Rule has worked as a portfolio manager for a large investment management firm for the past 10 years. Rule earned his CFA charter last year and has decided to open his own investment management firm. After leaving his current employer, Rule creates some marketing material for his new firm. He states in the material, “In earning the CFA charter, a highly regarded credential in the investment management industry, I further enhanced the portfolio management skills learned during my professional career. While completing the examination process in three consecutive years, I consistently received the highest possible scores on the topics of Ethics, Alternative Investments, and Portfolio Management.” Has Rule violated Standard VII(B)–Reference to CFA Institute, the CFA Designation, and the CFA Program in his marketing material?

Which of the following statements is correct under the Code and Standards?

Which of the following is least likely a requirement of the GIPS standards? Firms are required to:

A profession is most likely described as a group of people that:

Sergio Morales, CFA, believes he has found evidence that his supervisor is engaged in fraudulent activity involving a client’s account. When Morales confronts his supervisor, he is told the client is fully aware of the issue. Later that day, Morales contacts the client and upon disclosing the fraudulent activity, is told by the client to mind his own business. Following the requirements of local law, Morales provides all of his evidence, along with copies of the client’s most recent account statements, to a government whistle blower program. Has Morales most likely violated the CFA Institute Standards of Professional Conduct?

To maintain trust, the investment management profession must be interdependent with:

Jacques Lagarde, CFA, is a sell-side analyst at Springhill Financial, a small investment bank. Springhill is the lead manager for the equity offering of Chorale Music. Lagarde is not part of the IPO team for this offering. While finalizing a research report on Chorale, Lagarde discovers inconsistencies that makes him believe the company may have concealed losses in its leasing division last quarter that would significantly reduce its earnings. Lagarde suspects that Springhill’s investment banking team are aware of these unreported losses. The prospectus for Chorale’s equity offering has already been approved by regulators and distributed to potential investors. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, Lagarde should most likely:

Amanda Covington, CFA, works for McJan Investment Management. McJan employees must receive prior clearance of their personal investments in accordance with McJan’s compliance procedures. To obtain prior clearance, McJan employees must provide a written request identifying the security, the quantity of the security to be purchased, and the name of the broker through which the transaction will be made. Pre-cleared transactions are approved only for that trading day. As indicated below, Covington received prior clearance.

While waiting in the business class lounge before boarding an airplane, Becca Msafari, CFA, an equity analyst, overhears a conversation by a group of senior managers, including members of the Board, from a large publicly listed bank. The managers discuss staff changes necessary to accommodate their regional expansion plans. Msafari hears several staff names mentioned. Under what circumstances could Msafari most likely use this information when making an investment recommendation to her clients?

Leng Bo, CFA, is a bond portfolio manager for individual investors. Last year, a client whose portfolio is limited to investment-grade bonds approved Bo’s purchase of a below investment grade bond. Because yields in the high grade fixed-income markets declined, Bo subsequently decides to enhance this client’s portfolio by investing in several additional bonds with ratings one or two notches below investment grade. The investment strategy implemented by Bo most likely violated which of the following CFA Institute Standards of Professional Conduct?

A key feature of the GIPS standards is that:

Jean-Luc Schlumberger, CFA, is an independent research analyst providing equity research on companies listed on exchanges in emerging markets. He often incorporates statistical data he obtains from the web sites of the World Bank and the central banks of various countries into the body of his research reports. While not indicated within the reports, whenever his clients ask where he gets his information he informs them the information is in the public domain but he doesn’t keep his own records. When the clients ask for the specific web site addresses he provides the information. Which Standard has Schlumberger least likely violated?

