Latest CFA Level 3 Practice Exam Questions, Sample Questions

Question #1

Wealth Management's top economist, Frederick Milton, is an economic cycle forecaster- Milton's economic forecasts indicate an economic upswing that will impact all goods and services sectors. Milton presents his economic findings to the rest of Wealth Management's professionals at their monthly meeting. All are excited about Milton's forecast of an improving economic condition that should translate into a steadily rising stock market.Nathaniel Norton and Timothy Tucker have confidence in Milton's capabiliti

A. alendar rebalancing provides discipline while requiring less monitoring

B. ercentage-of-portfolio rebalancing minimizes the amount by which the allocations stray from their strategic levels

C. ercentage of portfolio rebalancing is better than calendar rebalancing because it keeps allocations closer to their strategic levels

View answer

Correct Answer: C

Question #2

Mark Rolle, CFA, is the manager of the international bond fund for the Ryder Investment Advisory. He is responsible for bond selection as well as currency hedging decisions. His assistant is Joanne Chen, a candidate for the Level 1 CFA exam. Rolle is interested in the relationship between interest rates and exchange rates for Canada and Great Britain. He observes that the spot exchange rate between the Canadian dollar (C$) and the British pound is C$1.75/£. Also, the 1-year interest rate in Canada is 4.0% a

A.

B.

C.

View answer

Correct Answer: C

Question #3

Jack Rose and Ryan Boatman are analysts with Quincy Consultants. Quincy provides advice on risk management and performance presentation to pension plans, insurance firms, and other institutional portfolio managers throughout the United States and Canada.Rose and Boatman are preparing an analysis of the defined benefit pension plans for four mature corporations in the United States. In an effort to ascertain the risk to the firm's shareholders from the plans. Rose and Boatman gather the information in Figure

A.

B.

C. 0

View answer

Correct Answer: C

Question #4

Dynamic Investment Services (DIS) is a global, full-service investment advisory firm based in the United States. Although the firm provides numerous investment services, DIS specializes in portfolio management for individual and institutional clients and only deals in publicly traded debt, equity, and derivative instruments.Walter Fried, CFA, is a portfolio manager and the director of DIS's offices in Austria. For several years, Fried has maintained a relationship with a local tax consultant. The consultant

A. ffer the different service levels and may accept the account without full knowledge of West's other accounts

B. ot offer the different service levels but may accept the account without full knowledge of West's other accounts

C. ot offer the different service levels and may not accept the account without full knowledge of West's other accounts

View answer

Correct Answer: B

Question #5

Harold Chang, CFA, has been the lead portfolio manager for the Woodlock Management Group (WMG) for the last five years. WMG runs several equity and fixed income portfolios, all of which are authorized to use derivatives as long as such positions are consistent with the portfolio's strategy. The WMG Equity Opportunities Fund takes advantage of long and short profit opportunities in equity securities. The fund's positions are often a relatively large percentage of the issuer's outstanding shares and fund trad

A. oth of Stirr's comments regarding the projections in the report, and the length of the report, are correct

B. nly Stirr's comment about the projections in the report is correct

C. nly Stirr's comment regarding the length of the report is correct

View answer

Correct Answer: A

Question #6

Arthur Campbell, CFA, is the founder of Campbell Capital Management (CCM), a money management firm focused solely on high net worth individuals. Campbell started CCM two years ago after a 25-year career with a large bank trust department. CCM provides portfolios tailored to match the unique situation of each individual client. All of CCM's clientele have balanced portfolios. CCM does not use derivatives or exotic instruments to manage any of its portfolios. CCM's equity style is defined as growth at a reaso

A. xternal verification of CCM's performance measurement policies is not required

B. CM must report the number of accounts in the moderate portfolio composite for 2008

C. he cash balance in the CCM conservative composite must be excluded from any return calculations

View answer

Correct Answer: A

Question #7

Arthur Campbell, CFA, is the founder of Campbell Capital Management (CCM), a money management firm focused solely on high net worth individuals. Campbell started CCM two years ago after a 25-year career with a large bank trust department. CCM provides portfolios tailored to match the unique situation of each individual client. All of CCM's clientele have balanced portfolios. CCM does not use derivatives or exotic instruments to manage any of its portfolios. CCM's equity style is defined as growth at a reaso

