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CFA LEVEL III Exam with verified solutions

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CFA LEVEL III Exam with verified solutions

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Uploaded on
October 29, 2025
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CFA LEVEL III Exam with verified ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




solutions

Estate deffinition - correct answer✔✔is everything a person owns ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




Probate - correct answer✔✔the legal process to confirm the validity of the will. ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




what is intestate - correct answer✔✔when you die without a will and a court has to decide
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




who gets what ||\\//|| ||\\//||




civil law vs common law courts - correct answer✔✔civil law is predominant legal system,
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




apply abstract rules or thoughts to case. Common law (Britain and USA) uses the rulings in
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




previous court cases to defend claims ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




communal vs separate property regimes - correct answer✔✔separate: each spouse can ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




control property independently ||\\//|| ||\\//||




in community property regime there is always a 1/2 split regardless
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




4 ways taxes are levied - correct answer✔✔tax on income, tax on wealth, tax on spending,
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




tax on wealth transfers ||\\//|| ||\\//|| ||\\//||




testamentary gratuitous transfer - correct answer✔✔means a transfer of wealth to another ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




person made after death ||\\//|| ||\\//|| ||\\//||




human capital - correct answer✔✔an implied asset that people have. basically their ability
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




to work and generate money
||\\//|| ||\\//|| ||\\//|| ||\\//||

,Formula for how much you should save based on probability of survival - correct ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




answer✔✔[(psurvival) * Spending]/(1+r) ||\\//|| ||\\//||




psurvival=probability of surviving until that year and the cash spend expected in that year ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




r=risk free rate ||\\//|| ||\\//||




why discount probability of spending flows with risk free rate - correct answer✔✔beacuse
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




these flows risk is unrelated to market forces and the probability of dying is unrelated to
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market forces ||\\//||




formula for geometric average return - correct answer✔✔FV= (1+rg)^n which is equal to ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




each periods return times the next ie...(1+r)*(1+r1)*(1+r2)*(1+r3)
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




how to calculate Rg - correct answer✔✔Rg= r-(.5*std. dev.)
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




r= arithmetic average return
||\\//|| ||\\//|| ||\\//||




how are compounding returns organized and how do withdrawals effect it - correct
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




answer✔✔if you have poor performance to start strong to end and dont take anything out ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




your returns would be the same. If you are liquidating a portion of the portfolio then the
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




sequence matter a great deal ||\\//|| ||\\//|| ||\\//|| ||\\//||




relative value of tax free gift equation - correct answer✔✔FVgift/FVbequest= 1+[r*(1-t)]^n
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




/ [1+r*(1-t)]^n*(1-T)
||\\//||




Big T is tax on transfer. Little T tax on returns for that person. Top is recipient
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




relative value of taxed gift - correct answer✔✔FV gift/ FV bequest = [1+r*(1-t)]^n*(1-T) /
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




[1+r*1-T)]^n

,this assumes that there are different interest rates on lifetime gifts than bequests...
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




Bit T tax on transfer. Little T tas on returns. Top is recipient
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




relative value of gift when gifter pays the tax - correct answer✔✔[1+r*(1-tg)]^n*(1-
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




T+TgTe)/(1+r*(1-tg)]^n*(1-te))



deemed dispositions - correct answer✔✔means that at death and transfer there is no tax on
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




transfer but all unrecognized gains and losses become realized and are taxed themselves.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




relative value charitable gift to taxed bequest - correct answer✔✔(1+r)^n +T[1+r*(1-
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




t)]^N*(1-t)/[1+r*(1-t)]^n *(1-t)] ||\\//||




trust settlor or grantor is who - correct answer✔✔man who makes the trust. Beneficiary is
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




not the owner of the trust but gets benefits
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




revocable vs irrevocable - correct answer✔✔revoke: can call back but also responsible for ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




taxes and creditors can make claims on assets. Not the case in irrevocable trust.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




foundation vs trust - correct answer✔✔foundation set up for particular cause or purpose ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




instead of person. Reasons for both are asset control, minimize taxes, asset protection
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




use of life insurance - correct answer✔✔to create liquidity for transfer of hard assets to
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




heirs. also allows you to transfer wealth in some ways where trusts are not acceptable to
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




common law ||\\//||

, CFC and reasons for it - correct answer✔✔controlled foreign corporation. basically shell
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




company off shore where you can hide gains until they are distributed to shareholders and
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




avoid paying taxes until a certain point in time.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




Deemed distribution - correct answer✔✔if you own too much of CFC or other things the
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




IRS can just determine you are hiding money offshore and tax you in deemed distribution
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




case.



Hague Conference - correct answer✔✔its an international conference that works to
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




conform private international law ||\\//|| ||\\//|| ||\\//||




source vs residence tax system - correct answer✔✔source: country where revenue comes
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




from taxes product||\\//|| ||\\//||




Residence: tax is placed on resident of country regardless of revenue source ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




united states taxes on assets and real estate in US - correct answer✔✔they tax everything
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




regardless of place of residence. UK not bad as you can avoid taxes if you are not a ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




permanent citizen and do not repatriate your money. many HNW people there keep off ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




shore accounts in sing a pore and other counties
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




Double tax in US? - correct answer✔✔yes beacause we tax everything even if foregin
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




resident. but through tax treaties can usually avoid issues. ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




types of doubel tax issues - correct answer✔✔residence residence = 2 counties claim as
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




resident

source source= 2 countries calim as source
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||




resident source most common. ||\\//|| ||\\//|| ||\\//||

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