Situational influences in decision making will most likely be minimized if:

Which of the following statements is most likely consistent with the CFA Institute Code of Ethics? CFA Institute members and CFA candidates must:

Priscilla Moab, CFA, is the director of marketing at Red Lantern Investments. Red’s investment approach uses technical and fundamental analysis as well as portfolio construction to minimize risk. Moab plans to market an online investment newsletter to retail clients. Moab decides to let prospective clients have access to Red’s buy and sell recommendation list by posting this information on a social media site. The posting also provides information on Red’s basic investment process and logic. To avoid violating the CFA Institute Code of Ethics and Standards of Professional Conduct, Moab should most likely:

A regulator who requires financial advisers to merely consider the suitability of a product when making recommendations to their clients would most likely be setting:

Ethical conduct is most likely behavior that:

Gregor Pavlov, CFA, is a fund manager working for the general partner of a new private equity fund. Pavlov includes in the fund marketing material his performance history from his previous employer. He received permission from his former employer to take his historical recommendations and the supporting research reports he used to make those recommendations. Did Pavlov most likely violate the CFA Institute Standards?

Firms claiming compliance with GIPS standards are most likely required to:

Paper was recently terminated as one of a team of five managers of an equity fund. The fund had two value-focused managers and terminated one of them to reduce costs. In a letter sent to prospective employers, Paper presents, with written permission of the firm, the performance history of the fund to demonstrate his past success.

Upon receiving notification that he passed his Level III CFA exam, Paulo Garcia updates his educational background on his social media site by adding “completed the CFA course.” Does Garcia most likely violate the CFA Institute Standards of Professional Conduct?

Albert Nyakenda, CFA, was driving to a client’s office where he was expected to close a multi-million-dollar deal when he was pulled over by a traffic policeman although he did not believe he had violated any traffic laws. When Nyakenda realized the policeman planned to wrongly ticket him for speeding, he offered to buy him “lunch” so that he could quickly get to his client’s office. The lunch would cost significantly more than the ticket. The alternative was to go to the police station and file a complaint of being wrongly accused that would also involve going to court the next day to present his case. Did Nyakenda most likely violate the CFA Code of Ethics?

Lisa Hajak, CFA, specialized in research on real estate companies at Cornerstone Country Bank for the past twenty years. Hajak recently started her own investment research firm, Hajak Investment Advisory. One of her former clients at Cornerstone asks Hajak to update a research report she wrote on a real estate company when she was at Cornerstone. Hajak updates the report, which she had copied to her personal computer without the bank’s knowledge, and replaces references to the bank with her new firm, Hajak Investment Advisory. Hajak also incorporates the conclusions of a real estate study conducted by the Realtors Association that appeared in the Wall Street Journal. She references the Journal as her source in her report. She provides the revised report free of charge along with a cover letter for the bank’s client to become a client of her firm. Concerning the reissued research report, Hajak least likely violated the CFA Institute Standards of Professional Conduct because she:

Madeline Smith, CFA, was recently promoted to senior portfolio manager. In her new position, Smith is required to supervise three portfolio managers. Smith asks for a copy of her firm’s written supervisory policies and procedures, but is advised that no such policies are required by regulatory standards in the country where Smith works. According to the Standards of Practice Handbook, Smith’s most appropriate course of action would be to:

Specialized knowledge and skills, a commitment to serve others, and a shared code of ethics best characterize a(n):

Several years ago, Leo Peek, CFA, co-founded an investment club. The club is fully invested but has not actively traded its account for at least a year and does not plan to resume active trading of the account. Peek’s employer requires an annual disclosure of employee stock ownership. Peek discloses all of his personal trading accounts, but does not disclose his holdings in the investment club. Peek’s actions are least likely to be a violation of which of the CFA Institute Standards of Professional Conduct?

The elasticity of demand for a good is most likely greater when:

A company plans to hire additional factory employees. In the short run, marginal returns are most likely to decrease if:

Assuming no changes in other variables, which of the following would decrease ROA?

A US company that complies with US GAAP would like to exclude some items in determining non-GAAP financial measures, other than EBIT and EBITDA. Which of the following items may be excluded?

The conditional expected value of a random variable is best described as the:

Oil Exploration LLC paid $45,000 in printing, legal fees, commissions, and other costs associated with its recent bond issue. It is most likely to record these costs on its financial statements as:

The Austrian economic school attributes the primary cause of the business cycle to:

Which technique most likely increases the cash flow provided by operations?

Which of the following components of the cash flow statement may be prepared under the indirect method under both IFRS and US GAAP?

