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【单选】
According to the Code of Ethics, which of the following statements is NOT correct? CFA Institute members are required to:
A. use reasonable care and exercise independent professional judgment.
B. comply with the CFA Institute Performance Presentation Standards.
C. maintain and improve their competence and strive to maintain the competence of others in the profession.
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【单选】
Michael Malone, CFA, is an investment analyst for a large brokerage firm in New York who covers the airlines industry. After hours in his personal time, Malone maintains an online blog on which he expresses his personal opinions about various investment opportunities, including, but not limited to, the airlines industry. On his blog, he posts a very negative investment opinion about WestAir stock. Malone knows that WestAir's stock will be downgraded to a “sell” by his firm next week. Malone has:
A. violated Standard IV(A) Loyalty by divulging confidential information that is the intellectual property of his employer.
B. violated Standard II(A) Material Nonpublic Information by releasing material that could negatively impact the price of the security.
C. violated Standard VI(B) Priority of Transactions by releasing material information to the public before releasing to the firm’s clients.
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【单选】After she received the Notice of Inquiry from the Designated Officer, Liu had fully cooperated with the investigation into her actions during the CFA Exam. If a covered person receives a Notice of Inquiry about an alleged violation of the CFA Institute Code and Standards and fails to cooperate fully with the investigation, which of the following sanctions do the Rules of Procedure permit the Designated Officer to impose?
A. Private Censure.
B. Summary Suspension.
C. 1-year Timed Suspension.
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【单选】Throughout the investigation and appeal processes, Liu was concerned that her friends and colleagues would learn that she was under investigation and might be expelled from the CFA Program.
Which of the following circumstances would permit the CFA Institute Professional Conduct Program to disclose information about a professional conduct investigation to external parties?
A. The Designated Officer receives a call from a journalist about a case under investigation.
B. A complaining party wants to know what the Professional Conduct Program is doing to investigate his complaint.
C. Criminal activity is uncovered.
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【单选】After conducting an investigation into Liu's actions, including reviewing proctor reports, speaking with proctors, and reviewing Liu's notes, the Designated Officer notified Liu that she was proposing the following sanction: voiding of exam results and a permanent expulsion from participation in the CFA program. Liu is devastated and determines to appeal the proposed sanction.
Which of the following best describes the option open to Liu to appeal the Designated Officer's proposed sanction?
A. Liu may admit wrongdoing and enter into a stipulation agreement with the Designated Officer for a lesser sanction.
B. Liu may request a Hearing Panel.
C. Liu may request a Review Panel.
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【单选】Several weeks after the exam, Liu received a letter from the Designated Officer of the CFA Institute's Professional Conduct Program concerning Liu's use of notes during the exam. When a proctor (complaining party) informs the CFA Institute Professional Conduct Program of a potential violation of the Code and Standards during the examination, the CFA Institute's Rules of Procedure permit the Designated Officer to do all of the following EXCEPT:
A. disclose the name, address and phone number of the proctor (complaining party) to the candidate regardless of the complaining party's wishes.
B. disclose the name, address and phone number of the proctor (complaining party) to the candidate regardless of the complaining party's wishes.
C. disclose the name, address and phone number of the proctor (complaining party) to the candidate regardless of the complaining party's wishes.
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【单选】
With respect to the CFA Institute enforcement of the Code and Standards, which of the following is NOT a possible disciplinary sanction?
A. Payment of a fine.
B. Private censure.
C. Refusing to allow a candidate for the CFA designation to take one of the exams.
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【单选】
With respect to filing complaints concerning the professional conduct of a CFA Institute member, which of the following is CORRECT?
A. Only other members can write the Professional Conduct Program staff with a complaint concerning the conduct of another member.
B. Anyone can write the Professional Conduct Program staff with a complaint concerning the conduct of any member.
C. Anyone can write the Standards and Policy Committee staff with a complaint concerning the conduct of any member.
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【单选】
A broker and CFA charterholder has been arrested for the crime of murder. Which, if any, of the following could result in the member being summarily suspended from using the CFA designation?
A. Both of the results listed here.
B. Either being convicted or pleading guilty to the crime.
C. He is acquitted of the crime, but he is barred from continuing to work in the investment industry.
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【单选】
A CFA charterholder may NOT be suspended without a hearing for which of the following reasons?
A. Being convicted of murder.
B. Failing to respond in writing to charges filed by his/her immediate supervisor.
C. Failing to complete the annual professional conduct questionnaire two years in a row.
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【单选】
Steve Jones is a member of CFA Institute but has not earned the CFA designation yet. CFA Institute is investigating Jones’ activities. If Jones declines to cooperate, he:
A. is within his right only because it could be self incriminating.
B. is within his right only because he does not have the CFA designation yet.
C. could be summarily suspended from membership.
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【单选】William Parthley, age 69, has had bad luck with his investments in recent years and decides to consult Moira Wembley, CFA, for advice.
