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Free CFA-Level-I Exam Braindumps (page: 44)

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PDF with 3963 Questions

According to the AIMR PPS, composites must include new portfolios at the start of the next performance measurement period, ________, after the portfolio comes under management or according to reasonable and consistently applied firm guidelines.

  1. at least annually
  2. at least semi-annually
  3. at least quarterly
  4. at least monthly

Answer(s): C

Explanation:

Composites must include new portfolios at the start of the next performance measurement period (at least quarterly) after the portfolio comes under management or according to reasonable and consistently applied firm guidelines. This is a requirement for creation and maintenance of composites.



Procedures for compliance with Standard I include ________.

  1. activities relating to interns and people under contract
  2. keep informed
  3. when you suspect illegal activity, determine legality
  4. when you suspect illegal activity, dissociate from that activity
  5. all of these answers
  6. maintain current files
  7. review procedures

Answer(s): E

Explanation:

Members should maintain current reference copies of applicable statutes, rules and regulations in a readily accessible manner. Members should establish a procedure by which employees are kept informed about changes in applicable laws. Members should review procedures on a regular basis to ensure that they reflect current law and provide adequate guidance. When a member suspects illegal activity is being conducted, the member should consult counsel to determine the conduct's legality and dissociate from the conduct if there are reasonable grounds to believe that it is illegal. This applies to the activities of interns or contractors as well.



What is the effective date for compliance with the AIMR-Performance Presentation Standards for including accrued income in market value performance calculations?

  1. January 1, 1997
  2. January 1, 1993
  3. July 1, 1995
  4. January 1, 1992

Answer(s): A

Explanation:

From January 1, 1997, going forward, all of the firm's composites and performance presentations must include accrued income in market value performance calculations. In addition, all of the firm's performance presentations, including presentations of historical performance, must contain a measure of composite dispersion.



Wolfram Hitchwalker is a money manager with Armadillo Investments. He currently manages a few retirement accounts, clients who have a steady current income need and are averse to capital loss. Wolfram recently read a research report which concluded that the stock of HighFly, Inc. was a great buy because of a pending expansion plan into Southeast Asia which would double the profits of HighFly from foreign operations. Wolfram decided that the analysis was sound and that his clients could gain significantly if he bought the HighFly stock now and sold it once the price run-up occurred. Accordingly, he sold some of the fixed income securities in his client accounts and bought shares of HighFly. After two weeks, he sold the shares at a substantial profit and reinvested the funds back in fixed income securities. Wolfram has

  1. not violated any code of ethics since the investment was wise and made his clients better off.
    II. has violated Standard IV (1) - Reasonable Basis & Representations.
    III. has violated Standard IV (B.1) - Fiduciary Duties.
    IV. has violated Standard IV (B.2) - Portfolio Investment Recommendations and Actions.
  2. II and IV only
  3. III and IV only
  4. I only
  5. II only
  6. IV only
  7. III only

Answer(s): A

Explanation:

Even though the transaction turned out to be profitable for the clients ex post, the decision to invest in the stock was unwise ex ante. Wolfram should have recognized that his clients do not have the risk appetite for speculative securities, given their need for current income and preservation of the principal. Clearly, speculation in stocks is not an appropriate investment for these clients.






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