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Test Prep CFA-Level-I Exam Questions
CFA® Level I Chartered Financial Analyst (Page 32 )

Updated On: 28-Feb-2026
Page 32 of 793
PDF with 3963 Questions

Mike Jordan recently met his old friend, Charlie Barklee, who's an accomplished statistician. Charlie showed him his new model for predicting stock prices and after considerable discussion, Mike was convinced the model was a viable alternative to his current methodology for picking stocks. To test it, he downloaded historical data from a well-known statistical data provider's web site. The tests indicated that some parts of the model needed fine tuning, which Mike implemented himself, without Charlie's help. Mike:

  1. cannot circulate the model since it is not publicly available.
  2. can show his clients the model, without any special disclosures, because all of the tests were done by him with publicly available data.
  3. none of these answers.
  4. must acknowledge Charlie's contribution. Otherwise, he would be in violation of the code of ethics and be subject to disciplinary action from AIMR.

Answer(s): D

Explanation:

Standard II (C) - Prohibition against Plagiarism.



The ________ assumption must be disclosed if results are presented after taxes.

  1. composite
  2. tax rate
  3. settlement-date
  4. selection
  5. trade

Answer(s): B

Explanation:

To be in compliance with the PPS, a firm's presentation of its investment performance must disclose the tax rate information.



Standard IV (B.5), Preservation of Confidentiality specifically states that one may not enter into ________ that may prevent a party from cooperating with the Professional Conduct Program (PCP) in its investigation of the member's alleged violations of the Code and Standards.

  1. settlement agreements
  2. confidential conversations
  3. priority dealings
  4. business relationships

Answer(s): A

Explanation:

Under Standard IV (B.5), members are prohibited from executing settlement agreements that may prevent a customer or other party from providing information, documents, or testimony or otherwise cooperating with the PCP in its investigation.



When dealing with a trust, according to the Prudent Man Rule, trustees must:

  1. apply "all reasonable efforts" to the remaindermen.
  2. be impartial between income beneficiaries and remaindermen.
  3. take into account income beneficiaries first, then the remaindermen.
  4. take into account the remaindermen first, then the income beneficiaries.
  5. apply "all reasonable efforts" to the income beneficiaries.

Answer(s): B

Explanation:

Under the Prudent Man Rule, trustees must be impartial between income beneficiaries and remaindermen and must achieve an equitable balance between current income and the preservation of principal in real terms.



Standard IV (A.3) relates to two major components, Independence and Objectivity. Under this Standard, modest gifts that do not exceed ________ and entertainment are acceptable, without disclosure.

  1. $100
  2. one-twentieth of your annual salary and bonus
  3. one-tenth of your annual salary and bonus
  4. $500
  5. none of these answers
  6. $1,000

Answer(s): A

Explanation:

External sources may try to influence the investment process by offering analysts and portfolio managers a variety of "perks." The perks may include gifts, invitations to lavish functions, tickets and so on. Modest gifts that do not exceed $100 and entertainment are acceptable, but special care should be taken by member analysts and investment managers to resist subtle and not-so-subtle pressures to act in a manner possibly detrimental to their clients.



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