs only.

B. reference to CFA Institute, the CFA designation, and the CFA program only.
C. both conduct as participants in CFA Institute programs and reference to CFA
Institute, the CFA designation, and the CFA program.

Q28. A central bank announcement of a program to raise rates to moderate inflation

will most likely lead to:

A. higher asset prices.

B. a weaker domestic currency.
C. revised interest rate expectations.

Q29. Deferred tax liabilities could arise when:

A. accounting profit is greater than taxable income.

B. the tax base of equipment is greater than its carrying value.
C. tax authorities do not allow an expense item for tax purposes.

Q30. Which of the following statements about dispersion measures is most accurate?
A. The range shows how the data are distributed
B. The variance is expressed in the same unit of measurement as the observations
C. The number of degrees of freedom in estimating the population variance with the
sample variance is equal to the sample size minus one

Q31. Based solely on the quick ratio, which company is most liquid?

A. Company X
B. Company Y
C. Company Z
Q32. If all paired observations of random variables X and Y satisfy the equation Y =
-0.2 + 0.8X, the correlation between
X and Y is:
A. 0.6.
B. 0.8.
C. 1.0.

Q33. A firm is operating under an oligopoly when it is:

A. the sole provider of a good or service.

B. one of many providers of a good or service.
C. one of a small number of providers of a good or service.

Q34. Which of the following best reflects good corporate governance?

A. Dual-class share structure

B. Established brand reputation
C. Diversity, experience, and independence of directors

Q35. With respect to fintech applications, data curation is best described as the
process of:

A. ensuring data quality and accuracy.

B. collecting and transforming data into a format that can be used.
C. recording, archiving, and accessing data from the underlying database.

Q36. If the short-term nominal risk-free interest rate is 4.0%, the yield on the bond is
closest to:
A. 6.0%.
B. 8.5%.
C. 10.0%.

Q37. Credit cycles are most likely:

 A. shorter and shallower than business cycles.
B. of equal length and depth as business cycles.
C. longer and deeper than business cycles.

Q38. Given this information, the diluted EPS of the company is closest to:
A. $1.51.
B. $1.60.
C. $1.61.

Q39. A company has announced that it is going to distribute a group of long-lived

assets to its owners in a spin-off. The most appropriate way to account for the assets
until the distribution occurs is to classify them as:

A. held for sale with no depreciation taken.

B. held for use until disposal with no depreciation taken.
C. held for use until disposal with depreciation continuing to be taken.

Q40. The analyst's gross margin forecast would be closest to a(n):

A. decrease of 4%.
B. decrease of 1%.
C. increase of 1%.
Q41. The continuously compounded return from time t = 0 to time t = 3 is closest to:
A. 6.07%.
B. 6.20%.
C. 6.25%.

Q42. Which of the following is an example of a liquidity ratio?

A. Defensive interval ratio

B. Inventory turnover ratio
C. Working capital turnover ratio

Q43. The company's WACC is closest to:

A. 11.02%.
B. 11.50%.
C. 11.86%.

Q44. Which of the following best describes the link between the cash flow statement
and the balance sheet?

A. The cash flow statement reconciles changes in all accounts on the balance sheet
B. The statement's investing activities section reconciles the changes in current
assets on the balance sheet
C. The cash flow statement reconciles the beginning and ending balances of cash
reported on the balance sheet
 Q45. Which of the following is best referred to as a nonparametric hypothesis test
concerning correlation? A test using the:

A. Pearson correlation coefficient

B. bivariate correlation coefficient
C. Spearman rank correlation coefficient

Q46. An exchange rate between two currencies has decreased to 1.3500. If the base
currency has depreciated by 7% against the price currency, the initial exchange rate
between the two currencies was closest to:
A. 1.2617.
B. 1.4445.
C. 1.4516.

Q47. According to Modigliani-Miller propositions, if a profitable company uses more

debt in the presence of taxes, firm value will:

A. decrease.
B. remain the same.
C. increase.

Q48. A qualified audit opinion is most appropriately issued when:

A. there is some scope limitation or exception to accounting standards.

B. the company's financial statements are fairly presented and free from material
error.
C. the company's financial statements materially depart from accounting standards
and are not fairly presented.

