CFA LEVEL 3
COMPREHENSIVE
STUDY EXAM LATEST
UPDATE 2024/2025
QUESTIONS AND
ANSWERS GRADED A+
,GIPS Input Requirements - ✔✔ANSWER✔✔--All data
must be captured and documented based on fair value,
using trade date accounting, and including accrued
income for fixed income securities.
-If market value of a security does not exist, the preferred
value approach sequence is the following:
1) Prices of similar assets in active markets.
2) Prices of similar assets in inactive markets.
3) Observable market inputs other than prices (e.g., PE,
div yield)
4) Subjective, unobservable inputs (e.g., discounted cash
flow)
,-Basic GIPS requires valuing portfolios at least monthly
and on the date of all large external cash flows (ECFs).
Large is anything big enough to materially distort the
computation of account or composite return.
GIPS Presentation and Reporting Requirements -
✔✔ANSWER✔✔-Initial report must include at least 5
years unless that composite's strategy has existed for less
than 5 years. Thereafter, add at least 1 year to the
composite presentation record until at least a rolling 10-
year history is included.
GIPS Real Estate Reporting Requirements -
✔✔ANSWER✔✔--Liquid marketable securities such as
REITS, MBS, and Evergreen Funds remain under the
regular provisions of GIPS.
-Basic GIPS requires monthly valuation and
measurement.
-RE valuation is quarterly and can be done internally by
the firm.
-At lest every 12 months, the valuation must be done by
a qualified external source. The external valuation can be
, as infrequent as every 36 months if the client agrees. In
that case, the GIPS report must also disclose the
percentage of composite assets valued externally each
year.
-For CEFs, return must be computed and presented since
inception of the fund using IRR (SI-IRR) and continued
until the fund is liquidated. ECFs for RE used to calculate
SI-IRR must be at least quarterly.
Bounded Rationality - ✔✔ANSWER✔✔-Investors have
limits in their ability to reach optimal decisions.
Satisfice - ✔✔ANSWER✔✔-Investors gather enough
information and perform enough analysis to reach an
acceptable (but not optimal) decision.
Traditional Finance Conclusion that Markets are Efficient -
✔✔ANSWER✔✔-The Price is Right: Suggests asset prices
reflect all available information and adjust
instantaneously to fully incorporate the value of new
information. Therefore, the function of the portfolio
manager is to allocate an investor's portfolio to asset
COMPREHENSIVE
STUDY EXAM LATEST
UPDATE 2024/2025
QUESTIONS AND
ANSWERS GRADED A+
,GIPS Input Requirements - ✔✔ANSWER✔✔--All data
must be captured and documented based on fair value,
using trade date accounting, and including accrued
income for fixed income securities.
-If market value of a security does not exist, the preferred
value approach sequence is the following:
1) Prices of similar assets in active markets.
2) Prices of similar assets in inactive markets.
3) Observable market inputs other than prices (e.g., PE,
div yield)
4) Subjective, unobservable inputs (e.g., discounted cash
flow)
,-Basic GIPS requires valuing portfolios at least monthly
and on the date of all large external cash flows (ECFs).
Large is anything big enough to materially distort the
computation of account or composite return.
GIPS Presentation and Reporting Requirements -
✔✔ANSWER✔✔-Initial report must include at least 5
years unless that composite's strategy has existed for less
than 5 years. Thereafter, add at least 1 year to the
composite presentation record until at least a rolling 10-
year history is included.
GIPS Real Estate Reporting Requirements -
✔✔ANSWER✔✔--Liquid marketable securities such as
REITS, MBS, and Evergreen Funds remain under the
regular provisions of GIPS.
-Basic GIPS requires monthly valuation and
measurement.
-RE valuation is quarterly and can be done internally by
the firm.
-At lest every 12 months, the valuation must be done by
a qualified external source. The external valuation can be
, as infrequent as every 36 months if the client agrees. In
that case, the GIPS report must also disclose the
percentage of composite assets valued externally each
year.
-For CEFs, return must be computed and presented since
inception of the fund using IRR (SI-IRR) and continued
until the fund is liquidated. ECFs for RE used to calculate
SI-IRR must be at least quarterly.
Bounded Rationality - ✔✔ANSWER✔✔-Investors have
limits in their ability to reach optimal decisions.
Satisfice - ✔✔ANSWER✔✔-Investors gather enough
information and perform enough analysis to reach an
acceptable (but not optimal) decision.
Traditional Finance Conclusion that Markets are Efficient -
✔✔ANSWER✔✔-The Price is Right: Suggests asset prices
reflect all available information and adjust
instantaneously to fully incorporate the value of new
information. Therefore, the function of the portfolio
manager is to allocate an investor's portfolio to asset
