Real Exam Dumps For CFA Level 1 Exam

1. According to the AIMR- PPS, ________ are defined to include all discretionary and nondiscretionary assets.

2. Standard IV (B.7) deals with ________.

3. Standard III (D) deals with ________.

4. Another name for "access" person is ________.

5. Which of the following is/are true about the Performance Presentation Standards?

I. A member who complies with the mandatory requirements of the PPS but does not follow the recommended requirements can publicly claim compliance with the PPS.

II. The PPS are designed to be primarily a performance measurement framework.

III. The Standards are not designed to enhance or detract from the presentation of historical results.

6. If a firm uses non- discretionary leverage, it must present performance using:

7. ________ and other hybrid securities must be treated consistently across and within composites.

8. Standard IV (B.8), Disclosure of Referral Fees, includes ________.

9. Which of the following relating to compliance procedures for complying with Standard III (E) is false? The compliance procedures should:

10. According to the AIMR- PPS for venture and private placements, ________ internal rate of return must be presented since inception of the fund and be net of fees, expenses and carry to the limited partner.

11. Which of the following AIMR Standards states that referral fees must be disclosed in writing to clients or customers?

12. Omega Prime Securities is a sizable investment bank that undertakes security issuances on behalf of small and medium- size businesses. Treffil Ellis is the senior vice president of corporate finance at Omega. Treffil, on one of his golf junkets, made acquaintance with Tralth Trevor, owner of a growing chain of resort hotels. Tralth invites Treffil to his estate mansion the next day and over drinks, asks him how fast Omega could issue equity- linked callable notes to finance the $200 million construction of new hotel businesses in Cairo and Bali. He forthrightly tells him that Omega could receive as much as 150 basis points above the normal fee if the issuance could be completed within the month. Treffil knows that this is not enough time to complete a research on Tralth's business and determine the issue price.

However, he does know that his research wing could quickly do a comparison with one of the other hotel chains and determine an approximate issue price. He instructs his department to do so. In a month, the public offering is ready for issuance and Omega ends up making almost $15 million more than on other similar business deals. Treffil receives commendation from the CEO for "going beyond the call of duty for his employer." Treffil has

I. violated Standard IV (B.3) - Fair Dealing.

II. not violated any code of ethics.

III. violated Standard IV (A.1) - Reasonable Basis & Representations.

IV. violated Standard IV (B.1) - Fiduciary Duties.

13. Which of the following statements clearly conflicts with the recommended procedures for compliance presented in AIMR's Standards of Practice Handbook?

14. Trust Fund is a reasonably successful investment management firm that has as its clients a few pension plans. Trust Fund executes all of its trades with Prime Brokerage, an average brokerage firm. Prime Brokerage charges higher commissions than comparable players in the market but in return, provides investment research on the stocks which are part of the pension plan assets under Trust Fund's management. Portfolio managers at Trust Fund know about the close relationship on the golf links between Prime Brokerage's chief broker, Ralph Fiennes, and Trust Fund's CEO, Armis Arvanitis. They also believe that the research provided by Prime Brokerage, while not superlative, is quite useful and justifies the excess expense in brokerage. This "soft- dollars" practice is disclosed in Trust Fund's official documents and contracts but Sisko, a freshly minted CFA charterholder, thinks that Trust Fund managers are in violation of the AIMR code of Ethics.

Which of the following is true?

15. A financial analyst should conduct himself with ________, competence and dignity and act in an ethical manner in his dealings with the public, clients, customers, employers, employees and fellow analysts.

16. Everly Smith has passed Level II of the CFA examination. While studying for Level III, he circulates his resume stating that he has "completed Charter Financial Analyst II" and his resume lists his name as "Everly Smith, CFA II." Which of these following statements is correct?

17. For ________ of five or fewer portfolios, the disclosure "five or fewer portfolios" may be made rather than a disclosure of the exact number of portfolios.

