CFA Level 1 Mock Exam 11 : 2024 Mock Exam
A Session 1: questions and answers A+ Grade
Peter Levinson, CFA, declared personal bankruptcy due to unpaid medical bills. After losing his receipt
for a business dinner, he uses his wife's receipt for a smaller amount from the same restaurant to
submit his expense claim. Has Levinson most likely violated the Standards?
A. No
B. Yes, by declaring personal bankruptcy
C. Yes, by using his wife's receipt for his expense claim
- correct answer C. Yes, by using his wife's receipt for his expense claim
Correct because according to the Standard I(D), misconduct, Members and Candidates must not engage
in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects
adversely on their professional reputation, integrity, or competence. And using his wife's receipt for
expense claim is a dishonest professional conduct.
Ethics Application
explain how the practices, policies, and conduct do or do not violate the CFA Institute Code of Ethics and
Standards of Professional Conduct
A member has been asked by her supervisor to write a research report on a company. The member's
firm owns options to buy the company's stock. The member's firm does not possess material nonpublic
information on the company. According to the Standards, the member should:
A. outsource the report to an approved third-party research provider.
B. place the stock on a restricted list and provide only factual information about the company.
,C. disclose in the research report the amount and the expiration date of the options held by her firm in
the covered company.
- correct answer C. disclose in the research report the amount and the expiration date of the options
held by her firm in the covered company.
because according to the recommended procedures for compliance with Standard VI (A), Disclosure of
Conflicts, if a member, a candidate, or a member's or candidate's firm has outstanding agent options to
buy stock as part of the compensation package for corporate financing activities, the amount and
expiration date of these options should be disclosed as a footnote to any research report published by
the member's or candidate's firm. Therefore, if the member's firm owns options to buy the company's
stock as part of the compensation for offering corporate finance solutions, the member should disclose
in the research report the amount and the expiration date of the options held by her firm in the covered
company.
Guidance for Standards I-VII
recommend practices and procedures designed to prevent violations of the Code of Ethics and
Standards of Professional Conduct
Simon Jensen, CFA, a portfolio manager, participates in an IPO of PT Tech. Jensen prorates the
oversubscribed issue on an odd-lot basis to suitable clients. After the successful IPO, his colleague Todd
Durkny, a CFA candidate, initiates coverage of PT Tech and sends her "buy" recommendation to all
clients by email. She then calls her premium fee-paying clients to discuss PT Tech in-depth. Whose
actions are consistent with the Standards?
A. Durkny's only
B. Jensen's only
C. Both Durkny's and Jensen's
- correct answer A. Durkny's only
Correct because according to Standard III (B), Fair Dealing, members and candidates may provide more
personal, specialized, or in-depth service to clients who are willing to pay for premium services through
higher management fees or higher levels of brokerage.
,According to the recommended procedures for compliance with the Standard relating to performance
presentation, members should:
A. exclude terminated accounts from performance history.
B. consider the knowledge of the audience to whom a performance presentation is addressed.
C. use a representative account when presenting the performance of the weighted composite of similar
portfolios.
- correct answer B. consider the knowledge of the audience to whom a performance presentation is
addressed.
because according to Standard III (D), Performance Presentation, members can meet obligation of the
Standard by considering the knowledge and sophistication of the audience to whom a performance
presentation is addressed.
Gurdeep Singh, CFA, is an analyst with a hedge fund and works closely with his supervisor, Joan Tanner,
who earned her CFA designation 20 years ago. Singh becomes aware that Tanner uses her CFA
designation even though she no longer pays her membership dues. Tanner uses the designation during
several meetings that she and Singh have with the firm's clients and emphasizes that all her team
members, including herself, are CFA charterholders. Has Singh violated the Standards?
