Joan Tasha, CFA, a supervisor at Olympia Advisors (OA), wrote and implemented compliance policies at her firm. A long-time OA employee, Derek Longtree, recently changed the asset allocation of a client, which is inconsistent with her financial needs and objectives and with OA’s policies. Until now, Longtree has never violated OA’s policies. Tasha discusses the issue with Longtree but takes no further action. Do Tasha’s actions concerning Longtree most likely violate any CFA Institute Standards of Professional Conduct?

Which of the following situations most likely helps to explain why the GIPS® standards were created?

Delaney O’Keefe, a CFA candidate, is a portfolio manager at Bahati Management Company. The company is considering investing offshore for the first time, particularly in North America, on behalf of their clientele, all of whom are high-net-worth individuals. O’Keefe does not have experience in offshore investments, so she hires Mark Carlson, CFA, of Carlson Consulting on the sole basis that he has a CFA charter, to undertake due diligence exercises on the top ten portfolio managers in North America, ranked by Assets under Management (AUM). To avoid violating any Code and Standards, O’Keefe should most likely undertake:

Jeffrey Jones passed the Level I CFA examination in 1997 and the Level II examination in 2009. He is not currently enrolled for the Level III examination. According to the CFA Institute Standards of Professional Conduct, which of the following is the most appropriate way for Jones to refer to his participation in the CFA Program?

Victoria Christchurch, CFA, is a management consultant currently working with a financial services firm interested in curtailing its high staff turnover, particularly amongst CFA charterholders. In recent months, the company lost 5 of its 10 most senior managers, all of whom have cited systemic unethical business practices as the reason for their leaving. To curtail staff turnover by encouraging ethical behavior, it would be least appropriate for Christchurch to recommend the company to do which of the following?

Q. Which is an example of an activity that may be legal but that CFA Institute considers unethical?

Raymond Ortiz, CFA, provides investment advice to high-net-worth investors. Ortiz has just completed an analysis of Continental Wheat, a manufacturer of wheat-based food products. He rated the company a long-term hold for investors seeking growth and income. Ortiz’s analysis included a review of the company’s management team, financial data, pro forma financial positions, dividends and dividend policy, and a comparison of Continental with its competitors. Although he does not tell anyone, five years ago, Ortiz worked for and managed the commodities derivatives trading unit of Continental. As part of his compensation at Continental, he received stock, which he still owns. Based upon his research, Ortiz recommends Continental to clients who have a moderate risk tolerance. Two weeks later Continental announces its quarterly earnings are 30% less than a year ago. Consequently, shares of Continental drop by 50%. Ortiz most likely violated the CFA Institute Code of Ethics and Standards of Professional Conduct related to his stock:

Q. Anderb, a portfolio manager for XYZ Investment Management Company—a registered investment organization that advises investment firms and private accounts—was promoted to that position three years ago. Bates, her supervisor, is responsible for reviewing Anderb’s portfolio account transactions and her required monthly reports of personal stock transactions. Anderb has been using Jonelli, a broker, almost exclusively for brokerage transactions for the portfolio account. For securities in which Jonelli’s firm makes a market, Jonelli has been giving Anderb lower prices for personal purchases and higher prices for personal sales than Jonelli gives to Anderb’s portfolio accounts and other investors. Anderb has been filing monthly reports with Bates only for those months in which she has no personal transactions, which is about every fourth month. Which of the following is most likely to be a violation of the Code and Standards?

Sue Kim, CFA, a US citizen, works as an analyst for a subsidiary of a US investment firm on a small island that attracts offshore investment accounts. Local securities laws allow insider trading. While having dinner with the CEO of a local company, Kim learns that the firm is in negotiations to be acquired for a significant premium. Would Kim most likely comply with the CFA Institute Standards if she purchased the company’s shares for her client accounts?

Verification of compliance with the GIPS® standards most likely requires:

Elliott Johnson, CFA, a portfolio manager at Childress Investment Management, a mid-size asset management firm, actively uses social media to discuss his firm’s outlook on the market and the stocks its analysts cover. He frequently posts on the firm’s Facebook page, his personal Twitter account, and the firm’s password-protected website. Which of the following would most likely result in Johnson violating CFA Institute Standard III(B): Fair Dealing?

During an on-site company visit, Marsha Ward, CFA, accidentally overheard the Chief Executive Officer (CEO) of Stargazer, Inc., discussing the company’s tender offer to purchase Dynamica Enterprises, a retailer of Stargazer products. According to the CFA Institute Standards of Professional Conduct, Ward most likely cannot use the information because:

Which of the following activities if undertaken by CFA Institute members and/or candidates would most likely violate the Code and Standards?