18. Standard I deals with ________.

19. According to the AIMR- PPS, terminated portfolios are included in the composite for how long after termination?

20. Edward Witten works for Princeton Investments and has registered to take Level III exam next year. He had taken the Level III exam 3 years ago but was not successful. In his firm's promotional material, he has stated that he is a candidate in the CFA program and has successfully passed Level II. Edward has:

21. Standard V (A) deals with ________.

22. Andy Pilling is a bond trading specialist who recently started a special fund, the "Structured Bond Fund." The strategy behind this fund is quite complex, involving a mix of highly speculative, high- yield bonds and various tax- free municipal bonds for some stability. Andy has a strong view that the economy will remain vibrant and bullish over the next two years and hence, is not worried about the risky bonds. Assuming a falling rate scenario in this case allows the fund to project an expected return 130 basis points above the S&P 500 return. In his special report, Pilling does not disclose such assumptions nor does he reveal any details about the bond strategy. He does analyze the state of the economy and the future outlook in the report. Based on his reputation and his association with some big name academics, Pilling is able to obtain capital of close to 75 million dollars on this fund alone.

Andy has:

23. According to Standard IV (A.2), members should consider including the following information in research reports, except:

24. The disclosures for retroactive compliance apply to composites formulated prior to ________.

25. With regard to real estate, all properties must be included in at least one ________.

26. Each ________ needs to comprise portfolios or asset classes that represent a similar investment goal.

27. ERISA fiduciaries must adhere to the following prudent procedures:

- establish a written investment policy for the plan

- diversify plan assets

- make investment decisions with the skill and care of a ________

- monitor investment performance

- control investment expenses

- avoid prohibited transactions

28. ________ establishes the fiduciary principles for U.S. corporate pension plans.

29. Under what conditions is Standard II (B)- Professional Misconduct violated?

I. The member is convicted of a misdemeanor.

II. The member regularly engages in unprofessional but legal behavior.

III. The member engages in dishonest activities that do not result in criminal conviction.

IV. The member is convicted of a felony.

30. Complete the following: According to The Code of Ethics, members of AIMR shall: "Act with ________, competence, dignity and in an ethical manner when dealing with the public, clients, prospects, employers, employees and fellow members."

31. Standard IV of the Standards of Professional Conduct deals with Relationships with and Responsibilities to ________.

32. Each of the following is true regarding Standard II (A), except:

33. Standard ________ pertains to fair dealing with customers and clients.

34. Social investments:

35. Which of the following are considered basic characteristics of a security and must be included in research reports?

36. Fundamental Responsibilities is dealt with under:

37. Corporate directors are governed by the ________. Trustees are governed by the ________.

38. Maria Golino is a financially savvy client of Hector Gomez, a portfolio manager with a small investment firm. Maria recently directed Hector to execute all trades on her behalf with Omega Brokerage. Omega charges higher commissions than most other brokerage firms but in this case, has agreed to provide research to Hector on behalf of Maria. Hector does not object to this and starts directing Maria's trades to Omega. Hector has

39. Another name for "covered" person is ________.

40. Which of the following can be found in Standard IV?

41. If a firm uses discretionary leverage, it must present performance using:

42. Kruskal Meriwether is a senior research analyst with Bellwether Advisors. He has been following Crystals & Candles a publicly traded firm which makes high- quality diamond jewelry. Kruskal, after extensive interviews with senior management at Crystals, has inferred that the firm is about to take over a diamond- mining firm in South Africa at a rock- bottom price. The Crystal management has refused to explicitly confirm or deny this but Kruskal firmly believes that such a deal is in the works. He has not used any inside information; just pieced together information from various avenues to come to this conclusion. In his reports, he states, "All my research seems to indicate that Crystal & Candles is likely to buy a South African diamond producer at a bargain price. Clearly, now is the time to buy Crystal and Candles' stock." 2 weeks after his report is released, Crystal's management announces that it has no intentions of making any acquisitions in the near future. This leads to a 7% decline in Crystal's stock, causing a large decline in the accounts of Kruskal's clients. Kruskal has

43. Standard II (C) deals with ________.

44. Which of the following AIMR Standards states that client transactions must have priority over transactions in which the analyst is a beneficial owner?