A. oss\'s and Bateman\'s accounts should be added to the "aggressive" and "conservative" composites, respectively

B. oss\'s and Bateman\'s accounts should NOT be added to the "aggressive" and "conservative" composites, respectively

C. oss's account should not be added to the aggressive composite, but it would be acceptable to add Bateman's account to the conservative composite

View answer

Correct Answer: C

Question #8

Jacques Lepage, CFA, is a portfolio manager for MontBlanc Securities and holds 4 million shares of AirCon in client portfolios. Lepage issues periodic research reports on AirCon to both discretionary and nondiscretionary accounts. In his October investment report, Lepage stated, "In my opinion, AirCon is entering a phase, which could put it 'in play' as a takeover target. Nonetheless, this possibility appears to be fully reflected in the market value of the stock."One month has passed since Lepage's October

A. nly the statement regarding the board is correct

B. nly the statement regarding the audit committee is correct

C. oth statements are correct or both statements are incorrect

View answer

Correct Answer: B

Question #9

Theresa Bair, CFA, a portfolio manager for Brinton Investment Company (BIC), has recently been promoted to lead portfolio manager for her firm's new small capitalization closed-end equity fund, the Quaker Fund. BIC is an asset management firm headquartered in Holland with regional offices in several other European countries. After accepting the position, Bair received a letter from the three principals of BIC. The letter congratulated Bair on her accomplishment and new position with the firm and also provid

A. es, Bair violated Standard II Integrity of Capital Markets

B. o, because she ensured public dissemination of the earnings restatement information before she traded the shares

C. es, because waiting to trade the stock would severely disadvantage investors in her fund and would have violated her duty of loyalty to her clients

View answer

Correct Answer: A

Question #10

Shirley Riley, CFA, has just been promoted, from vice president of trading to chief investment officer (CIO) at Crane & Associates, LLC (CA), a large investment management firm. Riley has been with CA for eight years, but she has much to learn as she assumes her new duties as CIO. Riley has decided to hire Denny Simpson, CFA, as the new compliance officer for CA, Riley and Simpson have been reviewing procedures and policies throughout the firm and have discovered several potential issues.Communications with

A. ocs not violate the Asset Manager Code of Professional Conduct

B. ould be acceptable so long as a similar investment vehicle was made available to all clients

C. s not consistent with the Asset Manager Code of Professional Conduct

View answer

Correct Answer: A

Question #11

Dynamic Investment Services (DIS) is a global, full-service investment advisory firm based in the United States. Although the firm provides numerous investment services, DIS specializes in portfolio management for individual and institutional clients and only deals in publicly traded debt, equity, and derivative instruments.Walter Fried, CFA, is a portfolio manager and the director of DIS's offices in Austria. For several years, Fried has maintained a relationship with a local tax consultant. The consultant

A. o

B. es, Fried should not have sold any shares of the emerging market fund

C. es, Fried should have waited to place the limit order until after the market orders were filled

View answer

Correct Answer: C

Question #12

Robert Keith, CFA, has begun a new job at CMT Investments as Head of Compliance. Keith has just completed a review of all of CMT's operations, and has interviewed all the firm's portfolio managers. Many are CFA charterholders, but some are not. Keith intends to use the CFA Institute Code and Standards, as well as the Asset Manager Code of Professional Conduct, as ethical guidelines for CMT to follow.In the course of Keith's review of the firm's overall practices, he has noted a few situations which potentia

A. general statement concerning certain fees and costs is acceptable, as long as the majority of the fees paid to the firm are disclosed to the client

B. ll fees must be disclosed to the client, including any periodic account costs

C. ll fees, including periodic costs, must be reported to the client

View answer

Correct Answer: B

Question #13

Gabrielle Reneau, CFA, and Jack Belanger specialize in options strategies at the brokerage firm of Damon and Damon. They employ fairly sophisticated strategies to construct positions with limited risk, to profit from future volatility estimates, and to exploit arbitrage opportunities. Damon and Damon also provide advice to outside portfolio managers on the appropriate use of options strategies. Damon and Damon prefer to use, and recommend, options written on widely traded indices such as the S&P 500 due to

A. 38 Unlimited

B. 43 $6

C. 38 $3

View answer

Correct Answer: C

Question #14

Travis Smith, CFA, is chief economic strategist and market analyst for Nashville Capital Management. He is developing a forecast of the S&P 500 stock market index utilizing different approaches.Using microeconomic analysis, Smith wants to value the S&P using a dividend discount model (DDM) valuation approach. The trailing recent 52-week dividend for the S&P 500 equaled $60. Used as a proxy for the nominal risk-free rate, Treasury rates are as follows:• 3-month T-bill rate: 3.5%• 30-year T-bond rate: 5.0%Smi