The GIPS® standards were most likely developed for the benefit of:

Heidi Katz is a CFA candidate and an analyst at a pension consulting firm. Her father is a major shareholder and managing director at Saturn Partners, a large hedge fund. When assisting in an alternative manager search for a pension client, Katz plans to recommend Saturn’s market-neutral strategy because she feels it meets all of the pension plan’s criteria. Given this situation, the best course of action for Katz is to:

Which of the following statements concerning an investment firm’s historical record is most likely correct according to the GIPS® standards?

Norman Bosno, CFA, acts as an outside portfolio manager to a Sovereign Wealth Fund. Raphel Palmeti, a Fund official, approaches Bosno to interest him in investing in Starlite Construction Company. He tells Bosno if he approves a two million dollar investment in Starlite by the Fund, Bosno will receive a “bonus” that will make him wealthy. Palmeti also adds if Bosno decides not to invest, he will lose the Fund account. After doing a quick and simple analysis, Bosno determines the investment is too risky for the Fund. If Bosno agrees to make the investment, what Standard is least likely to be violated?

Where local performance presentation regulations conflict with GIPS® standards, GIPS-compliant firms should most likely comply with:

Jiro Sato, CFA, deputy treasurer for May College, manages the Student Scholarship Trust. Sato issued a Request for Proposal (RFP) for domestic equity managers. Pamela Peters, CFA, a good friend of Sato, introduces him to representatives from Capital Investments, who submitted a proposal. Sato selected Capital as a manager based on the firm’s excellent performance record. Shortly after the selection, Peters, who had outstanding performance as an equity manager with another firm, accepted a lucrative job with Capital. Which of the CFA charterholders violated the CFA Institute Standards of Professional Conduct?

Q. Stewart has been hired by Goodner Industries, Inc., to manage its pension fund. Stewart’s duty of loyalty, prudence, and care is owed to:

Q. Verification:

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

Danielle Deschutes, CFA, is a portfolio manager who is part of a 10-person team that manages equity portfolios for institutional clients. A competing firm, South West Managers, asks Deschutes to interview for a position within its firm and to bring her performance history to the interview. Deschutes receives written permission from her current employer to bring the performance history of the stock portfolio with her. At the interview, she discloses that the performance numbers represent the work of her team and describes the role of each member. To bolster her credibility, Deschutes also provides the names of institutional clients and related assets constituting the portfolio. During her interview Deschutes most likely violated the CFA Institute Standards of Professional Conduct with regards to:

Marc Davidson, CFA, works as a trust specialist for Integrity Financial. On his own time, Davidson starts a part time consulting business providing advice to Trustees for a fee. Since this is only part time work, he doesn’t inform Integrity of the consulting business. Davidson asks his assistant to compile a list of Integrity’s clients and their contact information. The following month, Davidson is offered a similar role at Integrity’s largest competitor, Legacy Trust Services, Inc. After he begins working at Legacy, his new manager arranges for him to meet with a number of prospective clients, many of whom are clients of Integrity. After meeting with Davidson, a number of former Integrity clients decide to transfer their business to Legacy. Did Davidson’s action violate the Code and Standards?

Q. During a round of golf, Rodriguez, chief financial officer of Mega Retail, mentions to Hart, a local investment adviser and long-time personal friend, that Mega is having an exceptional sales quarter. Rodriguez expects the results to be almost 10% above the current estimates. The next day, Hart initiates the purchase of a large stake in the local exchange-traded retail fund for her personal account.

Which of the following is most likely an example of an overconfidence bias leading to poor ethical decision making?

The following excerpt was taken from the notes of a company’s financial statements that were prepared in accordance with International Financial Reporting Standards. All figures are in thousands of Australian dollars. Note 12/ Broadcast Licenses/ During 2014, the company successfully disposed of broadcast licenses that were held for sale for A$37,900 (net book value of A$23,500). Based on the successful completion of that sale, the impairment losses taken in 2012 on other licenses have been reversed, restoring those intangible assets to their amortized historical cost. Broadcast licenses are amortized over a period of 15–25 years./ The note leads an analyst to believe that the rapid reversal of the impairment loss related to the broadcast licenses arose as an attempt by management to manage earnings./ If the analyst’s belief is correct, her analysis of the original 2013 financial statements would most likely have shown that, compared with the economic reality in 2013, the company had:

Q. When total revenue is greater than total variable costs but less than total costs, in the short term a firm will most likely:

Q. 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:

At the time of issue, for a corporate bond that sells at par, the liability on the issuer's balance sheet would be:

Q. A manager will select 20 bonds out of his universe of 100 bonds to construct a portfolio. Which formula provides the number of possible portfolios?