45. Cariella is a junior analyst who is currently preparing a report on a diamond producing firm, Dense Carbon, Inc. Dense Carbon recently announced that the results of a mining survey in its South African diamond mines were in, which revealed substantial amounts of diamond reserves for the first time. It has offered to take a few industry analysts for a tour of the facilities and take stock of the situation first hand. During this tour, all expenses, including air- fare and basic accommodations, were provided for by Dense Carbon. Since the visit spanned a weekend, Dense Carbon also arranged for a Safari tour for all the analysts. Cariella did not consider the safari to be an undue entertainment, given the fact that the analysts had to be in the middle of nowhere for 5 days. She was quite assiduous in her appraisal of the mining reserves and in the final analysis, the tour proved extremely valuable to her analysis.

However, she did not reveal the fact about the Safari trip to her employer. Cariella has

I. violated Standard III (C) - Disclosure of Conflicts to Employer.

II. violated Standard IV (A.1) - Reasonable Basis and Representations.

III. violated Standard IV (A.3) - Independence and Objectivity.

IV. not violated the AIMR code of ethics.

46. Arbaaz, an AIMR member, works for an investment advisory firm, Leon Investments. His friend, Shahzad, recently asked him for some investment recommendations. Arbaaz analyzed Shahzad's portfolio over a weekend and suggested some changes. While he did not accept any remuneration, Shahzad promised him some gifts if his portfolio "performed well." Arbaaz did not inform his employer since he thought he was helping a friend and in any case, the Shahzad's account was extremely small and there were no financial payments. Arbaaz has:

47. "Restricted Periods" are discussed in Standard IV (B.4), Priority of Transactions. Another name for restricted periods is ________ periods.

48. Liz Hurley is an investment advisor who has recently started advising a client, Zeta, regarding investment decisions. Zeta lives in Imphal, where investment laws are quite lax, almost non- existent. Hurley is domiciled in Britania, where investment laws clearly specify that the laws governing finance professionals in any given case are the laws that govern their clients. Britania laws, in general, are far stricter than the AIMR code of ethics. In her dealings with Zeta, Hurley must follow

49. In order to inform your employer that as a member of AIMR, you must abide by the code of ethics, you must:

50. Spassky was assigned the task of managing the portfolio of Fisher three days ago when Anand, who was managing Fisher's portfolio, retired. Fisher's portfolio consists of some deep- in- the- money put options, which will be exercised today, resulting in a cash flow of about $40,000. Spassky has not yet had a chance to meet Fisher in person to determine his needs, investment objectives and risk appetite. He did get a briefing from Anand about the portfolio and has a general idea about Fisher's investment attitude. In fact, over the past two years, Fisher's portfolio has generated handsome returns due to high- risk investments which Fisher prefers. Spassky's problem is determining what he should do with the $40,000. According to the AIMR Code of Ethics, he should:

51. Willier is the research analyst responsible for following Company X. All the information he has accumulated and documented suggest that the outlook for the firm's new products is poor, so the stock should be rated a weak hold. During lunch, however, Willier overhears a financial analyst from another firm offer opinions that conflict with Willier's forecasts and expectations. Upon returning to his office, Willier releases a strong buy recommendation to the public. Willier:

52. Under AIMR Rules of Procedure for the Proceeding Related to Professional Conduct, membership in AIMR and/or the right to hold and to use the CFA designation may be summarily suspended by AIMR's Designated Officer for the following misconduct:

I. Conviction for a crime that is defined as a felony or its equivalent.

II. Indefinite bar from registration under the securities laws (even though reapplication may be made after a specific period of time).

III. Failure to complete and return a professional conduct statement for each of two successive years.

53. Grey recommends the purchase of a mutual fund that invests solely in long- term U.S.

Treasury bonds. He makes the following statements to his clients:

I. "The payment of the bond is guaranteed by the U.S. government; therefore, the default risk of the bonds is virtually zero."

II. "If you invest in the mutual fund, you will earn a 15 percent rate of return each year for the next several years." Did Grey's statements violated AIMR's Code and Standards?

