CFA INVESTMENT FOUNDATIONS MOCK
EXAM Questions and Answers
1. Proprietary trading is most likely carried out by:
dealers
.
brokers
.
settlement agents.: Dealers,
Dealers act as principals, so they are deemed proprietary traders. Dealers trade on behalf of their own
accounts and use their own capital to make markets. B is incorrect. Brokers arrange deals between the
buyers and the sellers. They do not trade for their own accounts. C is incorrect. Settlement agents
provide services to clear and settle deals after they have been negotiated.
2. Q. Globalisation in the investment industry is associated with the
growing tendency of investors:
to look outside their local market for investment opportunities.
to prefer to hedge the risks of foreign investment, such as currency risk.
in smaller countries to compete more effectively with those in larger
coun-tries: to look outside their local market for investment opportunities.
A is correct. Globalisation occurs as investors develop a growing tendency to look outside their local markets
for better portfolio diversification and higher returns. B is incorrect. The decision to hedge various
risks will depend on the individual investor's needs and beliefs, not the extent of globalisation. C is
,incorrect. Globalisation gives all investors more opportunities but does not favour one group over
another.
3. The goal of all economic systems is to:
efficiently allocate scarce resources to their most productive uses.
produce enough goods and services to satisfy the desires of all consumers.
support government spending on public services, such as education,
defence, and infrastructure.: eflciently allocate scarce resources to their most productive
uses
The goal of all economic systems is the efficient allocation of scarce resources to their most productive
uses. People have an unlimited desire for goods and services, but resources are limited. Economic
systems must address three questions: (1) What should be produced? (2) How should it be produced?
(3) Who should receive what is produced? The goal is to answer these questions in a way that best
satisfies consumers' needs
4. An individual who helps buyers and sellers find and trade with one
another is a(n):
broker.
dealer.
auditor.:
Broker
5. Securities regulations are created by:
,legislative bodies.
individual investors.
government agencies.: Government Agencies
6. The CFA Institute Code of Ethics requires members to:
protect clients' interests at all times and in all situations.
encourage competitors to increase their levels of competence.
ensure investment recommendations are similar across an industry.:
encourage
competitors to increase their levels of competence.
7. An employee is assigned a complicated task by her supervisor but
believes she does not have the technical skills to carry it out. The
employee should:
refuse to carry out the assignment.
carry out the work as best as she
can.
get a co-worker to do it and take credit for the work.: Refuse to carry out the
assignment
8. Investment advisers have an ethical obligation to:
protect their own interests.
exercise independent
, judgment.
sell products with the highest fees.: Exercise independent judgment
9. Based on the CFA Institute Standards of Practice, investment advisers
should manage a client's investment portfolio the same way they
would manage:
their own assets.
other client
accounts.
the account if managed by a competitor.: Their own assets
10. During a job interview, a potential employer described the CFA
Institute Code of Ethics as "a set of principles establishing rules
governing ethical behaviour required of investment professionals toward
their clients and em-ployers". Does this description fully capture the
Code of Ethics' requirement to act in an ethical manner?
Yes
No, the Code of Ethics also requires ethical behaviour when dealing with
potential clients
No, the Code of Ethics also requires ethical interaction with all capital
market participants: No, the code of ethics also require ethical interaction with all capital market
participants
11. Regulators often seek public consultation prior to the
EXAM Questions and Answers
1. Proprietary trading is most likely carried out by:
dealers
.
brokers
.
settlement agents.: Dealers,
Dealers act as principals, so they are deemed proprietary traders. Dealers trade on behalf of their own
accounts and use their own capital to make markets. B is incorrect. Brokers arrange deals between the
buyers and the sellers. They do not trade for their own accounts. C is incorrect. Settlement agents
provide services to clear and settle deals after they have been negotiated.
2. Q. Globalisation in the investment industry is associated with the
growing tendency of investors:
to look outside their local market for investment opportunities.
to prefer to hedge the risks of foreign investment, such as currency risk.
in smaller countries to compete more effectively with those in larger
coun-tries: to look outside their local market for investment opportunities.
A is correct. Globalisation occurs as investors develop a growing tendency to look outside their local markets
for better portfolio diversification and higher returns. B is incorrect. The decision to hedge various
risks will depend on the individual investor's needs and beliefs, not the extent of globalisation. C is
,incorrect. Globalisation gives all investors more opportunities but does not favour one group over
another.
3. The goal of all economic systems is to:
efficiently allocate scarce resources to their most productive uses.
produce enough goods and services to satisfy the desires of all consumers.
support government spending on public services, such as education,
defence, and infrastructure.: eflciently allocate scarce resources to their most productive
uses
The goal of all economic systems is the efficient allocation of scarce resources to their most productive
uses. People have an unlimited desire for goods and services, but resources are limited. Economic
systems must address three questions: (1) What should be produced? (2) How should it be produced?
(3) Who should receive what is produced? The goal is to answer these questions in a way that best
satisfies consumers' needs
4. An individual who helps buyers and sellers find and trade with one
another is a(n):
broker.
dealer.
auditor.:
Broker
5. Securities regulations are created by:
,legislative bodies.
individual investors.
government agencies.: Government Agencies
6. The CFA Institute Code of Ethics requires members to:
protect clients' interests at all times and in all situations.
encourage competitors to increase their levels of competence.
ensure investment recommendations are similar across an industry.:
encourage
competitors to increase their levels of competence.
7. An employee is assigned a complicated task by her supervisor but
believes she does not have the technical skills to carry it out. The
employee should:
refuse to carry out the assignment.
carry out the work as best as she
can.
get a co-worker to do it and take credit for the work.: Refuse to carry out the
assignment
8. Investment advisers have an ethical obligation to:
protect their own interests.
exercise independent
, judgment.
sell products with the highest fees.: Exercise independent judgment
9. Based on the CFA Institute Standards of Practice, investment advisers
should manage a client's investment portfolio the same way they
would manage:
their own assets.
other client
accounts.
the account if managed by a competitor.: Their own assets
10. During a job interview, a potential employer described the CFA
Institute Code of Ethics as "a set of principles establishing rules
governing ethical behaviour required of investment professionals toward
their clients and em-ployers". Does this description fully capture the
Code of Ethics' requirement to act in an ethical manner?
Yes
No, the Code of Ethics also requires ethical behaviour when dealing with
potential clients
No, the Code of Ethics also requires ethical interaction with all capital
market participants: No, the code of ethics also require ethical interaction with all capital market
participants
11. Regulators often seek public consultation prior to the