Parthley’s portfolio is composed of 90% stocks and 10% bonds, with a total value of $2.6 million. Classifying himself as conservative, Parthley blamed the aggressive allocation on a previous money manager, and says he wants to substantially increase the fixed-income weighting of his portfolio.
From his portfolio, Parthley hopes to fund his retirement at a rate of $7,000 per month, adjusted for inflation. He has also promised his alma mater at least $2 million upon his death. Parthley is in good health, and most of the men in his family have lived into their late 80s.
Based solely on the information presented above, Wembley can conclude that there is most likely a conflict between Parthley’s:
A. return requirements and asset allocation.
B. willingness to take risk and ability to take risk.
C. return requirements and asset allocation as well as his willingness to take risk and ability to take risk.
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【单选】
Collette Gallant, CFA, employs the capital asset pricing model (CAPM) to determine the required returns for stocks. Gallant works for Trey-Black Inc. (TBI) which uses the Treynor-Black model for portfolio optimization. Gallant is deciding whether to include stock ABZ in the TBI’s actively managed portfolio. She forecasts that the ABZ stock return will be 15% next year. TBI provides Gallant with the following information.
Expected return on the S&P500 stock market index = 15%.
1-year Treasury bill rate = 5%.
ABZ stock beta = 1.25.
TBI determines that Gallant’s forecast ability has been very poor. TBI also finds that the average alpha across stocks in their actively managed portfolio equals 1%. Determine if Trey-Black’s allocation to ABZ in its actively managed portfolio should be an above or below average, long or short position.
Magnitude
Position
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【单选】
Frederick Kurzonkowski, CFA, employs the Treynor-Black portfolio optimization model at his firm, TBP, where he serves as portfolio manager. TBP recently decided against holding short positions in their portfolios. Kurzonkowski is asked to determine the most likely result of the short-sale prohibition on the weights allocated to the long positions in the active portfolio, and to the alpha on the active portfolio. Kurzonkowski should make the following predictions about the effects of the prohibition on short sales on the actively managed portfolio:
Allocation to long positions
Alpha
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【单选】
Amanda Keene, CFA, works for an investment firm that employs the Treynor-Black portfolio optimization model. Keene predicts that the market index return will move higher next year as markets move closer to equilibrium. Keene advises a client, whose risk aversion will remain unchanged next year. Using the Treynor-Black framework, Keene should make which of the following changes in her client’s allocations, with respect to the percentage of actively managed and passively managed portfolios, noting that the remaining percentage is allocated to cash?
A. Decrease only actively managed portfolios.
B. Decrease both portfolios.
C. Decrease only passively managed portfolios.
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【单选】
Rosemary Stone, CFA, uses the Treynor-Black active portfolio optimization model. Stone attempts to quantify the importance of security selection in the model. Stone should conclude that security selection is of high importance if the actively managed portfolio is characterized by:
Alpha
Unsystematic risk
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【单选】
Janice Barefoot, CFA, has managed a portfolio where she used the Dow Jones Industrial Average (DJIA) as a benchmark. In the past two years the average monthly return on her portfolio has been higher than that of the DJIA. To get a measure of active return per unit of active risk Barefoot should compute the:
A. information ratio, which is the standard deviation of the differences between the portfolio and benchmark returns divided into the average of those differences.
B. information ratio, which is the standard deviation of the differences between the portfolio and benchmark returns divided by the average of those differences.
C. Sharpe ratio, which is the standard deviation of the differences between the portfolio and benchmark returns divided into the average of those differences.
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【单选】
Janice Barefoot, CFA, has been managing a portfolio for a client who has asked Barefoot to use the Dow Jones Industrial Average (DJIA) as a benchmark. In her first year Barefoot managed the portfolio by choosing 29 of the 30 DJIA stocks. She selected a non-DJIA stock in the same industry as the omitted stock to replace that stock. Compared to the DJIA, Barefoot has placed a higher weight on the financial stocks and a lower weight on the other stocks still in the portfolio. Over that year, the non-DJIA stock in the portfolio had a negative return while the omitted DJIA stock had a positive return. The portfolio managed by Barefoot outperformed the DJIA. Based on this we can say that the return from factor tilts and asset selection were:
A. negative and positive respectively.
B. positive and negative respectively.
C. both positive.
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【单选】
Janice Barefoot, CFA, has been managing a portfolio for a client who has asked Barefoot to use the Dow Jones Industrial Average (DJIA) as a benchmark. In her second year, Barefoot used 29 of the 30 DJIA stocks. She selected a non-DJIA stock in the same industry as the omitted DJIA stock to replace that stock. Compared to the DJIA, Barefoot placed a lower weight on the communication stocks and a higher weight on the other stocks still in the portfolio. Over that year, the non-DJIA stock in the portfolio had a positive and higher return than the omitted DJIA stock. The communication stocks had a negative return while all of the other stocks had a positive return. The portfolio managed by Barefoot outperformed the DJIA. Based on this we can say that the return from factor tilts and asset selection were:
A. negative and positive respectively.
B. both positive.
C. positive and negative respectively.
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【单选】
Rachel Stephens, CFA, examines data for two computer stocks, AAA and BBB, and derives the following results:
Standard deviation for AAA is 0.50.