Q49. A credit rating agency assesses a company's corporate governance structure as

favorable to creditor rights. The most likely impact of this assessment on the company
is a(n):

A. reduction in its cost of debt.

B. increase in its risk of default.
C. reduction in its financial performance.

Q50. Which of the following statements about company stakeholders is most

accurate?

A. Debtholders tend to prefer that a company raise more equity

B. Shareholder-debtholder conflict is greater for short-term creditors
 C. Shareholders are more likely than debt holders to impose contractual limits on
leverage

Q51. Which of the following acts as an automatic stabilizer for the economy?

A. A decrease in corporate tax rates

B. New public spending on hospitals
C. Government expenditure on unemployment benefits

Q52. The most appropriate statement about financial ratio analysis is that it has
limited use as an analytical tool for:

A. evaluating management.
B. comparing companies that use different accounting methods.
C. providing insights into microeconomic relationships within a company that
help analysts project earnings.

Q53. Work performed provides an appropriate measure of progress towards

completing the contract and the performance obligations are satisfied over time.
Assuming it is highly probable that revenue will not be subsequently reversed,
revenue recognized in Year 1 is:
A. €240,000.
B. €270,000.
C. €300,000.
Q54. Based only on this information, the company with the greatest capacity to absorb
additional leverage in Year 4 is most likely:

A. Company 1.
B. Company 2
C. Company 3.

Q55. In the static trade-off theory of capital structure, when a company's capital
structure is optimal, its marginal cost of financial distress is:

A. less than the marginal benefit of its tax shield.

B. equal to the marginal benefit its tax shield.
C. greater than the marginal benefit of its tax shield.

Q56. A characteristic of monopolistic competition is most likely:

A. high barriers to entry.

B. a large number of sellers.
C. strong pricing power of firms.

Q57. Cyber threats are most likely an example of:

A. event risk.
B. thematic risk.
C. exogenous risk.

Q58. The standard error of the slope coefficient for a simple linear regression model is
the ratio of the model's standard error of the estimate to the square root of the:

A. sum of squares regression.

B. standard error of the forecast.
C. variation of the independent variable.
Q59. The value of the standard error of the estimate is closest to:
A. 0.68.
B. 0.78.
C. 1.05.

Q60. An increase in a central bank's policy rate most likely leads to:

A. decreasing real domestic demand and increasing net external demand.

B. increasing real domestic demand and decreasing net external demand.
C. decreasing real domestic demand and decreasing net external demand.

Q61. An investor turned 25 years old today. She plans to deposit $5,000 in a savings
account at the end of each year, with the first deposit to be made one year from today.
The last deposit will be made on her 65th birthday. If the annual return is 4%, the total
savings on the day of her last deposit will be closest to:
A. $452,046.
B. $475,128.
C. $499,133.

Q62. The standard deviation of EPS is closest to:

A. $2.4.
B. $4.0.
C. $5.8.
Q63. Which of the following statements relating to the financial reporting of defined
contribution pension plans is correct?

A. The only balance sheet impact from contributions to defined-contribution plans

is on an asset account
B. Under a defined-contribution plan, company contributions to the plan are
treated as an operating cash flow
C. Defined-contribution plans require companies to make several assumptions in
order to estimate their pension obligations

Q64. The financial leverage ratio is:

A. 0.6.
B. 1.5.
C. 2.5.

Q65. The company with the highest quick ratio is:

A. Company 1.
B. Company 2.
C. Company 3.
Q66. The standard error of the sample mean is closest to:
A. 0.12.
B. 0.41.
C. 0.64.

Q67. The second quartile of the observations is closest to:

A. 2.0.
B. 2.5.
C. 3.0.

Q68. If wages and prices are rigid, which of the following policy combinations most
likely leads to an increase in aggregate demand from the private sector relative to the
public sector?

A. Easy fiscal policy and easy monetary policy

B. Easy fiscal policy and tight monetary policy
C. Tight fiscal policy and easy monetary policy

Q69. An increase in which of the following accounts could increase the current ratio?