Q. The value in six years of $75,000 invested today at a stated annual interest rate of 7% compounded quarterly is closest to:

Given stable inflation, a tight fiscal policy accompanied by easy monetary policy will most likely:

Q. At a 5% interest rate per year compounded annually, the present value (PV) of a 10-year ordinary annuity with annual payments of $2,000 is $15,443.47. The PV of a 10-year annuity due with the same interest rate and payments is closest to:

Q. For its fiscal year-end, Calvan Water Corporation (CWC) reported net income of $12 million and a weighted average of 2,000,000 common shares outstanding. The company paid $800,000 in preferred dividends and had 100,000 options outstanding with an average exercise price of $20. CWC’s market price over the year averaged $25 per share. CWC’s diluted EPS is closest to:

Q. The management of Bank EZ repurchases its own bonds in the open market. They pay €6.5 million for bonds with a face value of €10.0 million and a carrying value of €9.8 million. The bank will most likely report:

Q. A company is comparing straight-line and double-declining balance amortization methods for a non-renewable six-year license, acquired for €600,000. The difference between the Year 4 ending net book values using the two methods is closest to:

Q. Which attribute of financial reports would most likely be evaluated as optimal in the financial reporting spectrum?

Q. A decrease in a country’s total imports is most likely caused by:

Q. A company issues €10,000,000 face value of 10-year bonds dated 1 January 2015 when the market interest rate on bonds of comparable risk and terms is 6%. The bonds pay 7% interest annually on 31 December. Based on the effective interest rate method, the interest expense on 31 December 2015 is closest to:

Q. Because of a sharp decline in real estate values, the household sector has increased the fraction of disposable income that it saves. If output and investment spending remain unchanged, which of the following is most likely?

Q. A national government responds to a severe recession by funding numerous infrastructure projects using deficit spending. Which school of economic thought is most consistent with such action?

Trade receivables are most commonly reported at:

Q. A company doing business in a monopolistically competitive market will most likely maximize profits when its output quantity is set such that:

Q. Investment property is most likely to:

A gourmet pizza restaurant did very well in the first six months it was open, with tables full and waiting lines during peak periods. The owner realized that if the table turnover rate were higher, he could serve more dinners every evening and increase profits. He added two servers, and both revenues and profits increased. Adding an additional two servers, however, did not increase revenues and profits proportionately, because the serving staff now had to wait longer for the kitchen to cook the orders. Which of the following best describes the problem the restaurant is experiencing and the potential solution? The restaurant is experiencing diminishing returns to:

Q. A company chooses to change an accounting policy. This change requires that, if practical, the company restate its financial statements for:

Q. In a discrete uniform distribution with 20 potential outcomes of integers 1–20, the probability that X is greater than or equal to 3 but less than 6, P(3 ≤ X < 6), is:

Q. Under IFRS, what must be disclosed under the cost model of valuation for investment properties?

Q. Which ratio would a company most likely use to measure its ability to meet short-term obligations?

If two events, A and B, are independent, and the probability of A does not equal the probability of B [i.e., P(A) ≠ P(B)], then the probability of event A given that event B has occurred [i.e., P(A | B)] is best described as:

According to US GAAP, the payment of cash dividends during the year will most likely affect the cash flow from which type of activity?

Q. Which of the following amortization methods is most likely to evenly distribute the cost of an intangible asset over its useful life?

Q. Disinflation is best described as a:

Q. When evaluating mean differences between two dependent samples, the most appropriate test is a:

Under general principles of expense recognition, a company should:

Q. The three major classifications of activities in a cash flow statement are:

During a period of rising inventory costs, a company decides to change its inventory method from FIFO to the weighted average cost method. Under the weighted average method, which of the following financial metrics will most likely be higher than under FIFO?

An economist expects the following: The decline in the unemployment rate will result in higher revenues for home retailers./ A tighter labor market will put upward pressure on wages, compelling home retailers to raise prices./ Q. Which type of inflation best corresponds to the economist’s expectations?

Q. Which of the following would an analyst most likely be able to determine from a common-size analysis of a company’s balance sheet over several periods?

Q. Information about a company’s objectives, strategies, and significant risks are most likely to be found in the:

Which of the following most likely results in an increase of owners’ equity?

An investor deposits £2,000 into an account that pays 6% per annum compounded continuously. The value of the account at the end of four years is closest to:

Which of the following is best described as a discrete random variable?

Which of the following will most likely cause the short-run aggregate supply (SRAS) curve to shift to the right?

Q. Which of the following is not a constraint on the financial statements according to the Conceptual Framework?

Assume that a central bank has decided to lower interest rates in the economy. To carry out this policy, the central bank will most likely:

Q. Over time, the market share of the dominant company in an oligopolistic market will most likely:

Q. If the price elasticity coefficient of the demand curve for paper clips is equal to −1, demand is:

In an effort to influence the economy, a central bank conducted open market activities by selling government bonds. This action implies that the central bank is most likely attempting to:

After a two-for-one stock split, which of the following will most likely change relative to its pre-split value?

Q. Which of the following represents a correct statement about the p-value?