54. Standard III (D) is ________.

55. Level I verification requires independent attestation that the requirements of the AIMR- PPS have been met on a(n) ________ basis.

56. Carmina Aburana is a sales assistant to Drew Door, a sales manager at Hicost Brokerage. Hicost has a policy of requiring at least 20% margin on stocks that are deemed illiquid or extremely risky. For these purposes, it creates and updates a list of such stocks on a weekly basis. Yoddly Yoo, Inc. is an up and coming internet firm whose stock has been on this list for some time now. One of Carmina's "blue chip" clients, Amadeus, has been speculating on Yoddly's stock for the past two weeks, repeatedly going in and out of the market. In this process, he has unfortunately generated significant losses and his margin on the account has fallen to 12%. To make up for the shortfall, Amadeus calls up Carmina and requests a "borrowing on the account" of 10% for the next 2 weeks, promising to pay a hefty interest rate of 38%on an annualized basis. Since Amadeus has never been in default, Carmina agrees to the arrangement and moves some funds from another client's account. There is no explicit rule at Hicost that prohibits such an arrangement, though it is clearly an oversight on part of the Compliance department. Drew notices this transaction and calls Carmina for an explanation. On hearing the explanation, he tells Carmina that such arrangements are in violation of the company rules and should not be repeated. After 2 weeks, Amadeus supplies the necessary margin for his account.

57. Susan Jackson, with HRS Investments, is appearing in court as an expert witness. She will have to use research done at HRS, to which she did not contribute directly, during her testimony.

Which of the following is true, in relation to Jackson's need to comply with Standard II (C)?

58. Which of the following AIMR Standards states that additional compensation agreements must be disclosed to the employer?

59. When an analyst reaches conclusions about a firm's impending announcements before the actual release of information, using non- material, non- public information in conjunction with public information, insider trading charges cannot be leveled against her.

This arises from a legal defense against insider trading charges known as:

60. Smith, a research analyst with a brokerage firm, decides to change his recommendation on the common stock of Green company, Inc., from a buy to a sell. He mails this change in investment advice to all the firm's clients on Wednesday. The day after the mailing, a client calls with a buy for 500 shares of Green Company.

In this circumstance, Smith should:

61. Mirabelle is an experienced analyst who has worked for the investment research arm of Clifford & Clifford, Inc. for the past 7 years. Recently, TransOmega retained Clifford & Clifford to conduct a study on possible takeover candidates in the aviation industry. Mirabelle has been given the project and two assistants to conduct the research. During their review, Mirabelle's assistants located a research report created recently by Donaldson, a freelance analyst. Mirabelle found the report thorough, though she did not agree with many of Donaldson's conclusions. She carried out further inquiry along those lines and modified the report with new conclusions. She showed the completed report, with proper attributions to Donaldson in places where she had used his results, to a senior partner, John Cliff of Clifford & Clifford. The report was approved and released to TransOmega. In this case,

62. According to the AIMR- PPS when presenting results, annual returns for all years must be presented. Performance for periods of less than one year

63. ________ accounting is mandatory for fixed- income securities.

64. Joseph Silk is a veteran money manager with Aakanksha, Inc., a hedge fund that caters to high net- worth individuals. His friend, Gribbin, recently incorporated a private business and invited Joseph to be on its board of directors. Gribbin's business is in the paper industry and does not directly or indirectly affect Aakanksha's client base. Joseph accepted the board membership with the understanding that he would participate in Gribbin's business only over the weekends. He considered this a private venture and did not inform Aakanksha's Compliance officer. In not doing so, Joseph has