A. No
B. Yes, the Standard relating to knowledge of the law
C. Yes, the Standard relating to reference to CFA Institute, the CFA designation, and the CFA program
- correct answer B. Yes, the Standard relating to knowledge of the law
because according to Standard I(A), Knowledge of the Law, members and Candidates must not
knowingly participate or assist in and must dissociate from any violation of such laws, rules, or
regulations. In this case, by staying silent in a client meeting in which he knows false information is being
given to a potential investor that could cause harm to that investor, Singh would be seen as assisting
Tanner in providing that false information, even though Singh is not actively engaging in the misconduct
, himself Singh should report her conduct to the fund's compliance department for it to address and
should dissociate himself from the activity. By not dissociating himself from Tanner and their meetings
with clients, Singh has violated the Standard.
John McCay, CFA, is an analyst who has prepared a report on the cable industry based on research from
a variety of sources and analysts. He compiles these findings to form his own opinion and distributes the
report to clients without acknowledging his sources. McCay has violated the Standards by:
A. failing to cite the work of others.
B. failing to have a reasonable basis for his conclusions.
C. incorporating other analysts' research into his own work
- correct answer A. failing to cite the work of others.
because according to Standard I(C), Misrepresentation, in order to prevent plagiarism, members and
candidates may use and distribute other sources' research as long as they do not represent themselves
as the authors. Members should disclose and cite the sources of their information, so that the client is
not misled as to the level of expertise behind the report. One of the most egregious practices in
violation of this standard is the preparation of research reports based on multiple sources of
information without acknowledging the sources. Therefore, McCay violated this Standard by failing to
cite the work of others.
Gardner Knight, CFA, is a product development specialist at an investment bank. Knight is responsible
for creating and marketing collateralized debt obligations (CDOs) consisting of residential mortgage
bonds. In the marketing brochure for his most recent CDO, Knight provided a list of the mortgage bonds
from which the CDO was created. The brochure also states "an independent third party, the collateral
manager, has sole authority for the selection of all mortgage bonds used as collateral in the CDO."
However, Knight met with the collateral manager and contributed to determining the bonds included in
the CDO. Knight is least likely to be in violation of which of the following Standards?
A. Suitability
B. Disclosure of Conflicts
A Session 1: questions and answers A+ Grade
Peter Levinson, CFA, declared personal bankruptcy due to unpaid medical bills. After losing his receipt
for a business dinner, he uses his wife's receipt for a smaller amount from the same restaurant to
submit his expense claim. Has Levinson most likely violated the Standards?
A. No
B. Yes, by declaring personal bankruptcy
C. Yes, by using his wife's receipt for his expense claim
- correct answer C. Yes, by using his wife's receipt for his expense claim
Correct because according to the Standard I(D), misconduct, Members and Candidates must not engage
in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects
adversely on their professional reputation, integrity, or competence. And using his wife's receipt for
expense claim is a dishonest professional conduct.
Ethics Application
explain how the practices, policies, and conduct do or do not violate the CFA Institute Code of Ethics and
Standards of Professional Conduct
A member has been asked by her supervisor to write a research report on a company. The member's
firm owns options to buy the company's stock. The member's firm does not possess material nonpublic
information on the company. According to the Standards, the member should:
A. outsource the report to an approved third-party research provider.
B. place the stock on a restricted list and provide only factual information about the company.
,C. disclose in the research report the amount and the expiration date of the options held by her firm in
the covered company.
- correct answer C. disclose in the research report the amount and the expiration date of the options
held by her firm in the covered company.
because according to the recommended procedures for compliance with Standard VI (A), Disclosure of
Conflicts, if a member, a candidate, or a member's or candidate's firm has outstanding agent options to
buy stock as part of the compensation package for corporate financing activities, the amount and
expiration date of these options should be disclosed as a footnote to any research report published by
the member's or candidate's firm. Therefore, if the member's firm owns options to buy the company's
stock as part of the compensation for offering corporate finance solutions, the member should disclose
in the research report the amount and the expiration date of the options held by her firm in the covered
company.
