CFA Institute CFA Institute Certifications CFA-LEVEL-1 Questions & Answers

• Question 3771:

  Performance Presentation Standards require the disclosure of whether composite returns on international investments are ________ of foreign withholding taxes.

  A. net

  B. gross

  C. none of these answers

  D. net or gross

  Correct Answer: D

  The performance presentation must disclose whether composites and benchmarks are presented gross or net of withholding taxes on dividends, interest and capital gains; if net, the assumed tax rate for both the composite and the benchmark.

• Question 3772:

  Under the Performance Presentation Standards, selected firm composites can be designated as being in compliance, only if ________ of the firm's composites are in compliance.

  A. all

  B. many

  C. some

  D. one

  Correct Answer: A

  Compliance cannot be met on a per product or per composite basis, but can only be met on a firmwide basis. Composites may not be presented as being in compliance unless all of the firm's qualifying portfolios have been accounted for in at least one composite defined according to similar strategy or investment objective.

• Question 3773:

  Composite ________ measures represent the consistency of a firm's composite performance results with respect to the individual portfolio returns within a composite.

  A. disclosure

  B. fee

  C. dispersion

  D. deviation

  E. error

  Correct Answer: C

  The AIMR-PPS require that managers disclose the dispersion of portfolio returns within each composite.

• Question 3774:

  Which of the following statements is correct regarding Standard II (A) - Use of Professional Designation?

  A. Joe Martin passed Level I and Level II of the CFA exams and is scheduled for the next Level III exam. He may write "Joe Martin, CFA II."

  B. Joe Martin passed Level I and Level II of the CFA exams and is scheduled for the next Level III exam. He may write "Joe Martin, CFA III."

  C. Joe Martin passed Level I and Level II of the CFA exams, but is not scheduled for the next Level III exam. He may state, "I am a CFA candidate."

  D. None of these statements are correct.

  Correct Answer: D

  "Joe Martin, CFA II" and "Joe Martin, CFA III" are misrepresentations and a violation of Standard II (A). There is no designation for someone who has passed Level I, Level II, or Level III. He may not state he is a candidate unless he is registered for the next exam.

• Question 3775:

  Which of the following is true regarding Standard II (A)?

  A. You must be registered for the next CFA exam in order to call yourself a candidate.

  B. All of these answers.

  C. Candidates may state that they have completed Level I, II, or III.

  D. There is no designation for someone who has passed Level I, II, or III.

  E. This standard relates to oral statements.

  F. This standard relates to business cards and letterheads.

  Correct Answer: B

  Standard II (A) relates to the responsibility of AIMR members and candidates to use their professional designation properly and in a non-misleading manner. A person must be registered to take the next scheduled CFA exam to be a "candidate" in the CFA program. There is no designation for someone who has passed Level I, II, or III of the CFA exam. Candidates may state, however, that they have completed Level I, II, or III. The standard applies to all related explanations or descriptions of the CFA designation, including letterheads and business cards, resumes, directory listings, printed advertising, brochures and oral statements to clients and prospects.

• Question 3776:

  Arditti manages the pension plan for a publicly traded firm, Eros Computers and in this capacity, has the right to vote 0.5% of the common shares outstanding. Recently, Eros wanted to expand its production operations into Latin America and the board had decided to put the matter for open vote from shareholders. Arditti was on vacation in Fiji at the time and when she was informed about the vote, instructed that the portfolio proxy votes be voted along the same lines as that favored by the senior management. Arditti herself has not studied the merits of the proposed expansion plan but has complete faith in the senior management of Eros, which has always proven to be conscientious and prudent. Arditti has

  I. violated Standard IV (B.1) - Fiduciary Duties by voting the proxy shares in an indiscriminate manner.

  II. can be held liable for failing in her duties under ERISA.

  III.

  violated Standard II (B) - Professional Misconduct by behaving in an unprofessional manner.

  A.

  I and II

  B.

  I, II and III

  C.

  I only

  D.

  II and III only

  Correct Answer: A

  Corporate pension plan managers are governed by ERISA (Employee Retirement Security Act, 1974). One of the fiduciary duties expected under these guidelines is the voting of proxy shares. A fiduciary who fails to vote the proxy votes, votes them without analysis, or votes them blindly with the management on non-routine decisions will be in violation of ERISA. They can be held liable for trust violation unless there are explicit provisions in the plan which preclude the manager from voting. Note, however, that Arditti's voting does not constitute professional misconduct. Standard II (B) - Professional Misconduct - and Standard IV

  (B.1) - Fiduciary Duties.

• Question 3777:

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

  A. international

  B. nationwide

  C. firmwide

  D. attainable

  Correct Answer: C

  This is a requirement under Level I verification procedures.

• Question 3778:

  Standard III (A) states that members notify their ________ of the Code and Standards. This notification must be done ________.

  A. nearest Society secretary; within 45 days of candidacy

  B. immediate supervisor; in writing

  C. nearest Society secretary; orally or in writing

  D. chief operating officer (or equivalent); in writing

  E. chief operating officer (or equivalent); orally or in writing

  F. immediate supervisor; orally or in writing

  G. immediate supervisor; within 45 days of candidacy

  H. any of these answers is acceptable; as long as the notification is made

  Correct Answer: B

  Standard III (A): Relationship with and Responsibilities to the Employer, states that: "Members shall inform their employer, in writing, through their direct supervisor, that they are obligated to comply with the Codes and Standards and are subject to disciplinary sanctions for violations thereof."

• Question 3779:

  In reference to AIMR-PPS, which of the following is/are true?

  I. If the valuation of an investment asset is not based on current market value, it should not be included in total assets to which PPS are being applied.

  II. Composites cannot not be presented as being in compliance unless all the firm'squalifying portfolios are accounted for in at least one composite defined according tosimilar strategy or investment objective.

  III.

  A subsidiary may claim to be in compliance with the PPS even if the parent firm is not.

  A.

  I, II and III

  B.

  I and III only

  C.

  II and III only

  D.

  II only

  Correct Answer: A

  Assets to which AIMR-PPS cannot be applied are not to be considered while considering compliance. For example, investment instruments like the GIC whose valuation is not based on market conditions, must be excluded.

• Question 3780:

  By blindly adopting the ideas and works of others without acknowledgment, you have definitely violated Standard ________. You also may have violated Standard ________ because you may be making recommendations without a reasonable basis.

  A. II (A); IV (A.1)

  B. II (A); IV (B.1)

  C. II (A); IV (A.2)

  D. II (C); IV (B.2)

  E. II (C); IV (A.2)

  F. II (C); IV (B.1)

  G. II (C); IV (A.1)

  H. II (A); IV (B.2)

  Correct Answer: G

  This is explicitly stated under Standard II (C) - Prohibition against Plagiarism.