65. Which of the following is/are required by AIMR- PPS with regards to calculation of returns?

I. Total return - realized and unrealized gains plus income - should be used.

II. Returns must be based on arithmetic mean calculations.

III. Accrual accounting must be used for fixed- income securities.

66. What is the effective date for compliance with the AIMR- PPS for U.S. and Canadian investments?

67. Standard II (C) - Prohibition against Plagiarism - addresses all of the following forms of communication, except:

68. Sterling Drachma is a senior investment consultant currently researching a few high- risk internet stock companies which recently started trading on NASDAQ. Sterling manages 5 large and private investment accounts for which he has discretionary investment authority. Sterling is about 3 years away from retirement and his retirement portfolio is managed by Franc Escudo. Sterling has concluded from his research that two of the internet stocks he has been following are great buys and instructs Franc to divert part of the retirement investments into these stocks. Franc executes the orders as soon as he receives them. Sterling then instructs his brokers to buy the stocks for the two discretionary accounts that he knows are inclined toward high- risk investments. He does not buy any for the remaining three accounts since those are income- oriented, low- risk accounts.

In this sequence of events, which of the following is/are true?

I. Franc has violated Standard IV (B.1) - Fiduciary Duties - by investing retirement account funds in the high- risk stocks.

II. Sterling has violated Standard IV (B.3) - Fair Dealing - by not treating all his accounts equally.

III. Sterling has violated Standard IV (B.4) - Priority of Transactions - by trading for his retirement account before trading for his client accounts.

69. Jorgenson is a senior bond analyst with Morgan Co., a large investment banking firm. Over the past quarter, Morgan's corporate bond department has been betting on the credit spreads in the market narrowing and in anticipation, has invested a large amount of capital in the bonds of two firms, High Tech and Amerizone.com. Unfortunately, the credit spreads have not displayed much activity and as the quarter end is approaching, the department wants to unload the bonds. For this, it puts pressure on Jorgenson to push the bonds on some of his larger clients. Jorgenson believes that both the bonds are good investments since High tech and Amerizone have been doing very well and their prospects look rosy. So he goes ahead and convinces his clients to purchase as much as a third of Morgan's bond holdings in these companies. Morgan has

70. Emmy Noether is a senior division manager at Harding & Harding, a money management firm. Emmy is quite fastidious about following the rules of the investment industry and has established specific procedures and guidelines designed to prevent any violations. Recently, it surfaced that one of the employees reporting to Emmy, William Bathwater, had been secretly using inside information on a computer maker to generate profits in his portfolio. William had been extremely clever at hiding these profits and only a serendipitous audit by the Compliance Department revealed the pattern.

Emmy, in her capacity as William's supervisor, has:

71. NL is a country with no securities laws. LS is a country that has securities laws that are less strict than the AIMR code of ethics while MS has securities laws that are stricter than the code of ethics.

Which of the following is/are true?

I. A member who lives in NL must always follow the AIMR code.

II. A member who lives in MS is governed by the AIMR code.

III. A member lives in NL but does business in MS. If MS laws apply to her business transactions, she must follow the AIMR code.

IV. A member lives in LS and does business in NL. He must always follow the AIMR code.

72. Because it is not the preferred method recommended by the PPS, the use of ________ valuation needs to be disclosed.

73. A critical part of Standard IV (A.2) is to distinguish between:

74. When a manager is responsible for the portfolios of pension plans or trusts, the duty of loyalty is owed to the ________.

75. Brokers who knowingly or recklessly engage in excessive trading in customers' accounts are known to be ________.

76. According to the AIMR- PPS, systems incompatibilities

77. Argus is a large- accounts money manager with a high- profile hedge fund. He manages all his accounts in a very efficient manner and all his clients are satisfied with his performance. Argus has one character flaw, though. He is given to making sexually inappropriate comments in mixed company, touching female employees in inappropriate ways and cracking adult jokes loudly. This makes many of the other employees uncomfortable in his presence. Argus

78. When dealing with charitable organizations, the fiduciary must consider all of the following, except:

79. According to the Prudent Investor Rule, the trustee must:

- adhere to loyalty, impartiality and ________

- maintain overall portfolio risk at a reasonable level

- provide for reasonable diversification of trust investments

- act with prudence in deciding whether and how to delegate authority to experts and in selecting and supervising agents

- be cost conscious when investing

80. Standard III includes which of the following?

81. The Prudent Man Rule states that the trustee must achieve an equitable balance between current income and the ________ of principal in ________.