Guidance for Standards I-VII
recommend practices and procedures designed to prevent violations of the Code of Ethics and
Standards of Professional Conduct
Simon Jensen, CFA, a portfolio manager, participates in an IPO of PT Tech. Jensen prorates the
oversubscribed issue on an odd-lot basis to suitable clients. After the successful IPO, his colleague Todd
Durkny, a CFA candidate, initiates coverage of PT Tech and sends her "buy" recommendation to all
clients by email. She then calls her premium fee-paying clients to discuss PT Tech in-depth. Whose
actions are consistent with the Standards?
A. Durkny's only
B. Jensen's only
C. Both Durkny's and Jensen's
- correct answer A. Durkny's only
Correct because according to Standard III (B), Fair Dealing, members and candidates may provide more
personal, specialized, or in-depth service to clients who are willing to pay for premium services through
higher management fees or higher levels of brokerage.
,According to the recommended procedures for compliance with the Standard relating to performance
presentation, members should:
A. exclude terminated accounts from performance history.
B. consider the knowledge of the audience to whom a performance presentation is addressed.
C. use a representative account when presenting the performance of the weighted composite of similar
portfolios.
- correct answer B. consider the knowledge of the audience to whom a performance presentation is
addressed.
because according to Standard III (D), Performance Presentation, members can meet obligation of the
Standard by considering the knowledge and sophistication of the audience to whom a performance
presentation is addressed.
Gurdeep Singh, CFA, is an analyst with a hedge fund and works closely with his supervisor, Joan Tanner,
who earned her CFA designation 20 years ago. Singh becomes aware that Tanner uses her CFA
designation even though she no longer pays her membership dues. Tanner uses the designation during
several meetings that she and Singh have with the firm's clients and emphasizes that all her team
members, including herself, are CFA charterholders. Has Singh violated the Standards?
A. No
B. Yes, the Standard relating to knowledge of the law
C. Yes, the Standard relating to reference to CFA Institute, the CFA designation, and the CFA program
- correct answer B. Yes, the Standard relating to knowledge of the law
because according to Standard I(A), Knowledge of the Law, members and Candidates must not
knowingly participate or assist in and must dissociate from any violation of such laws, rules, or
regulations. In this case, by staying silent in a client meeting in which he knows false information is being
given to a potential investor that could cause harm to that investor, Singh would be seen as assisting
Tanner in providing that false information, even though Singh is not actively engaging in the misconduct
, himself Singh should report her conduct to the fund's compliance department for it to address and
should dissociate himself from the activity. By not dissociating himself from Tanner and their meetings
with clients, Singh has violated the Standard.
John McCay, CFA, is an analyst who has prepared a report on the cable industry based on research from
a variety of sources and analysts. He compiles these findings to form his own opinion and distributes the
report to clients without acknowledging his sources. McCay has violated the Standards by:
A. failing to cite the work of others.
B. failing to have a reasonable basis for his conclusions.
C. incorporating other analysts' research into his own work
- correct answer A. failing to cite the work of others.
because according to Standard I(C), Misrepresentation, in order to prevent plagiarism, members and
candidates may use and distribute other sources' research as long as they do not represent themselves
as the authors. Members should disclose and cite the sources of their information, so that the client is
not misled as to the level of expertise behind the report. One of the most egregious practices in
violation of this standard is the preparation of research reports based on multiple sources of
information without acknowledging the sources. Therefore, McCay violated this Standard by failing to
cite the work of others.
Gardner Knight, CFA, is a product development specialist at an investment bank. Knight is responsible
for creating and marketing collateralized debt obligations (CDOs) consisting of residential mortgage
bonds. In the marketing brochure for his most recent CDO, Knight provided a list of the mortgage bonds
from which the CDO was created. The brochure also states "an independent third party, the collateral
manager, has sole authority for the selection of all mortgage bonds used as collateral in the CDO."
However, Knight met with the collateral manager and contributed to determining the bonds included in
the CDO. Knight is least likely to be in violation of which of the following Standards?
A. Suitability
B. Disclosure of Conflicts
