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:

An investment fund manager has a finance degree and over 20 years of experience working for a top-ranking asset management firm. Based only on this information, could the investment fund manager most likely claim to be part of a profession?

If you are seeking guidance from the firm’s code of ethics or written policies, your actions most likely reflect which phase of an ethical decision-making framework?

Justin Blake, CFA, a retired portfolio manager, owns 20,000 shares of a small public company that he would like to sell because he is worried about the company’s prospects. He posts messages on several internet bulletin boards. The messages read, “This stock is going up once the pending patents are released, so now is the time to buy. The stock is a buy at anything below $3. I have done some close research on these guys.” According to the Standards of Practice Handbook, Blake most likely violated the Standard or Standards associated with:

On a flight to Europe, Romy Haas, CFA, strikes up a conversation with a fellow passenger, Vincent Trujillo. When Trujillo learns that Haas is in the investment profession, he asks about the CFA designation. Haas tells him the following about the CFA designation: Statement 1 Individuals who have completed the CFA Program have the right to use the CFA designation. Statement 2 The CFA designation is globally recognized, which is why I use it as part of my firm’s name. Statement 3 CFA charterholders must satisfy membership requirements to continue using the designation. In explaining the use of the CFA designation, Haas least likely violated the CFA Institute Standards of Professional Conduct concerning which of the following statements?

According to the Global Investment Performance Standards (GIPS®), which of the following is not a part of the verification process? Testing whether the:

Edo Ronde, CFA, an analyst for a hedge fund, One World Investments, is attending a key industry conference for the microelectronics industry. At lunch in a restaurant adjacent to the conference venue, Ronde sits next to a table of conference attendees and is able to read their nametags. Ronde realizes the group includes the president of a publicly traded company in the microelectronics industry, Fulda Manufacturing, a company Ronde follows. Ronde overhears the president complain about a production delay problem Fulda’s factories are experiencing. The president mentions that the delay will reduce Fulda earnings more than 20% during the next year if not solved. Ronde relays this information to the portfolio manager he reports to at One World explaining that in a recent research report he recommended Fulda as a buy. The manager asks Ronde to write up a negative report on Fulda so the fund can sell the stock. According to the CFA Institute Code of Ethics and Standards of Professional Conduct Ronde should least likely:

Q. ABC Investment Management acquires a new, very large account with two concentrated positions. The firm’s current policy is to add new accounts for the purpose of performance calculation after the first full month of management. Cupp is responsible for calculating the firm’s performance returns. Before the end of the initial month, Cupp notices that one of the significant holdings of the new accounts is acquired by another company, causing the value of the investment to double. Because of this holding, Cupp decides to account for the new portfolio as of the date of transfer, thereby allowing ABC Investment to reap the positive impact of that month’s portfolio return.

Vishal Chandarana, an unemployed research analyst, recently registered for the CFA Level I exam. After two months of intense interviewing, he accepts a job with a stock brokerage company in a different region of the country. Chandarana posts on a social media blog how being a CFA candidate really helped him get a job. He also notes how relieved he was when his new employer didn’t ask him about being fired from his former employer. Which CFA Institute Code of Ethics or Standards of Professional Conduct did Chandarana least likely violate?

Which of the following statements related to requirements for the CFA Institute Standards of Professional Conduct Standard V(B)–Communication with Clients and Prospective Clients is least likely accurate? The standard requires members and candidates to:

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:

Bailey Watson, CFA, manages 25 emerging market pension funds. He recently had the opportunity to buy 100,000 shares in a publicly listed company whose prospects are considered “above industry norm” by most analysts. The company’s shares rarely trade because most managers take a “buy and hold” strategy due to the company’s small free float. Before placing the order with his dealer, Watson allocated the shares to be purchased according to the weighted value of each of his clients’ portfolios. When it came time to execute the trades, the dealer was only able to purchase 50,000 shares. To prevent violating Standard III(B)–Fair Dealing, it would be most appropriate for Watson to reallocate the 50,000 shares purchased by:

Q. Long has been asked to be the keynote speaker at an upcoming investment conference. The event is being hosted by one of the third-party investment managers currently used by his pension fund. The manager offers to cover all conference and travel costs for Long and make the conference registrations free for three additional members of his investment management team. To ensure that the conference obtains the best speakers, the host firm has arranged for an exclusive golf outing for the day following the conference on a local championship-caliber course. Which of the following is least likely to violate Standard I(B)?

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:

Rebecca Wong is enrolled to take the Level I CFA examination. Her friend William Leung purchased Level I study materials from a well-known CFA review program the previous year. Leung made a photocopy of the previous year’s copyrighted materials and sold it to Wong to help her study. Who most likely violated the CFA Institute Code of Ethics or any Standards of Professional Conduct?

The benefits of an ethical decision-making framework would least likely include:

Q. Which of the following is a correct statement of a member’s or candidate’s duty under the Code and Standards?

Q. The mosaic theory holds that an analyst:

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?

Q. Brown works for an investment counseling firm. Green, a new client of the firm, is meeting with Brown for the first time. Green used another counseling firm for financial advice for years, but she has switched her account to Brown’s firm. After spending a few minutes getting acquainted, Brown explains to Green that she has discovered a highly undervalued stock that offers large potential gains. She recommends that Green purchase the stock. Brown has committed a violation of the Standards. What should she have done differently?