A. tock prices

B. ndex of industrial production

C. nterest rate spread

View answer

Correct Answer: B

Question #15

Daniel Castillo and Ramon Diaz are chief investment officers at Advanced Advisors (AA), a boutique fixed- income firm based in the United States. AA employs numerous quantitative models to invest in both domestic and international securities.During the week, Castillo and Diaz consult with one of their investors, Sally Michaels. Michaels currently holds a $10,000,000 fixed-income position that is selling at par. The maturity is 20 years, and the coupon rate of 7% is paid semiannually. Her coupons can be rein

A. oth are correct

B. either is correct

C. ne is correct

View answer

Correct Answer: B

Question #16

Jack Rose and Ryan Boatman are analysts with Quincy Consultants. Quincy provides advice on risk management and performance presentation to pension plans, insurance firms, and other institutional portfolio managers throughout the United States and Canada.Rose and Boatman are preparing an analysis of the defined benefit pension plans for four mature corporations in the United States. In an effort to ascertain the risk to the firm's shareholders from the plans. Rose and Boatman gather the information in Figure

A. nly Rose is correct

B. nly Boatman is correct

C. either is correct

View answer

Correct Answer: C

Question #17

Hilda Olson covers the chemical industry for Bern Securities. Based on conversations with two executives of InterChem, a major producer of synthetic fabrics, she issues a generalized sector report claiming that "according to a survey of industry executives, rayon feedstocks will be in short supply for at least the next 12 months." In addition, Olson recommends Han Chemical, a major producer of rayon, which has routinely reported higher profits than its competitors and should be well positioned to gain furth

A. oth sources of data, but must acknowledge the sources of the data

B. oth sources of data, and need not acknowledge the sources of the data

C. he S&P data, but not the BOK data, and she must acknowledge the source

View answer

Correct Answer: B

Question #18

Somerset Investment Limited is a Singapore-based money management firm that is conducting an appraisal of its investment performance. Cameron Li, CFA, has been charged with conducting the appraisal, and is to report back to upper management with his findings.Li is convinced that trade executions play a substantial role in overall portfolio performance, particularly for funds that have a relatively high level of turnover during the year. As a result, he is seeking methods that will allow him to evaluate the

A. nsures that the portfolio does not become over-concentrated (in specific assets or sectors), because it is based on quantitative rules

B. nvolves the use of automated processes based on quantitative measures, such as the ratio of the trade size to average daily volume, to guide trading decisions

C. alled simple logical participation breaks trades into small pieces to avoid detection and to minimize market impact costs

View answer

Correct Answer: A

Question #19

Somerset Investment Limited is a Singapore-based money management firm that is conducting an appraisal of its investment performance. Cameron Li, CFA, has been charged with conducting the appraisal, and is to report back to upper management with his findings.Li is convinced that trade executions play a substantial role in overall portfolio performance, particularly for funds that have a relatively high level of turnover during the year. As a result, he is seeking methods that will allow him to evaluate the

A.

B.

C.

View answer

Correct Answer: B

Question #20

Rowan Brothers is a full service investment firm offering portfolio management and investment banking services. For the last ten years, Aaron King, CFA, has managed individual client portfolios for Rowan Brothers, most of which are trust accounts over which King has full discretion. One of King's clients, Shelby Pavlica, is a widow in her late 50s whose husband died and left assets of over $7 million in a trust, for which she is the only beneficiary.Pavlica's three children are appalled at their mother's sp

A. es, he violated Standard III(A) Loyalty, Prudence, and Care

B. o, because he had a reasonable basis for making adjustments to the portfolio

C. o, because Pavlica agreed with the investment choices and King has discretion over the portfolio

View answer

Correct Answer: A

Question #21

Rowan Brothers is a full service investment firm offering portfolio management and investment banking services. For the last ten years, Aaron King, CFA, has managed individual client portfolios for Rowan Brothers, most of which are trust accounts over which King has full discretion. One of King's clients, Shelby Pavlica, is a widow in her late 50s whose husband died and left assets of over $7 million in a trust, for which she is the only beneficiary.Pavlica's three children are appalled at their mother's sp

A. o

B. es, because he misrepresented the expected performance of the strategy

C. es, because he met with her before their annual meeting which is unfair to clients who only meet with King annually

View answer

Correct Answer: B

Question #22

Security analysts Andrew Tian, CFA, and Cameron Wong, CFA, are attending an investment symposium at the Singapore Investment Analyst Society. The focus of the symposium is capital market expectations and relative asset valuations across markets. Many highly-respected practitioners and academics from across the Asia- Pacific region are on hand to make presentations and participate in panel discussions.The first presenter, Lillian So, President of the Society, speaks on market expectations and tools for estim

A.

