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CFA 1 Questions/Answers
In situations where the laws of a member or candidate's
country of residence,
the local laws of regions where the member or candidate
does business, and the
Code and Standards specify different requirements, the
member or candidate
must abide by:
A. local law or the Code and Standards, whichever is stricter.
B. the Code and Standards or his country's laws, whichever
are stricter.
C. the strictest of local law, his country's laws, or the Code
and Standards - -Correct answer-C To comply with Standard
I(A) Knowledge of the Law, a member must always abide by
the strictest applicable law, regulation, or standard.
According to the Standard on independence and objectivity,
members and
candidates:
A. may accept gifts or bonuses from clients.
B. may not accept compensation from an issuer of securities
in return for
1
, 2
producing research on those securities.
C. should consider credit ratings issued by recognized
agencies to be objective
measures of credit quality. - -Correct answer-A Gifts from
clients are acceptable under Standard I(B) Independence and
Objectivity,
but the Standard requires members and candidates to
disclose such gifts to their
employers. Standard I(B) allows issuerpaid research as long
as the analysis is thorough,
independent, unbiased, and has a reasonable and adequate
basis for its conclwions, and
the compensation from the issuer is disclosed. Members and
candidates should consider
the potential for conflicts of interest inherent in credit ratings
and may need to do
independent research to evaluate the soundness of these
ratings.
Bill Cooper finds a table of historical bond yields on the
website of the U.S.
Treasury that supports the work he has done in his analysis
and includes the
table as part of his report without citing the source. Has
Cooper violated the
2
, 3
Code and Standards?
A. Yes, because he did not cite the source of the table.
B. Yes, because he did not verify the accuracy of the
information.
C. No, because the table is from a recognized source of
financial or statistical
data. - -Correct answer-C According to Standard I(C)
Misrepresentation, members and candidates must cite the
sources of the information they we in their analysis, unless
the information is factual
data (as opposed to analysis or opinion) from a recognized
financial or statistical
reporting service. The U.S. Treasury is one example of a
recognized source of factual
data.
Which of the following statements about the Standard on
misconduct is most
accurate?
s.
A. Misconduct applies only to a member or candidate's
professional activities.
B. Neglecting to perform due diligence when required is an
example of
3
, 4
misconduct.
C. A member or candidate commits misconduct by engaging
in any illegal
activity. - -Correct answer-B Failing to act when required by
one's professional obligations, such as neglecting to
perform due diligence related to an investment
recommendation, violates Standard I(D)
Misconduct. Acts a member commits outside his professional
capacity are misconduct
if they reflect poorly on the member or candidate's honesty,
integrity, or competence
(e.g., theft or fraud).Violations of the law that do not reflect
on the member or
candidate's honesty, integrity, or competence (e.g., an act
related to civil disobedience)
are not necessarily regarded as misconduct.
Ed Ingus, CFA, visits the headquarters and main plant of
Bullitt Company
and observes that inventories of unsold goods appear
unusually large. From the
CFO, he learns that a recent increase in returned items may
result in earnings
for the current quarter that are below analysts' estimates.
Based on his visit,
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CFA 1 Questions/Answers
In situations where the laws of a member or candidate's
country of residence,
the local laws of regions where the member or candidate
does business, and the
Code and Standards specify different requirements, the
member or candidate
must abide by:
A. local law or the Code and Standards, whichever is stricter.
B. the Code and Standards or his country's laws, whichever
are stricter.
C. the strictest of local law, his country's laws, or the Code
and Standards - -Correct answer-C To comply with Standard
I(A) Knowledge of the Law, a member must always abide by
the strictest applicable law, regulation, or standard.
According to the Standard on independence and objectivity,
members and
candidates:
A. may accept gifts or bonuses from clients.
B. may not accept compensation from an issuer of securities
in return for
1
, 2
producing research on those securities.
C. should consider credit ratings issued by recognized
agencies to be objective
measures of credit quality. - -Correct answer-A Gifts from
clients are acceptable under Standard I(B) Independence and
Objectivity,
but the Standard requires members and candidates to
disclose such gifts to their
employers. Standard I(B) allows issuerpaid research as long
as the analysis is thorough,
independent, unbiased, and has a reasonable and adequate
basis for its conclwions, and
the compensation from the issuer is disclosed. Members and
candidates should consider
the potential for conflicts of interest inherent in credit ratings
and may need to do
independent research to evaluate the soundness of these
ratings.
Bill Cooper finds a table of historical bond yields on the
website of the U.S.
Treasury that supports the work he has done in his analysis
and includes the
table as part of his report without citing the source. Has
Cooper violated the
2
, 3
Code and Standards?
A. Yes, because he did not cite the source of the table.
B. Yes, because he did not verify the accuracy of the
information.
C. No, because the table is from a recognized source of
financial or statistical
data. - -Correct answer-C According to Standard I(C)
Misrepresentation, members and candidates must cite the
sources of the information they we in their analysis, unless
the information is factual
data (as opposed to analysis or opinion) from a recognized
financial or statistical
reporting service. The U.S. Treasury is one example of a
recognized source of factual
data.
Which of the following statements about the Standard on
misconduct is most
accurate?
s.
A. Misconduct applies only to a member or candidate's
professional activities.
B. Neglecting to perform due diligence when required is an
example of
3
, 4
misconduct.
C. A member or candidate commits misconduct by engaging
in any illegal
activity. - -Correct answer-B Failing to act when required by
one's professional obligations, such as neglecting to
perform due diligence related to an investment
recommendation, violates Standard I(D)
Misconduct. Acts a member commits outside his professional
capacity are misconduct
if they reflect poorly on the member or candidate's honesty,
integrity, or competence
(e.g., theft or fraud).Violations of the law that do not reflect
on the member or
candidate's honesty, integrity, or competence (e.g., an act
related to civil disobedience)
are not necessarily regarded as misconduct.
Ed Ingus, CFA, visits the headquarters and main plant of
Bullitt Company
and observes that inventories of unsold goods appear
unusually large. From the
CFO, he learns that a recent increase in returned items may
result in earnings
for the current quarter that are below analysts' estimates.
Based on his visit,
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