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Free CFA-Level-I Exam Braindumps (page: 45)

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PDF with 3963 Questions

According to Standard V (B), firms can claim compliance with the PPS only if their presentation is ________ in compliance with the Performance Presentation Standards in all material respects.

  1. none of these answers
  2. retroactively
  3. fully
  4. at least 50 percent
  5. partially

Answer(s): C

Explanation:

If members or firms want to claim compliance with PPS, their presentation must be fully in compliance with the PPS in all material respects. To claim compliance with the PPS without meeting the mandatory requirements of the PPS is a violation of Standard V (B).



________ provide a relative measure for the riskiness of a strategy.

  1. Volatility measures
  2. Benchmarks
  3. Indexes
  4. Investor universes
  5. Disclosures

Answer(s): B

Explanation:

Benchmarks, including market indexes, manager universes and normal portfolios, provide a relative measure for the riskiness of a strategy.



Shortin Mart is a quantitative research analyst with Dataminers, an investment advisory firm which prides itself on finding patterns in past market data. Shortin recently used data on high-yield, distressed firm corporate convertible bonds and discovered that over the last 3 years, this class has generated an astounding 76% rate of return (assuming optimal conversion). Realizing that this result is mainly due to a strong bull market, he recommends to his portfolio managers that if they believe the market will be bullish over the next year, they should add extreme junk bonds to their portfolios. Shortin has

  1. not violated any code of ethics.
    II. has violated Standard IV (1) - Reasonable Basis & Representations.
    III. has violated Standard IV (2) - Research Reports.
    IV. has violated Standard IV (B.2) - Portfolio Investment Recommendations and Actions.
  2. III and IV only
  3. II and III only
  4. I only
  5. II only

Answer(s): D

Explanation:

In the present case, Shortin was negligent in that he did not carry out through analysis of his result. For one, he should have used a much longer period to determine a pattern. Second, he should have been careful in laying out all the caveats to his result and even questioned the validity of the result. By not following such a course, he violated Standard IV (A.1) - Reasonable Basis & Representations. Note that he has not violated Standard IV (A.2) - Research Reports.



The primary determinant of a fiduciary's powers and duties are to be found in the ________.

  1. board of director's meeting minutes
  2. governing documents (trust documents & investment management agreements)
  3. FDIC General Rules
  4. ERISA Statement of Procedures
  5. none of these answers
  6. ERISA Funding Guidelines

Answer(s): B

Explanation:

Fiduciaries must manage any pool of assets in their control in accordance with the terms of the governing documents (such as trust documents and investment management agreements), which are the primary determinant of a fiduciary's powers and duties. Whenever their actions are contrary to provisions of those instruments or applicable law, fiduciaries are exposed to liability through litigation brought by parties at interest.






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