CMT Level 1 100% Accurate!!

David, a senior analyst with a brokerage firm, decides to change his recommendation for the common stock of Pigeon Industries, Inc. from a "buy" to a "sell". This change in investment advice is mailed to all the firm's clients on Wednesday. Next day, a client calls in with a buy order for 500 shares of Pigeon Industries, Inc. In this circumstance, Johnson should: -ANSWER Advise the customer of the change in recommendation before accepting the order. The mosaic theory holds that an analyst -ANSWER Can use material public information and nonmaterial nonpublic information in the analyst's analysis. Bell is a portfolio manager. One of his firm's clients has told Bell that he will compensate him beyond the compensation provided by his firm on the basis of the capital appreciation of his portfolio each year. Bell should -ANSWER Obtain permission from his employer prior to accepting the compensation arrangement. Which of the following is a correct statement of a member's or candidate's duty under the Code and Standards? -ANSWER In the absence of specific applicable law or other regulatory requirements, the Code and Standards govern the member's or candidate's actions. Elizabeth is a financial analyst with XYZ Brokerage Firm. She is preparing a purchase recommendation on JNI Corporation. Which of the following situations is most likely to represent a conflict of interest for Neely that would have to be disclosed? -ANSWER XYZ holds for its own account a substantial common stock position in JNI. This question involves Standard VI (A) - Disclosure of Conflicts. To increase the sensitivity of a 5x3 Point and Figure chart, one would -ANSWER Decrease the box size A basic Point and Figure buy signal is triggered when -ANSWER The current column of Xs rises above the previous column of Xs by one box In constructing a point and Figure chart, a new entry is added only when -ANSWER Price has moved equal to or more than the specified box size -ANSWER double top breakout -ANSWER double bottom breakdown -ANSWER triple top breakout -ANSWER triple bottom breakdown -ANSWER bearish catapult breakdown -ANSWER bullish catapult breakout -ANSWER descending triple bottom breakdown -ANSWER ascending triple top breakout -ANSWER bullish signal reversal -ANSWER bearish signal reversal -ANSWER bullish triangle breakout -ANSWER bearish triangle breakdown -ANSWER long tail down reversal -ANSWER bull trap -ANSWER bear trap -ANSWER spread triple top breakout -ANSWER spread triple bottom breakdown -ANSWER high pole When the Stochastic indicator crosses below 20, it is signaling -ANSWER The price is vulnerable to a reversal, but no action needs to be taken just yet. Which of the following principles describes a characteristic of related cycles -ANSWER harmonics Which of the following formations is often called a coil? -ANSWER Symmetrical Triangle Bullish support lines on a 3-box reversal P & F chart are drawn at a _____ degree angle: -ANSWER 45 The stock multiplication factor to adjust for a 30% stock dividend on a Point and Figure chart is: -ANSWER 1.3 Which one of the following chart types uses more than one data point to plot a particular time interval? -ANSWER Candlesticks __________ mean is the best choice when averaging ratios that can be either fractions or percentages: -ANSWER Geometric . Kurtosis refers to the: -ANSWER Peakedness or flatness of a distribution Standard deviation is calculated by taking the square root of -ANSWER Variance If the daily returns are constant, they can be converted to annualized risk by multiplying the daily return with the square root of -ANSWER 252 Sharpe Ratio -ANSWER The Sharpe ratio is calculated by dividing the mean excess return of the portfolio by the standard deviation of the excess return. In other words, this ratio measures the "reward" we can get for a particular level of variability or "risk". Treynor Ratio -ANSWER The Treynor ratio is similar to the Sharpe ratio, but CAPM beta is used in the denominator rather than the standard deviation. This is an important difference. Since the Treynor ratio uses only the non-diversifiable risk as the denominator, it should be used for evaluating funds or assets which are being added to a portfolio which is already well diversified. Information Ratio -ANSWER The information ratio is the "alpha" of a portfolio divided by the tracking error. In other words, the information ratio is the excess return relative to a benchmark that a manager generates divided by the extra risk that the manager takes on in order to generate that excess return. Seasonality is a cycle that occurs -ANSWER Yearly Fungibility is: -ANSWER Interchangeability of financial assets on identical terms Three orderly components of price movement -ANSWER Seasonality, Cycle and Trend The global business cycle as identified by the Princeton Economic Institute measures: -ANSWER 8.6 years What is the length of the Kondratieff Wave -ANSWER 54 years Presidential Cycle - 1st year -ANSWER Smallest gain Presidential Cycle - 2nd year -ANSWER Second to smallest gain Presidential Cycle - 3rd year -ANSWER Largest gain Presidential Cycle - 4th year -ANSWER Second to largest gain . An effective way of detrending price data to identify cycles is to -ANSWER Divide the closing prices by a moving average of those prices The New High-New Low index is calculated by: -ANSWER Subtracting New Lows from New Highs If the New High-New Low index declines while the broader market stays flat or rallies -ANSWER Bearish Divergence As per the theory of contrarian opinion, a high degree of consensus normally precedes: -ANSWER A trend reversal The Commitment of Traders report summarizes -ANSWER Buying and selling by commercials and large speculators Which of the following statements accurately describe a support level? -ANSWER A price level where buying is strong enough to interrupt or reverse a decline A bear trap occurs when: -ANSWER Prices recapture a violated support level after sell signals are generated A bull trap occurs when: -ANSWER Prices recapture a violated resistance level after buy signals are generated Serial correlation or autocorrelation means -ANSWER Persistence in data The most important feature of the martingale process that makes it an appropriate model for EMH is: -ANSWER The absence of future price predictability . Risk aversion refers to the assumption that investors prefer a portfolio with -ANSWER Higher returns but are averse to higher variance in returns Beta measures -ANSWER How much an individual stock's return is related to the return of a market index (benchmark) In E