An increase in sample size is most likely to result in a:

For a distribution of 2,000 observations with finite variance, sample mean of 10.0%, and standard deviation of 4.0%, what is the minimum number of observations that will lie within 8.0% around the mean according to Chebyshev's Inequality?

Which of the following international trade organizations has a mission to help developing countries fight poverty and enhance environmentally sound economic growth?

Which of the following statements is correct with respect to the null hypothesis?

A prolonged period of an official interest rate very close to zero without an increase in economic growth most likely suggests:

A hypothesis test for a normally-distributed population at a 0.05 significance level implies a:

The probability of an event given that another event has occurred is a:

A random variable with a finite number of equally likely outcomes is best described by a:

The crowding-out effect is most likely associated with:

Assume the companies use a periodic inventory system. 

A company that prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) uses the revaluation model to value land. At the end of the current year, the value of land, newly acquired this year, has increased and will be adjusted on the balance sheet. This land is the only asset in its asset class for revaluation purposes. Which of the following statements is most accurate? In the current period, the revaluation of the land will:

Normal profit is best described as:

A company has recorded an expense for interest costs that have not yet been paid as of the balance sheet date. On the balance sheet, they are best reported as:

Which of the following disclosures regarding new accounting standards provides the most meaningful information to an analyst?

The analytical tool that would be most appropriate for an analyst to use to identify the percentage of a company’s assets that are liquid is the:

Which of the following descriptions of financial reporting is considered to be of the highest quality?

A company that prepares its financial statements using IFRS wrote down its inventory value by €20,000 at the end of year 1. In year 2, prices increased and the same inventory at the end of the year was worth €30,000 more than its value at the end of the prior year. Which of the following statements is most accurate? In year 2, the company’s cost of sales:

Previously, a manufacturer of high-quality industrial electrical generators only sold its units to customers, but it has just introduced a leasing program. The generators have expected useful lives of about 25 years, and the company anticipates that the leases will have a term of 20 years or more. If the company reports under International Financial Reporting Standards, which of the following statements about the first year of the new leasing program is most accurate? The company will recognize:

For financial assets classified as trading securities, how are unrealized gains and losses reflected in shareholders’ equity?

Which of the following situations will most likely motivate managers to inflate reported earnings?

Over a four-year period, a portfolio has returns of 10%, −2%, 18%, and −12%. The geometric mean return across the period is closest to:

A fund manager reported a 2% mean quarterly return over the past ten years for its entire base of 250 client accounts that all follow the same investment strategy. A consultant employing the manager for 45 client accounts notes that their mean quarterly returns were 0.25% less over the same period. The consultant tests the hypothesis that the return disparity between the returns of his clients and the reported returns of the fund manager’s 250 client accounts are significantly different from zero.

Which of the following statements is correct with respect to the p-value?

Under conditions of perfect competition, a company will break even when market price is equal to the minimum point of the:

A call option on a stock index is valued using a three-step binomial tree with an up move that equals 1.05 and a down move that equals 0.95. The current level of the index is $190, and the option exercise price is $200. If the option value is positive when the stock price exceeds the exercise price at expiration and $0 otherwise, the number of terminal nodes with a positive payoff is:

In the case of a normal good with a decrease in own price, which of the following statements is most likely true?

An agricultural firm operating in a perfectly competitive market supplies wheat to manufacturers of consumer food products and animal feeds. If the firm were able to expand its production and unit sales by 10% the most likely result would be:

Accounts payable are:

For a small sample with unknown variance, which of the following tests of a hypothesis concerning the population mean is most appropriate?

In a simple economy with no foreign sector, the following equations apply:

Which of the following indicators is most appropriate in predicting a turning point in the economy?

With regard to the data in Problem 6, what would be the most reasonable explanation of the financial data?

Which of the following statements regarding the characteristics of money is correct?

The least likely goal of a government’s fiscal policy is to:

Which of the following statements regarding balance sheets is correct?

Which of the following risk premiums is most relevant in explaining the difference in yields between 30-year bonds issued by the US Treasury and 30-year bonds issued by a small private issuer?

For financial assets classified as available for sale, how are unrealized gains and losses reflected in shareholders’ equity?