A. Trade receivables
B. Accrued expenses
C. Deferred tax assets
Q70. If all the criteria for capitalization have been met, the maximum amount of
expenditures (in £ millions) eligible for capitalization is most likely:
A. 10.
B. 15.
C. 25.

Q71. A firm in an oligopoly market most likely faces a kinked demand curve because
competitors do not match:

A. price increases.
B. price decreases.
C. both price increases and price decreases.

Q72. The 2012 return needed to achieve a trailing five-year geometric mean
annualized return of 5% when calculated at the end of 2012 is closest to:
A. 17.9%.
B. 27.6%.
C. 35.2%.

Q73. Two populations are normally distributed with unknown variances that are
assumed to be equal. If a large independent random sample is drawn from each
population, the most appropriate test statistic for testing the difference between the
population means is the:

A. t-statistic.
 B. z-statistic.
C. F-statistic.

Q74. Under the revaluation model, an initial revaluation that increases the carrying
amount of assets increases:

A. the financial leverage ratio.

B. other comprehensive income.
C. current period return on assets.

Q75. The structural budget deficit is the deficit that exists if the economy:

A. is below full potential output.

B. is at full potential output.
C. is above full potential output.

Q76. All else being equal, during periods of rising prices and constant inventory
quantities, a company using the weighted average cost inventory valuation method
most likely reports a:

A. higher gross profit margin than if using FIFO.

B. lower inventory turnover ratio than if using FIFO.
C. shorter cash conversion cycle than if using FIFO.

Q77. A country which is a global leader and uses its political or economic influence
over other countries to control resources is best described as:

A. autarky.
B. multilateral.
C. hegemonic.

Q78. Which of the following statements is most accurate? Network effects:

A. lower the barriers to entry for competition.

B. are created only when crowdsourcing is used.
C. are present in many older, pre-internet businesses.

Q79. In capital investing, a production-flexibility option allows a company to:

A. reduce supply on lower demand.

B. sequence investments over time.
C. increase prices on excess demand.
Q80. All else being equal, if interest expense is not tax deductible, as a company's
marginal tax rate increases, the company's WACC:

A. decreases.
B. remains the same.
C. increases.

Q81. The USD is expected to depreciate against:

A. the AUD only.

B. the EUR only.
C. both the AUD and the EUR.

Q82. An analyst examining the statement of cash flows for possible manipulation is
least likely to be concerned about a(n):

A. cash flow from operations to net income ratio consistently higher than 1.
B. increase in cash from operations arising from a large change in accounts
payable.
C. change in the classification of interest paid from an operating cash flow to a
financing cash flow.

Q83. The appropriate discount rate to use in evaluating the project is 8%. The net
present value (NPV) of the project is closest to:
A. -€1,780.
B. -€1,736.
C. -€922.

Q84. Interest payable decreased during a company's fiscal year. Compared with the
amount of cash interest payments made, interest expense is most likely:

A. lower.
B. the same.
C. higher.

Q85. Under a common-size analysis, the value used for research and development
expenses is closest to:
A. 4.2%
B. 5%
C. 8.3%

Q86. The company's cash return on assets ratio is closest to:

A. 10%.
B. 12%.
C. 13%.

Q87. Because of a problem with the production process, a manufacturer produced a

batch of defective finished goods with a total cost of $18,000. The sales value of this
batch in its current condition is $6,000. With $3,000 of additional processing,
however, the batch could be sold for $11,000. The value of the unsold inventory is
closest to:
A. $8,000.
B. $9,000.
C. $11,000.

Q88. Which of the following statements is most accurate? Private companies:

A. are typically subject to registration requirements.

B. may be restricted to issue securities only to accredited investors.
C. have little ownership overlap between management and shareholders.

Q89. As a result of an inventory write-down, which of the following financial ratios

most likely decreases?

A. Quick ratio
B. Current ratio
C. Payables turnover ratio

Q90. The CAD/EUR 12-month forward points are closest to:

A. -211.
B. 21.
C. 214.