B.

C.

View answer

Correct Answer: B

Question #23

Powerful Performance Presenters (PPP) is a performance attribution and evaluation firm for pension consulting firms and has recently been hired by Stober and Robertson to conduct a performance attribution analysis for TopTech. Tom Harrison and Wendy Powell are the principals for PPP. Although performance attribution has come under fire lately because of its shortcomings, Stober believes PPP provides a needed service to its clients. Robertson shares Stober's view of performance attribution analysis.Stober an

A. o, the within-sector selection effect is -4

B. o, the within-sector selection effect is -3

C. es, the within-sector selection effect is 1

View answer

Correct Answer: A

Question #24

Kim Simpson, CFA, manages a $75 million multi-cap growth portfolio. Simpson utilizes a growth at a reasonable price (GARP) investment strategy and her investment universe consists of small, medium and large capitalization stocks. She turns the entire portfolio over once each year. Simpson is concerned about the amount of trading costs she has generated through the implementation of her investment strategy. Simpson decides to conduct a trade cost analysis with the cooperation of her trader, Janet Long, CFA.

A. 0

B. 0

C. 0

View answer

Correct Answer: C

Question #25

Powerful Performance Presenters (PPP) is a performance attribution and evaluation firm for pension consulting firms and has recently been hired by Stober and Robertson to conduct a performance attribution analysis for TopTech. Tom Harrison and Wendy Powell are the principals for PPP. Although performance attribution has come under fire lately because of its shortcomings, Stober believes PPP provides a needed service to its clients. Robertson shares Stober's view of performance attribution analysis.Stober an

A. o the pure allocation effect is -1

B. es the pure allocation effect is 1

C. es the pure allocation effect is 3

View answer

Correct Answer: A

Question #26

Dan Draper, CFA is a portfolio manager at Madison Securities. Draper is analyzing several portfolios which have just been assigned to him. In each case, there is a clear statement of portfolio objectives and constraints, as welt as an initial strategic asset allocation. However, Draper has found that all of the portfolios have experienced changes in asset values. As a result, the current allocations have drifted away from the initial allocation. Draper is considering various rebalancing strategies that woul

A.

B. merging market stocks

C.

View answer

Correct Answer: B

Question #27

Daniel Castillo and Ramon Diaz are chief investment officers at Advanced Advisors (AA), a boutique fixed- income firm based in the United States. AA employs numerous quantitative models to invest in both domestic and international securities.During the week, Castillo and Diaz consult with one of their investors, Sally Michaels. Michaels currently holds a $10,000,000 fixed-income position that is selling at par. The maturity is 20 years, and the coupon rate of 7% is paid semiannually. Her coupons can be rein

A. nly Castillo is correct

B. nly Diaz is correct

C. oth Castillo and Diaz are incorrect

View answer

Correct Answer: A

Question #28

Pace Insurance is a large, multi-line insurance company that also owns several proprietary mutual funds. The funds are managed individually, but Pace has an investment committee that oversees all of the funds. This committee is responsible for evaluating the performance of the funds relative to appropriate benchmarks and relative to the stated investment objectives of each individual fund. During a recent investment committee meeting, the poor performance of Pace's equity mutual funds was discussed. In part

A. nly Statement 1 is correct

B. nly Statement 2 is correct

C. either Statement is correct

View answer

Correct Answer: C

Question #29

John Green, CFA, is a sell-side technology analyst at Federal Securities, a large global investment banking and advisory firm. In many of his recent conversations with executives at the firms he researches, Green has heard disturbing news. Most of these firms are lowering sales estimates for the coming year. However, the stock prices have been stable despite management's widely disseminated sales warnings. Green is preparing his quarterly industry analysis and decides to seek further input. He calls Alan Vo

A. iolated CFA Institute Standards

B. iolated of CFA Institute Standards unless the contact was disclosed to his clients

C. id not violate CFA Institute Standards since he was conducting a legitimate research activity

View answer

Correct Answer: C

Question #30

Jack Mercer and June Seagram are investment advisors for Northern Advisors. Mercer graduated from a prestigious university in London eight years ago, whereas Seagram is newly graduated from a mid-western university in the United States. Northern provides investment advice for pension funds, foundations, endowments, and trusts. As part of their services, they evaluate the performance of outside portfolio managers. They are currently scrutinizing the performance of several portfolio managers who work for the

A.

