CFA Investment Foundations Mock
Exam Questions
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.
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 countries - -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.
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. -
-efficiently 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
An individual who helps buyers and sellers find and trade with one another is a(n):
broker.
dealer.
auditor. - -Broker
Securities regulations are created by:
legislative bodies.
individual investors.
government agencies. - -Government Agencies
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.
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
Investment advisers have an ethical obligation to:
protect their own interests.
exercise independent judgment.
sell products with the highest fees. - -Exercise independent judgment
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
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 employers". 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
Regulators often seek public consultation prior to the implementation of new regulations in order
to:
educate consumers and service providers on the new rules.
improve the final rules by undertaking a cost-benefit analysis.
ensure that the new rules are favourable to those likely to be affected. - -Improve the rules by
undertaking a cost-benefit analysis
Regulations prohibiting front running are types of:
trading rules.
operational rules.
sales practice rules. - -Trading rules
Exam Questions
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.
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 countries - -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.
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. -
-efficiently 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
An individual who helps buyers and sellers find and trade with one another is a(n):
broker.
dealer.
auditor. - -Broker
Securities regulations are created by:
legislative bodies.
individual investors.
government agencies. - -Government Agencies
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.
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
Investment advisers have an ethical obligation to:
protect their own interests.
exercise independent judgment.
sell products with the highest fees. - -Exercise independent judgment
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
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 employers". 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
Regulators often seek public consultation prior to the implementation of new regulations in order
to:
educate consumers and service providers on the new rules.
improve the final rules by undertaking a cost-benefit analysis.
ensure that the new rules are favourable to those likely to be affected. - -Improve the rules by
undertaking a cost-benefit analysis
Regulations prohibiting front running are types of:
trading rules.
operational rules.
sales practice rules. - -Trading rules
