QUESTION: 41

If a firm uses discretionary leverage, it must present performance using:

all-cash basis i.e. removing leverage effects.
both actual returns and all-cash basis.
none of these answers.
actual returns.

Answer(s): B

Explanation:

For discretionary leverage, both actual returns and all-cash returns must be presented.

Kruskal Meriwether is a senior research analyst with Bellwether Advisors. He has been following Crystals &

Candles a publicly traded firm which makes high-quality diamond jewelry. Kruskal, after extensive interviews with senior management at Crystals, has inferred that the firm is about to take over a diamond- mining firm in South Africa at a rock-bottom price. The Crystal management has refused to explicitly confirm or deny this but Kruskal firmly believes that such a deal is in the works. He has not used any inside information; just pieced together information from various avenues to come to this conclusion. In his reports, he states, "All my research seems to indicate that Crystal & Candles is likely to buy a South African diamond producer at a bargain price. Clearly, now is the time to buy Crystal and Candles' stock." 2 weeks after his report is released, Crystal's management announces that it has no intentions of making any acquisitions in the near future. This leads to a 7% decline in Crystal's stock, causing a large decline in the accounts of Kruskal's clients. Kruskal has

violated Standard IV (1) - Reasonable Basis & Representation.
not violated any AIMR code in this incident.
violated Standard IV (B.2) - Portfolio Investment Recommendations and Actions.
violated Standard IV (B.1) - Fiduciary Duties.

Answer(s): B

Explanation:

Kruskal's recommendations were not based on whim, unsubstantiated rumors or inside information. It is clear that he put in much research behind his recommendation. The fact that his recommendation turned out to an incorrect choice ex post does not mean he was negligent. An investment advisor cannot be expected to be correct 100% of the time. What is expected of them is professional competence and diligence (Code of Ethics).
Nothing in this incident indicates that Kruskal lacked either of these.

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QUESTION: 43

Standard II (C) deals with ________.

None of these answers
Obligation to Inform Employer of Code and Standards
Disclosure of Conflicts to Employer
Duty to Employer
Fundamental Responsibilities
Plagiarism
Use of Professional Designation
Professional Misconduct

Answer(s): F

Explanation:

Standard I deals with Fundamental Responsibilities. Standard II (A) deals with Use of Professional Designation.
Standard II (B) deals with Professional Misconduct. Standard II (C) deals with Plagiarism. Standard III (A) deals with the Obligation to Inform Employer of Codes and Standards. Standard III (B) deals with the Duty to Employer. Standard III (C) deals with Disclosure of Conflicts to Employer.

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QUESTION: 44

Which of the following AIMR Standards states that client transactions must have priority over transactions in which the analyst is a beneficial owner?

V
None of these answers
VII
VI

Answer(s): B

Explanation:

It is Standard IV (B.4) which states that client transactions must have priority over transactions in which the analyst is a beneficial owner so that such personal transactions do not operate adversely to their client's or employer's interests.

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Free CFA-Level-I Exam Braindumps (page: 11)

QUESTION: 41

Explanation:

QUESTION: 42

Explanation:

QUESTION: 43

Explanation:

QUESTION: 44

Explanation: