Mock 4 SS1
Mock 4 SS1
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:
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?
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:
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?
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?
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:
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. 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.
A. No
B. Yes, the Standard relating to loyalty
C. Yes, the Standard relating to additional compensation arrangements
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
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
Q26. Harbor Asset Management (HAM) manages both domestic and global portfolios
for its clients. HAM includes the following statements in its promotional materials:
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:
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.
Q35. With respect to fintech applications, data curation is best described as the
process of:
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%.
Q38. Given this information, the diluted EPS of the company is closest to:
A. $1.51.
B. $1.60.
C. $1.61.
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%.
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:
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.
A. decrease.
B. remain the same.
C. increase.
Q51. Which of the following acts as an automatic stabilizer for the economy?
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.
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. 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:
Q60. An increase in a central bank's policy rate most likely leads to:
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.
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.
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?
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:
Q75. The structural budget deficit is the deficit that exists if the economy:
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:
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.
A. decreases.
B. remains the same.
C. increases.
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%
A. Quick ratio
B. Current ratio
C. Payables turnover ratio