B.

C. 1

View answer

Correct Answer: C

Question #31

Albert Wulf, CFA, is a portfolio manager with Upsala Asset Management, a regional financial services firm that handles investments for small businesses in Northern Germany. For the most part, Wulf has been handling locally concentrated investments in European securities. Due to a lack of expertise in currency management he works closely with James Bauer, a foreign exchange expert who manages international exposure in some of Upsala's portfolios. Both individuals are committed to managing portfolio assets wi

A.

B.

C.

View answer

Correct Answer: B

Question #32

Powerful Performance Presenters (PPP) is a performance attribution and evaluation firm for pension consulting firms and has recently been hired by Stober and Robertson to conduct a performance attribution analysis for TopTech. Tom Harrison and Wendy Powell are the principals for PPP. Although performance attribution has come under fire lately because of its shortcomings, Stober believes PPP provides a needed service to its clients. Robertson shares Stober's view of performance attribution analysis.Stober an

A. t is investable

B. t is unambiguous

C. t is reflective of current investment opinion

View answer

Correct Answer: A

Question #33

Travis Smith, CFA, is chief economic strategist and market analyst for Nashville Capital Management. He is developing a forecast of the S&P 500 stock market index utilizing different approaches.Using microeconomic analysis, Smith wants to value the S&P using a dividend discount model (DDM) valuation approach. The trailing recent 52-week dividend for the S&P 500 equaled $60. Used as a proxy for the nominal risk-free rate, Treasury rates are as follows:• 3-month T-bill rate: 3.5%• 30-year T-bond rate: 5.0%Smi

A. latten

B. teepen

C. nvert

View answer

Correct Answer: A

Question #34

Stephanie Mackley is a portfolio manager for Durango Wealth Management (DWM), a regional money manager catering to wealthy investors in the southwestern portion of the United States. Mackley's clients vary widely in terms of their age, net worth, and investment objectives, but all must have at least $1 million in net assets before she will accept them as clients.Many of Mackley’s clients are referred to her by Kern & Associates, an accounting and consulting firm. DWM does not provide any direct compensation

A. o

B. es, because the request creates a conflict of interest between Mackley and Welch

C. es, because she failed to preserve the confidentiality of her client's information

View answer

Correct Answer: C

Question #35

Cynthia Farmington, CFA, manages the Lewis family's $600 million securities portfolio. Farmington and the Lewis family have agreed that they should hire a manager of alternative investments to manage a portion of the portfolio containing those assets. As part of the hiring process, they attempted to do the necessary due diligence. They assessed each manager's organization, the relative efficiency of the markets each manager has invested in, the character of each manager, and the service providers, such as l

A. as low turnover of his/her staff

B. nvests only in efficient and transparent markets

C. as stable providers of external services

View answer

Correct Answer: B

Question #36

Theresa Bair, CFA, a portfolio manager for Brinton Investment Company (BIC), has recently been promoted to lead portfolio manager for her firm's new small capitalization closed-end equity fund, the Quaker Fund. BIC is an asset management firm headquartered in Holland with regional offices in several other European countries. After accepting the position, Bair received a letter from the three principals of BIC. The letter congratulated Bair on her accomplishment and new position with the firm and also provid

A. es, Bair's policy will violate Standard 11(B) Fair Dealing

B. o, because disclosure in Sweden would disadvantage clients residing in other countries

C. o, because disclosure in any country would break the confidentiality that Bair owes to her clients

View answer

Correct Answer: A

Question #37

Travis Smith, CFA, is chief economic strategist and market analyst for Nashville Capital Management. He is developing a forecast of the S&P 500 stock market index utilizing different approaches.Using microeconomic analysis, Smith wants to value the S&P using a dividend discount model (DDM) valuation approach. The trailing recent 52-week dividend for the S&P 500 equaled $60. Used as a proxy for the nominal risk-free rate, Treasury rates are as follows:• 3-month T-bill rate: 3.5%• 30-year T-bond rate: 5.0%Smi