82. Standard IV (B.5), Preservation of Confidentiality states:

83. Since return results must be calculated on a basis that includes the effect of leverage, return results must be restated to a(n) ________ basis.

84. Standard II (A) deals with ________.

85. Which of the following is/are true about the PPS?

I. Accounts of clients that are not currently under the firm's management should not be included in the presentation of the historical performance results.

II. Compliance with PPS cannot be met on a composite- by- composite basis, only on a firm- wide basis.

III. The PPS require that firms report, at a minimum, at least the most recent 5 years (or since inception, if less than 5 years) of performance results.

86. Which of the following can be found in Standard III?

87. Which of the following can be found in Standard II?

88. Which of the following is/are forms of plagiarism as defined by AIMR code of conduct?

I. Using material from a seminar in research reports without proper acknowledgment.

II. Presenting statistical estimates prepared by others without the associated caveats and qualifiers.

III. Using of information obtained in a teleconference without identifying the original source.

IV. Using Standard & Poor's estimates of stock betas without attribution.

89. Which of the following AIMR standards pertains to the responsibilities of supervisors?

90. Firms with records or performance calculations for periods prior to the applicable effective date(s) that are not in conformance with the AIMR Performance Presentation Standards can still claim compliance with the standards if certain conditions are met.

Which of the following is an option available to such a firm?

91. When formulating an investment policy for a client, all of the following fall under "investor constraints," except ________.

92. Which of the following can be found in Standard I?

93. AIMR Standard ________ prohibits plagiarism.

94. Fiduciaries are obligated to vote proxies:

95. Standard III (E) is ________.

96. Chan and Chung are two of the five Managing Directors of Alfalfa, a mid- size hedge fund. In a recent court case involving a securities lawsuit, Chan was called on to testify as an expert on securities research. During his testimony, Chan had to invoke several results from a proprietary research carried out by his staff at Alfalfa. He did so without specifically attributing the results to them. At around the same time, Chung had to meet with a few prospective clients for a business presentation. During this presentation, he showed them some of the results obtained by Chan's team, without specifically acknowledging the research team. Instead, he referred to them with phrases like, "our studies indicate that..." In this set of events, as it relates to Standard II(C) - Prohibition against Plagiarism,

97. Standard IV (B.3) deals with ________.

98. Brikland Strickowski learned a month ago that one of his clients, Stratmann, had been regularly using inside information provided by numerous "contacts" in various firms to generate his trading activity with Brikland. Brikland was surprised at Stratmann's recklessness but did not want to get him into trouble so he did not inform anyone about this. AIMR has been tipped about Stratmann's activity and one of the investigators from AIMR's Professional Conduct Program (PCP) recently got in touch with Brikland about this. Brikland, in his desire not to have his CFA designation voided by AIMR, decided to divulge everything he knew about Stratmann's investment activity, though this information is considered confidential even by AIMR.

Which of the following is/are true about this sordid mess?

I. Brikland violated Standard IV (B.5) - Preservation of Confidentiality - by revealing confidential information about Strattman to the PCP investigator.

II. Strattman violated Standard V (A) - Prohibition Against Use of Non- Public Information.

III. Brikland violated Standard I - Fundamental Responsibilities - by not informing his supervisor and/or the SEC about the insider trading.

IV. Brikland violated Standard I - Fundamental Responsibilities - by not dissociating himself from Strattman's portfolio.

99. Xuanchi Zuan is a successful portfolio manager with Up & Away, a money management fund that operates strongly bullish funds. One of Zuan's clients, Margo Margolis, is about to retire in a couple of years. Margo has been phasing out her risky investments over the past five years, moving them into longterm treasury bonds.

However, she recently read in a financial magazine the attractiveness of investing in emerging markets. She was especially enticed by the 30% and 40% annual returns observed in these markets over the past 2- 3 years. She approaches Zuan and instructs him to move 30% of her funds into these markets. Zuan should:

100. If every one of your research reports had a statement stating that every research report on issues by a corporate client reflects the unbiased opinion of the analyst, you would be complying with Standard ________.