CFA level1-Mock-120
Questions 1~18 Relate to Ethics ............................................................................................. 2
Questions 19~32 Relate to Quantitative analysis .................................................................. 8
Questions 33~44 Relate to Economics.................................................................................. 14
Questions 45~68 Relate to Financial Statement Analysis................................................... 18
Questions 69~76 Relate to Corporate finance ..................................................................... 27
Questions 77 ~88 Relate to Equity investment .................................................................... 30
Questions 89~94 Relate to Derivatives ................................................................................. 34
Questions 95~106 Relate to Fixed-income Analysis ............................................................ 36
Questions 107~110 Relate to Alternative Investments ....................................................... 40
Questions 111 ~120 Relate to Portfolio Management ......................................................... 42
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, CFA level1-Mock-120
Questions 1~18 Relate to Ethics
1. Correct answer: B.
Members/candidates who possess material nonpublic information that could affect the value of an
investment should not act or cause others to act on the information as stated in Standard II(A).
Crux traded on the material information that Orca is about to be acquired by Cyber Kinetics. The
information is non-public because it is not publicly available, which was verified when Crux
researched Orca on the Internet and found nothing about the acquisition.
CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard II(A)
2. Correct answer: B.
GIPS verification does not ensure the accuracy of any specific composite presentations.
CFA Level I
“Introduction to the Global Investment Performance Standards (GIPS),” CFA Institute
Section V–Verification
3. Correct answer: B.
Under Standard III (B)-Fair Dealing, members and candidates should disclose to clients and
prospective clients how they select accounts to participate in and how they determine the amount
of securities each account will buy or sell. Trade allocation procedures must be fair and equitable,
and disclosure of inequitable allocation methods does not relieve the member or candidate of this
obligation. All discretionary accounts should be treated in the same manner. Treating newer
accounts differently would be considered inequitable regardless of whether this policy is
disclosed.
CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard III (B)
4. Correct answer: C.
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, CFA level1-Mock-120
The two principles of the Rules of Procedure for Professional Conduct are confidentiality of
proceedings and fair process to the member or candidate.
CFA Level I
"Rules of Procedure for Professional Conduct"
5. Correct answer: A.
There is no evidence Chandarana violated Standard VII(B)–Reference to CFA Institute, the CFA
Designation, and the CFA Program with regard to his being a CFA candidate. Specifically,
Chandarana does not overstate his competency or imply he will achieve superior performance as a
result of his CFA designation. It does appear, however, Chandarana did not act with integrity when
he hid information that could potentially harm his new employer's reputation, thus violating
Standard I(D)–Misconduct and Standard IV(A)–Loyalty.
CFA Level I
"Guidance for Standards I–VII"
Standard VII(B)–Reference to CFA Institute, the CFA Designation, and the CFA Program,
Standard I(D)–Professionalism, Standard IV(A)–Duty to Employers
6. Correct answer: C.
According to Standard III (B) best practices include allocating pro rata on the basis of order size,
not account size. All clients participating in the block trade should receive the same execution
price and be charged the same commission.
CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard III(B)
7. Correct answer: A.
The client is the trust/trustees, not the beneficiary. Mawar followed Standard III(C)–Suitability by
managing the trust assets in a way that would likely result in a stable source of income while
keeping the risk profile low, thereby complying with the investment objectives of the trust.
CFA Level I
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, CFA level1-Mock-120
"Guidance for Standards I–VII"
Standard III(C)–Suitability
8. Correct answer: A.
According to Standard VI(A) Disclosure of Conflicts, Grabbo should disclose to her employer her
hedge fund development because this activity could possibly interfere with her responsibilities at
Atlantic. In setting up a hedge fund, Grabbo was not acting for the benefit of her employer. She
should have informed Atlantic she wanted to organize the hedge fund and come to some mutual
agreement on how this process would occur.
CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard IV(B), Standard VI(A), Standard VI(B)
9. Correct answer: B.
The GIPS standards benefit two main groups: investment management firms and prospective
clients. GIPS-compliant presentations allow prospective clients to know that the track record of a
GIPS-compliant fund manager is complete and fairly presented.
CFA Level I
"Introduction to the Global Investment Performance Standards (GIPS)"
Section III
10. Correct answer: C.
Unethical behavior erodes and destroys trust. Investors with low levels of trust are less willing to
accept risk and, therefore, will likely demand a higher return for the use of their capital. They may
also choose to invest elsewhere or to not invest at all.
CFA Level I
"Ethics and Trust in the Investment Profession," Bidhan L. Parmar, Dorothy C. Kelly, David B.
Stevens
Section 5
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