A. oo low if capital expenditure is positive

B. oo low if change in working capital is positive

C. oo low if proceeds from new debt issues exceed principal debt repayments

View answer

Correct Answer: C

Question #38

Mark Rolle, CFA, is the manager of the international bond fund for the Ryder Investment Advisory. He is responsible for bond selection as well as currency hedging decisions. His assistant is Joanne Chen, a candidate for the Level 1 CFA exam.Rolle is interested in the relationship between interest rates and exchange rates for Canada and Great Britain. He observes that the spot exchange rate between the Canadian dollar (C$) and the British pound is C$1.75/£. Also, the 1-year interest rate in Canada is 4.0% an

A. 9

B. 8

C.

View answer

Correct Answer: B

Question #39

Security analysts Andrew Tian, CFA, and Cameron Wong, CFA, are attending an investment symposium at the Singapore Investment Analyst Society. The focus of the symposium is capital market expectations and relative asset valuations across markets. Many highly-respected practitioners and academics from across the Asia- Pacific region are on hand to make presentations and participate in panel discussions.The first presenter, Lillian So, President of the Society, speaks on market expectations and tools for estim

A. razil would be favored for equity investment

B. hina would be favored for either equity or bond investment

C. ussia would be favored for bond investment

View answer

Correct Answer: C

Question #40

Mark Rolle, CFA, is the manager of the international bond fund for the Ryder Investment Advisory. He is responsible for bond selection as well as currency hedging decisions. His assistant is Joanne Chen, a candidate for the Level 1 CFA exam.Rolle is interested in the relationship between interest rates and exchange rates for Canada and Great Britain. He observes that the spot exchange rate between the Canadian dollar (C$) and the British pound is C$1.75/£. Also, the 1-year interest rate in Canada is 4.0% an

A. ap Covered call

B. ap Protective put

C. loor Covered call

View answer

Correct Answer: B

Question #41

Jacques Lepage, CFA, is a portfolio manager for MontBlanc Securities and holds 4 million shares of AirCon in client portfolios. Lepage issues periodic research reports on AirCon to both discretionary and nondiscretionary accounts. In his October investment report, Lepage stated, "In my opinion, AirCon is entering a phase, which could put it 'in play' as a takeover target. Nonetheless, this possibility appears to be fully reflected in the market value of the stock."One month has passed since Lepage's October

A. n appropriate discharge of his duties as portfolio manager if the details of the compensation structure had not previously been made public

B. n appropriate discharge of his duties as portfolio manager if the details of the compensation structure had previously been made public

C. ot an appropriate discharge of his duties as portfolio manager

View answer

Correct Answer: C

Question #42

Lucy Sakata, CFA and Gary Lowenstein, CFA are portfolio managers for the Murray Funds, a provider of investment funds to institutional and wealthy individual investors. Murray frequently indexes in developed markets, but uses full blown active management in less efficient markets and when they think their analysts have a particular expertise. The vast majority of Murray's clients attempt to minimize tracking error.One of the Murray's funds invests in a Hong Kong index and is marketed as a way for investors

A. anager

B. anager

C. anager

View answer

Correct Answer: C

Question #43

Cindy Hatcher, CFA, has spent the last ten years as a portfolio manager with Bernhardt Capital. While working for Bernhardt, Hatcher was responsible for maintaining and improving the company's code of ethics and guidelines for ethical money management. As a result of Hatcher's efforts, Bernhardt saw a dramatic decline in the number of complaints received from their individual and institutional customers.One of Bernhardt's direct competitors, Smith Investments, is keenly aware of Hatcher's reputation for eth

A. he policy violates the Code and Standards and can be fixed by barring employees from trading the conflicting securities

B. he policy violates the Code and Standards and can be fixed by requiring written disclosure to clients regarding Smith employees with beneficial ownership of conflicting securities

C. his particular policy does not violate the Code and Standards

View answer

Correct Answer: B

Question #44

Daniel Castillo and Ramon Diaz are chief investment officers at Advanced Advisors (AA), a boutique fixed- income firm based in the United States. AA employs numerous quantitative models to invest in both domestic and international securities.During the week, Castillo and Diaz consult with one of their investors, Sally Michaels. Michaels currently holds a $10,000,000 fixed-income position that is selling at par. The maturity is 20 years, and the coupon rate of 7% is paid semiannually. Her coupons can be rein