Q. As stated in the revised 11th edition, the Standards of Professional Conduct:

Claire Jones, CFA, is an analyst following natural gas companies in the United States. At an industry energy conference, the CFO of Alpine Energy states they are interested in making strategic acquisitions. At a separate event, Alpine’s head of exploration commented he is bullish on natural gas production prospects within Northeastern Pennsylvania. Jones is aware that Alpine currently has very little exposure to this region. She also knows another company in her universe, Pure Energy, Inc., is based in Northeastern Pennsylvania and controls significant assets in the area. Pure Energy is highly leveraged, and Jones believes they will need to raise additional capital or partner with another firm to move to the production phase with their assets. Jones attempts to contact Alpine’s CEO with an unrelated question and is told he is unavailable because he is on a business trip to Northeastern Pennsylvania. Jones updates her research on Pure Energy and then recommends the stock to Lisa Wong, CFA, a portfolio manager who purchases significant positions in client accounts. The following week, Pure Energy announces that they have entered into an agreement to be purchased by Alpine for a significant premium. Has either Jones or Wong most likely violated Standards with regards to the integrity of capital markets?

Q. The Responsibilities as a CFA Institute Member or CFA Candidate Standard explicitly states a requirement regarding:

While at a bar in the financial district after work, Ellen Miffitt, CFA, overhears several employees of a competitor discuss how they will manipulate down the price of a thinly traded micro cap stock’s price over the next few days. Miffitt’s clients have large positions of this stock so when she arrives at work the next day she immediately sells all of these holdings. Because she had determined the micro cap stock was suitable for all of her accounts at its previously higher price, Miffitt buys back her client's original exposure at the end of the week at the new, lower price. Which CFA Institute Standards of Professional Conduct did Miffitt least likely violate?

According to the Code and Standards regarding knowledge of laws and regulations, CFA Institute members and candidates must:

Q. Cinnamon, Inc. recorded a total deferred tax asset in Year 3 of $12,301, offset by a $12,301 valuation allowance. Cinnamon most likely:

Q. An analyst calculated the excess kurtosis of a stock’s returns as −0.75. From this information, we conclude that the distribution of returns is:

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:

None

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

Q. Which one of the following statements concerning chi-square and F-distributions is false?

Q. A bank quotes a stated annual interest rate of 4.00%. If that rate is equal to an effective annual rate of 4.08%, then the bank is compounding interest:

Q. When the spread between 10-year US Treasury yields and the federal funds rate narrows and at the same time the prime rate stays unchanged, this mix of indicators most likely forecasts future economic:

Which of the following statements regarding inventory valuation is most accurate?

None

None

Q. In the step “stating a decision rule” in testing a hypothesis, which of the following elements must be specified?

Q. When accounting standards require recognition of an expense that is not permitted under tax laws, the result is a:

Q. A market structure characterized by many sellers with each having some pricing power and product differentiation is best described as:

Q. When a central bank announces a decrease in its official policy rate, the desired impact is an increase in:

One reason that the last-in, first-out (LIFO) inventory valuation method is widely used in the United States is most likely that it:

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

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

Common stock prices are approximately lognormally distributed. Therefore, it is most likely that conventional (discrete) common stock prices are:

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

Q. The characteristic business cycle patterns of trough, expansion, peak, and contraction are:

None

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:

Q. One disadvantage of the Herfindahl–Hirschmann Index is that the index:

Q. Which of the following is a continuous random variable?

None

Q. Deep River Manufacturing is one of many companies in an industry that make a food product. Deep River units are identical up to the point they are labeled. Deep River produces its labeled brand, which sells for $2.20 per unit, and “house brands” for seven different grocery chains which sell for $2.00 per unit. Each grocery chain sells both the Deep River brand and its house brand. The best characterization of Deep River’s market is:

Under IFRS, it is most appropriate to include which of the following pension costs of a defined-benefit plan in other comprehensive income?

Q. When preparing an income statement, which of the following items would most likely be classified as other comprehensive income?

None

None

Which of the following is most likely a characteristic of a country that follows the dollarization exchange rate regime? The country:

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. A central bank’s repeated open market purchases of government bonds:

None

None

None

Trade receivables are most commonly reported at:

None

None

Unrealized gains and losses on securities categorized as available-for-sale:

Q. Which of the following statements regarding a one-tailed hypothesis test is correct?

None

Interest payable decreased during a company’s fiscal year. Compared with the amount of cash interest payments made, interest expense is most likely:

Liabilities of a company equal:

Q. If the base currency in a forward exchange rate quote is trading at a forward discount, which of the following statements is most accurate?

None

None

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

If all of the assets and liabilities are listed on the balance sheet broadly in order of how easily they can be converted into cash, the presentation format is best described as:

Q. Intangible assets with finite useful lives mostly differ from intangible assets with infinite useful lives with respect to accounting treatment of:

The unemployment rate is best described as the ratio of unemployed to:

By definition, the probability of any Event E is a number between:

None

Under US GAAP, for defined-benefit plans, which of the following items is reported as profit and loss?

All else remaining equal, a decline in the average duration of unemployment most likely indicates that an economic:

Q. Which of the following elements of financial statements is most closely related to measurement of financial position?

Q. When screening for potential equity investments based on return on equity, to control risk, an analyst would be most likely to include a criterion that requires:

A small country has a comparative advantage in the production of pencils. The government establishes an export subsidy for pencils to promote economic growth. Which of the following will be the most likely result of this policy?

Q. Under conditions of perfect competition, in the long run firms will most likely earn:

Along with relevance, the most critical qualitative characteristic of financial information is:

Q. An exchange rate between two currencies has increased to 1.4500. If the base currency has appreciated by 8% against the price currency, the initial exchange rate between the two currencies was closest to:

Q. When a company buys shares of its own stock to be held in treasury, it records a reduction in: