Hi CFA Aspirants, welcome to AKVTutorials. Are you preparing for CFA Level 1, 2, 3 exams for making a career in CFA (Charted Financial Analyst). According to CFA Wikipedia, CFA The Chartered Financial Analyst (CFA) program is a postgraduate professional certification offered internationally by the American-based CFA Institute. A candidate who successfully completes the program and meets other professional requirements is awarded the “CFA charter” and becomes a “CFA charter holder”. Therefore, you need CFA Study Notes and Free CFA Level 1 Test 2 Practice Sample Questions Answer Keys AMBIPi.
In this article, you will get Free CFA Level 1 Mock Exam Practice Questions.
Free CFA Level 1 Mock Practice Exam Questions Bank
Free CFA Level 1 Practice Question No: 11:
Jorgenson is a senior bond analyst with Morgan Co., a large investment banking firm. Over the past quarter, Morgan’s corporate bond department has been betting on the credit spreads in the market narrowing and in anticipation, has invested a large amount of capital in the bonds of two firms, High Tech and Amerizone.com. Unfortunately, the credit spreads have not displayed much activity and as the quarter end is approaching, the department wants to unload the bonds. For this, it puts pressure on Jorgenson to push the bonds on some of his larger clients. Jorgenson believes that both the bonds are good investments since High tech and Amerizone have been doing very well and their prospects look rosy. So he goes ahead and convinces his clients to purchase as much as a third of Morgan’s bond holdings in these companies. Morgan has
Option A : not violated the AIMR code of ethics.
Option B : violated Standard IV
Option C : violated Standard IV
Option D : violated Standard IV
Show/Hide Answer
Option A : not violated the AIMR code of ethics.
There is no evidence that Jorgenson has bowed to any external pressure in recommending the bonds to his clients. If his analysis indicates, in his judgment, that a security is a good investment and suits the needs of a client, then he should recommend it, regardless of whether there is any external pressure for or against that course of action.
CFA Level 1 Exam Question No: 12:
Emmy Noether is a senior division manager at Harding & Harding, a money management firm. Emmy is quite fastidious about following the rules of the investment industry and has established specific procedures and guidelines designed to prevent any violations. Recently, it surfaced that one of the employees reporting to Emmy, William Bathwater, had been secretly using inside information on a computer maker to generate profits in his portfolio. William had been extremely clever at hiding these profits and only a serendipitous audit by the Compliance Department revealed the pattern. Emmy, in her capacity as William’s supervisor, has:
Option A: has not violated any standard in the AIMR code of ethics.
Option B: none of these answers.
Option C: violated Standard III (E) – Responsibilities of Supervisors – by failing to check William’s behavior.
Option D: violated Standard III (B) – Duty to the Employer – by failing to check William’s behavior.
Show/Hide Answer
Option A : has not violated any standard in the AIMR code of ethics.
Under Standard III (E) – Responsibilities of Supervisors, members must take reasonable care to ensure that their subordinates do not violate any laws or the code of conduct. This includes designing effective procedures to deter fraudulent activity. However, no amount of scrutiny can prevent the cleverest of frauds. What is expected of the members is that they be diligent enough in carrying out their duties. In the present case, given the facts, Emmy cannot be faulted for William’s criminal activity since she hasn’t been found to be negligent in any way. Hence, she has not violated Standard III (E) – Responsibilities of Supervisors nor any other standards.
Free CFA Level 1 Mock Exam Question No: 13:
NL is a country with no securities laws. LS is a country that has securities laws that are less strict than the AIMR code of ethics while MS has securities laws that are stricter than the code of ethics. Which of the following is/are true?
I. A member who lives in NL must always follow the AIMR code.
II. A member who lives in MS is governed by the AIMR code.
III. A member lives in NL but does business in MS. If MS laws apply to her business transactions, she must follow the AIMR code.
IV. A member lives in LS and does business in NL. He must always follow the AIMR code.
Option A: II and IV only.
Option B: I and IV only.
Option C: I, II, III and IV.
Option D: II and III only.
Show/Hide Answer
Option B :
AIMR member must always adhere to the code of ethics, unless the laws governing his/her behavior are stricter, in which case, the stricter laws must be followed. A member governed by MS must always follow the MS laws since they are stricter. Standard I.
CFA Level 1 Free Practice Question No: 14:
When a manager is responsible for the portfolios of pension plans or trusts, the duty of loyalty is owed to the ______.
Option A: beneficiaries.
Option B: none of these answers.
Option C: stockholders of the firm.
Option D: investing public.
Option E: entity who hires the manager.
Option F: board of directors.
Option G: manager’s supervisor(s).
Show/Hide Answer
Option A : beneficiaries.
The first step in fulfilling a fiduciary duty is to determine what the responsibility is and to who it is owed. Members should take particular care in determining the identity of the “client” to whom the duty of loyalty is owed. In the context of an investment manager managing the portfolios of pension plans or trusts, the client is not the person or entity who hires the manager but, rather, the beneficiaries of the plan or trust. The duty of loyalty is owed to the beneficiaries.
Free CFA Practice Question No: 15:
Brokers who knowingly or recklessly engage in excessive trading in customers’ accounts are known to be ______.
Option A: over-selling.
Option B: mixing.
Option C: churning.
Option D: none of these answers.
Option E: shingling
Show/Hide Answer
Option C : churning.
Brokers and dealers are held to a higher standard of care than the average person. They are liable for knowingly or recklessly engaging in excessive trading in customers’ accounts, (churning); for accepting funds when they are insolvent, for manipulating the market and for fraud under the shingle theory.
CFA Level 1 Sample Question No: 16:
According to the AIMR-PS, systems incompatibilities
Option A: causes distortion of performance presentation and needs to be disclosed.
Option B: are one reason for which a firm may not claim compliance for all assets.
Option C: cannot be used as a reason for not claiming compliance for all assets.
Option D: render a firm unable to claim compliance with the PPS, thus the firm should ensure compatibility
Show/Hide Answer
Option C : cannot be used as a reason for not claiming compliance for all assets.
Systems incompatibilities cannot be used as a reason for not claiming compliance for all assets (i.e., a firm cannot make the claim of compliance for only those assets that are measured and monitored on compatible systems).
Free CFA Level 1 Quiz Question NO: 17:
Argus is a large-accounts money manager with a high-profile hedge fund. He manages all his accounts in a very efficient manner and all his clients are satisfied with his performance. Argus has one character flaw, though. He is given to making sexually inappropriate comments in mixed company, touching female employees in inappropriate ways and cracking adult jokes loudly. This makes many of the other employees uncomfortable in his presence. Argus
Option A: none of these answers.
Option B: has violated AIM standard on professional incompetence.
Option C: has violated AIM standard on professional conduct.
Option D: has not violated any AIMR standard since he has kept his clients satisfied and the professional misbehavior is an internal matter to be handled by his superiors.
Show/Hide Answer
Option C : has violated AIM standard on professional conduct.
Standard II (B) is designed to address professional behavior and personal integrity. The behavior should not put the firm at risk in any way or reflect adversely on the profession. Argus’s behavior leaves his firm open to sexual harassment lawsuits and in general, reduces the productivity and comfort zone of female employees. Hence, he is in violation of Standard II (B) – Professional Misconduct.
Free CFA Level 1 Quiz Question NO: 18:
According to the Prudent Investor Rule, the trustee must:
– adhere to loyalty, impartiality and _______.
– maintain overall portfolio risk at a reasonable level
– provide for reasonable diversification of trust investments
– act with prudence in deciding whether and how to delegate authority to ex in selecting and supervising agents
– be cost conscious when investing
Option A: Commitment.
Option B: none of these answers.
Option C: prudence
Option D: diversification.
Option E: supervisors.
Show/Hide Answer
Option C : prudence
Modern Portfolio Theory dictates that trustees consider a portfolio in its entirety and not just on an investment-by-investment basis. As a fiduciary, therefore, the trustee must.
– adhere to fundamental fiduciary duties of loyalty, impartiality and prudence.
– maintain overall portfolio risk at a reasonable level
– the trade-off between risk and return is the fiduciary’s central concern.
– provide for reasonable diversification of trust investments.
– act with prudence in deciding whether and how to delegate authority to experts and in selecting and supervising agents.
– be cost conscious when investing.
Free CFA Practice Question No: 19:
Standard IV (B.5), Preservation of Confidentiality states:
Option A: all of these answers.
Option B: none of these answers.
Option C: members must release information to AIR when the Professional Conduct Program is holding an investigation, unless there is a settlement agreement between the parties that stipulates confidentiality.
Option D: if the information is confidential, even illegal activity may\not be reported, because there is the issue of trust between parties.
Option E: members should avoid disclosing any information received from a client except to authorized fellow employees who are also working for the client.
Show/Hide Answer
Option E : members should avoid disclosing any information received from a client except to authorized fellow employees who are also working for the client.
Under Standard IV (B.5), members shall preserve the confidentiality of information communicated by clients within the scope of client-member or employer- member relationship, except when the member receives information concerning illegal activity on the part of the client. When there is an investigation under PCP, members shall provide information about a client in support of the investigation. Settlement agreements with confidentiality clauses do not prohibit members from cooperating with a PCP investigation.
CFA Mock Exam Free Question No: 20:
Since return results must be calculated on a basis that includes the effect of leverage, return results must be restated to a(n) ______ basis.
Option A: margin.
Option B: total asset.
Option C: cash flow.
Option D: all cash.
Option D: multiple cash.
Show/Hide Answer
Option D : multiple cash.
Return results must be calculated on a basis that includes the effect of leverage, return results must be restated to an all-cash basis when the portfolio used leverage and the same securities could have been purchased at the same prices if the portfolio has the cash to do so. Results should be restated to an all cash basis only when the necessary restatement can be based entirely on actual transactions and can be verified in accordance with applicable account standards.