A. nly statement 1 is correct

B. nly statement 2 is correct

C. either statement is correct

View answer

Correct Answer: B

Question #45

Paul Dennon is senior manager at Apple Markets Associates, an investment advisory firm. Dennon has been examining portfolio risk using traditional methods such as the portfolio variance and beta. He has ranked portfolios from least risky to most risky using traditional methods.Recently, Dennon has become more interested in employing value at risk (VAR) to determine the amount of money clients could potentially lose under various scenarios. To examine VAR, Paul selects a fund run solely for Apple's largest c

A. 11 million

B. 12 million

C. 15 million

View answer

Correct Answer: B

Question #46

Kim Simpson, CFA, manages a $75 million multi-cap growth portfolio. Simpson utilizes a growth at a reasonable price (GARP) investment strategy and her investment universe consists of small, medium and large capitalization stocks. She turns the entire portfolio over once each year. Simpson is concerned about the amount of trading costs she has generated through the implementation of her investment strategy. Simpson decides to conduct a trade cost analysis with the cooperation of her trader, Janet Long, CFA.

A. nly the statement about business relationships is correct

B. nly the statement about high portfolio turnover is correct

C. oth statements are correct

View answer

Correct Answer: A

Question #47

Dynamic Investment Services (DIS) is a global, full-service investment advisory firm based in the United States. Although the firm provides numerous investment services, DIS specializes in portfolio management for individual and institutional clients and only deals in publicly traded debt, equity, and derivative instruments.Walter Fried, CFA, is a portfolio manager and the director of DIS's offices in Austria. For several years, Fried has maintained a relationship with a local tax consultant. The consultant

A. tandards were violated in accepting both Phillips and West as clients

B. here was no violation in accepting Phillips, but there was a violation in accepting West

C. here were no Standards violations in accepting either client

View answer

Correct Answer: B

Question #48

Lucy Sakata, CFA and Gary Lowenstein, CFA are portfolio managers for the Murray Funds, a provider of investment funds to institutional and wealthy individual investors. Murray frequently indexes in developed markets, but uses full blown active management in less efficient markets and when they think their analysts have a particular expertise. The vast majority of Murray's clients attempt to minimize tracking error.One of the Murray's funds invests in a Hong Kong index and is marketed as a way for investors

A.

B.

C.

View answer

Correct Answer: B

Question #49

Jacques Lepage, CFA, is a portfolio manager for MontBlanc Securities and holds 4 million shares of AirCon in client portfolios. Lepage issues periodic research reports on AirCon to both discretionary and nondiscretionary accounts. In his October investment report, Lepage stated, "In my opinion, AirCon is entering a phase, which could put it 'in play' as a takeover target. Nonetheless, this possibility appears to be fully reflected in the market value of the stock."One month has passed since Lepage's October

A. he base salary should make up a larger portion of the compensation package

B. he use of the corporate aircraft does not pose any problems for shareholder interests

C. he stock options cause a potential misalignment between management and shareholder interests

View answer

Correct Answer: C

Question #50

Dan Draper, CFA is a portfolio manager at Madison Securities. Draper is analyzing several portfolios which have just been assigned to him. In each case, there is a clear statement of portfolio objectives and constraints, as welt as an initial strategic asset allocation. However, Draper has found that all of the portfolios have experienced changes in asset values. As a result, the current allocations have drifted away from the initial allocation. Draper is considering various rebalancing strategies that woul

A. roportion strategy has a concave payoff curve and a multiplier greater than 1

B. roportion strategy has a convex payoff curve and a multiplier less than 1

C. ix strategy has a concave payoff curve and a multiplier less than 1

View answer

Correct Answer: C

DON'T WANT TO MISS A THING?

100% Pass Cisco, PMP, CISA, CISM, AWS Practice test on SALE!
Get Now

Latest CFA Level 3 Practice Exam Questions, Sample Questions | SPOTO

View The Updated Level 3 Exam Questions

View The Updated CFA Exam Questions

View Answers after Submission

DON'T WANT TO MISS A THING?

100% Pass Cisco, PMP, CISA, CISM, AWS Practice test on SALE! Get Now

Latest CFA Level 3 Practice Exam Questions, Sample Questions | SPOTO

View The Updated Level 3 Exam Questions

View The Updated CFA Exam Questions

View Answers after Submission

100% Pass Cisco, PMP, CISA, CISM, AWS Practice test on SALE!
Get Now