CFA( Chartered Financial Analyst )Level I Mock Exam.

1. Richard Cardinal, CFA, is the founder of Volcano Capital Research, an investment management firm whose sole activity is short selling. Cardinal seeks out companies whose stocks have had large price increases. Cardinal also pays several lobbying firms to update him immediately on any legislative or regulatory changes that may impact his target companies. Cardinal sells short those target companies he estimates are near the peak of their sales and earnings and that his sources identify as facing legal or regulatory challenges. Immediately after he sells a stock, Cardinal conducts a public relations campaign to disclose all of the negative information he has gathered on the company, even if the information is not yet public. Which of Cardinal's actions is least likely to be in violation of the CFA Institute Standards of Professional Conduct? A. Selling stock short B. Trading on information from lobbyists C. Disclosing information about target companies 2. Beth Kozniak, a CFA candidate, is an independent licensed real estate broker and a well-known property investor. She is currently brokering the sale of a commercial property on behalf of a client in financial distress. If the client's building is not sold within 30 days, he will lose the building to the bank. A year earlier, another client of Kozniak's had expressed interest in purchasing this same property. However, she is unable to contact this client, and she has not discovered any other potential buyers. Given her distressed client's limited time frame, Kozniak purchases the property herself and forgoes any sales commission. Six months later, she sells the property for a nice profit to the client who had earlier expressed interest in the property. Has Kozniak most likely violated the CFA Institute Standards of Professional Conduct? A. Yes, she did not disclose her potential conflicts of interest to either client B. Yes, she profited on the real estate to the detriment of her financially stressed client C. No 3. Which of the following statements concerning the Global Investment Performance Standards (GIPS) is most likely correct? A. The Standards eliminate the need for in-depth due diligence by investors. B. Compliance with the Standards enhances the credibility of investment management firms. C. Clients or prospective clients benefit from the Standards because the historical track record of compliant firms is accurate and precise