Standard deviation for BBB is 0.50.
Standard deviation for the S&P500 is 0.20.
Correlation between AAA and the S&P500 is 0.60.
Beta for BBB is 1.00.
Stephens is asked to identify the stock that has the highest systematic risk and the stock that has the highest unsystematic risk. Stephens should draw the following conclusions:
Highest Systematic Risk
Highest Unsystematic Risk
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【单选】
Jung Wu, CFA, uses the security market line to determine if stocks are undervalued or overvalued. Wu recently completed an analysis of Sang Tractor Supplies (STS) and derived the following forecasts for STS and for the broad market:
Forecasted return for STS: 10%
Standard deviation forecasted for STS: 15%
Expected return on the stock market index: 12%
Standard deviation on the stock market index: 20%
Correlation between STS and stock market index: 0.60
Risk-free rate: 6%
To determine the fair value of STS, Wu should use the following risk value and should make the following valuation decision:
Risk value
Valuation
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【单选】
It can be determined from the figure below that ρ2 is:
A.
between -1.0 and 0.2.
B.
between 0.2 and 1.0.
C.
between 0.0 and 0.2.
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【单选】
Jill Matton, CFA, has been asked to invest $100,000, choosing one or more of the following three stocks. All stocks have the same expected return and standard deviation. The correlation matrix for the three stocks is given below:
Stock Correlations
X
Y
Z
X
1.00
0.15
0.70
Y
0.15
1.00
0.51
Z
0.70
0.51
1.00
Which of the three stocks, X, Y, and Z, should be included in the portfolio?
A. X, Y, and Z.
B. Any investment in the three stocks will result in the exact same expected return and risk.
C. X and Y only.
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【单选】Wanda Brunner, CFA, is contemplating adding a swaption to her portfolio. She makes the following two statements about the possible payoffs and cash flows of an interest rate swaption:
A. Both statements are correct.
B. Only statement 1 is correct.
C. Only statement 2 is correct.
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【单选】
Wanda Brunner, CFA, is contemplating adding a swaption to her portfolio. Which of the following is least likely her goal?
A. provide short-term liquidity.
B. interest rate speculation.
C. lock in a fixed rate.
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【单选】
Jim Trent, CFA has been asked to price a three month forward contract on 10,000 shares of Global Industries stock. The stock is currently trading at $58 and will pay a dividend of $2 today. If the effective annual risk-free rate is 6%, what price should the forward contract have? Assume the stock price will change value after the dividend is paid.
A. $56.85.
B. $58.85.
C. $56.82.
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【单选】
Wanda Brunner, CFA, is evaluating two tranches of a sequential-pay CMO structure.
Tranche
OAS (bps)
Z-spread (bps)
Effective duration
I
95
100
4.25
II
90
100
4.25
How should Brunner trade these CMO tranches?
A. Buy Tranche I and sell Tranche II.
B. Buy Tranche II and sell Tranche I.
C. Cannot be determined.
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【单选】
A CFA charter holder observes a 12-year 7 ¾ percent semiannual coupon bond trading at 102.9525. If interest rates rise immediately by 50 basis points the bond will sell for 99.0409. If interest rates fall immediately by 50 basis points the bond will sell for 107.0719. What are the bond's effective duration (ED) and effective convexity (EC).
A. ED = 8.031, EC = 2445.120.
B. ED = 7.801, EC = 40.368.
C. ED = 40.368, EC = 7.801.
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【单选】
Steve Jacobs, CFA, is analyzing the price volatility of Bond Q. Q’s effective duration is 7.3, and its effective convexity is 91.2. What is the estimated price change for Bond Q if interest rates fall/rise by 125 basis points?
Fall
Rise
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【单选】
Christina Wagner is a CFA level II candidate currently studying about hedge funds, private equity and commodity futures. One of her friends is fascinated by what Wagner is learning and asks several questions on the topic. In particular, she is curious to know what exit options are available to a promising young venture capital (VC) firm if it is having difficulty attracting buyers due to poor market conditions. What should be Wagner’s most appropriate response?
A. The VC firm should be liquidated in the absence of prospective buyers through the sale of the firm’s assets.
B. The VC firm should consider the acquisition of another firm and sell the merged entity once capital market conditions have improved.
C. Since an initial public offering is not feasible, the VC firm should be sold to another firm through a buyout or secondary market sale.
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