CFA Mock Exam Full Q&A with Complete Solution (Already Passed)

If you were fired from a previous job and fail to tell your new employer is that a violation and if so of what? - ANSWER yes, misconduct. this information could potentially harm your new employer and he needs to know man! Degrees of price discrimination - ANSWER 1st degree-- know price that every consumer is willing to pay. 2nd degree-- price varies according to quantity demanded. sellers aren't able to distinguish classes or consumers. third degree-- charging different prices to different consumer groups. charging kids and adults differently. peak and off-peak rates for electricity. disposition bias - ANSWER loss aversion if you get offered a senior position with a new department at a bank that has bad compliance procedures and/or bad marketing materials what should you do? - ANSWER not accept the position. possibly agree to be hired as an interim consultant until proper procedures are taken. why would a multinational financial service holding company be unlikely to be able to claim GIPS compliance? - ANSWER GIPS standards require that firms be defined as an investment firm, subsidiary, or division held out to clients as a distinct business entity. multinational finance firm unlikely to be operating solely as an investment firm. to claim compliance with GIPS, who do you have to make a reasonable effort to provide a compliant presentation to? - ANSWER prospective investors only. it is recommended to do so also for existing investors, but you don't have too. the primary monetary goal of most major central banks is... - ANSWER maintaining price stability. is it though?? a motor scooter rental shop charges $90 per day. owner is considering a Wed special of 75 per day. at current price, shop rents 40 scooters and expects rentals to increase to 60 at lower price. - ANSWER $45. Change in TR/Change in quantity. This is technically incorrect!!!!! deadweight loss problems from price ceilings/floors - ANSWER draw it out and think of lost surplus to identify... how is a building owned for the purpose of leasing out to tenants treated by under IFRS - ANSWER as an investment property, can be reported at either cost or fair value. only prior losses that are reversed are shown as profit in income statement. gains above prior value are recorded in shareholders equity. under IFRS, how are deferred tax liabilities and warranties classified as current or non-current - ANSWER DTL are non-current and warranties are current. income tax expense equals... - ANSWER income tax payable (income tax rate times by taxable income) plus increase in deferred tax liabilities. look at 174. redo #179. repeat #237 and 238!! - ANSWER Elliot Wave Theory - ANSWER wave 1 is a large gain, wave 2 gives back much of gains from Wave 1, but not all. the lost proportion is usually a percentage equal to a fibonaccci ratio, and consists of three smaller waves. three main sources of return for a commodities future contract... - ANSWER 1. collateral yield, roll yield, and spot price return. i think the reason why convience yield isn't factored in is that it probably doesn't change very much... can early exercise of deep in the money american call be advantageous - ANSWER apparently not. remember early exercise of call's can be good if it has cashflows like dividends etc. if future prices and interest rates are negatively correlated.. - ANSWER the forwards will be more desirable than futures (for long positions) the voting rights of an unsponsored depository receipt belong to the... - ANSWER depository bank. be able to estimate value of stock using forward P/E!!!! - ANSWER a bond with the greatest reinvestment risk out of one selling at a premium/discount/par - ANSWER premium.... has the highest coupon rate and therefore highest risk of not being able to reinvest at that rate... CAPM assumes that investors plan for the same single holding period!! - ANSWER having a higher risk aversion coefficient means... - ANSWER you have a lower risk tolerance! how do you solve for the macaulay duration of a non-callable perpetual bond with a yield in perpetuity? - ANSWER (1+r)/r justified forward P/E ratio - ANSWER dividend payout ratio/(r-g) why were the GIPS standards created? - ANSWER to help prevent misleading practices such as "representative accounts", where a firm picks a top performaing account to represent overall investmment results Teresa Avila, CFA, is a micro-cap investment analyst at a hedge fund. The fund requires Avila to hold any securities she recommends for the fund in her own account as well. Because Avila has such a small account, whenever she trades for her own portfolio, she combines the transactions with those of the hedge fund so she is sure to have her account aligned with the fund. Has Avila most likely violated any CFA Institute Standards of Professional Conduct? - ANSWER Standard VI(B)-Priority of Transactions requires that investment transactions for clients and employers take priority over transactions in which members have beneficial ownership. By executing her own transactions with those of the hedge fund, the analyst has violated this standard because micro-cap securities can be thinly traded and easily influenced by changes in the volume of activity. So, the analyst may benefit when she combines her transactions with the hedge funds, and she should let the fund execute its orders before she makes investments for her account. is an hour of research on a topic you don't know anything about enough to say that you made enough effort at the dillegence and reasonable basis thing? - ANSWER no sir Gregor Pavlov, CFA, is a fund manager working for the general partner of a new private equity fund. Pavlov includes in the fund marketing material his performance history from his previous employer. He received permission from his former employer to take his historical return figures and the supporting research reports he used to make the related investment decisions. Did Pavlov most likely violate the CFA Institute Standards of Professional Conduct? - ANSWER Even though Pavlov had his former employer's permission to take his performance record and supporting research reports with him, he does not have the underlying performance data to support those historical return calculations and is, therefore, most likely in violation of Standard V(C)-Record Retention. Pavlov had the permission of his employer to take his historical performance record and research reports with him when he left the firm, so he is not in violation of Standard IV(A)-Loyalty check the non fee paying accounts don't have to be included in GIPS composites.... - ANSWER i think according to CFA it might or maybe just a really poorly worded question.. if the forward rate for USD/EUR is 1.43 and the forward premium to the spot trade is 400 points what is the spot rate? - ANSWER 1.39 A power generation company is a monopoly that has very high barriers to entry. The quantity demand (QD) for its product is QD = 800 - 0.25 × P (where P is price). The slope of the marginal revenue curve is closest to: - ANSWER Q = 800 - 0.25 P P = 3200 - 4Q TR = P × Q = 3200 Q - 4 Q2 and Marginal Revenue = ΔTR/ΔQ = 3200 - 8 Q Therefore the slope of the curve is -8.