Free Online CFA Level 1 Mock Exam 3


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Looking for a free CFA Level 1 mock exam online? You’ve come to the right place! We offer a complimentary online CFA Level 1 mock exam designed to help you familiarize yourself with the exam format, assess your knowledge, and prepare thoroughly for the real thing. Whether you’re in the midst of studying or seeking a self-assessment, our free mock exam provides valuable practice. Start now to experience the real exam atmosphere and gauge your performance under exam conditions.

Ethical and Professional Standards

1. Andy McCarthy, CFA, resigned as a portfolio manager at Drexell Investments to take a position as an adjunct faculty member at a local college. For the next two years, he did not file a complete Statement of Professional Conduct with the CFA Institute and did not pay CFA Institute dues.

Two years later, McCarthy began practicing independently as a financial analyst and wrote his CFA designation on his business card and next to his name.McCarthy did not reinstate his CFA Institute membership by filing a Statement of Professional Conduct and paying CFA membership dues. McCarthy did not reinstate his CFA membership by filing a Statement of Professional Conduct and paying the CFA membership fee. He argued that he had not been involved in the investment industry for the past two years and therefore did not need to reinstate his CFA membership.

Did McCarthy violate any CFA Institute standards?

A. No.

B. Yes, relating to reference to the CFA Institute, the CFA designation, and the CFA Program.

C. Yes, relating to loyalty.

Correct Answer: B

Answer Explanation:

McCarthy violated Standard VII (B)-because his right to use the CFA designation was suspended when he failed to file a Statement of Professional Conduct and ceased paying dues.

As a result, he can no longer state or imply that he is an active CFA charterholder unless he files a Statement of Professional Conduct, resumes payment of CFA Institute dues, and ultimately completes the CFA Institute’s reinstatement process.

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2. John Smith, CFA, a trader and chartered financial analyst at Zeta Capital, was having lunch with his software industry analyst friend when he noticed rumors of a merger between two software companies. Smith, always valuing his friend’s advice, placed a large buy order the next day, equally divided among all discretionary accounts that fit the target company. He also informed all of his non-discretionary accounts of this advice.

Did Smith violate the CFA Institute’s Standards of Professional Conduct by acting on his friend’s advice?

A. Yes, with respect to diligence and reasonable basis.

B. Yes, with respect to priority of transactions.

C. Yes, with respect to fair dealing.

Correct Answer: A

Answer Explanation:

Standard V (A) Diligence and Reasonable Basis requires Smith to exercise diligence, independence, and thoroughness in any investment analysis, supported by appropriate research and investigation, when analyzing investments, making investment recommendations, and taking investment actions.

Smith’s lack of independent research in acting on his friend’s advice violated Standard V (A).

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3. Which of the following is least likely correct under the Code and Standards?

A. Financial analysts may use conclusions drawn from the analysis of public and immaterial nonpublic information as recommendations, even if those conclusions would be material inside information if communicated directly by the company.

B. If material nonpublic information comes from an industry expert, the financial analyst is free to act on that information.

C. A member or candidate shall make reasonable efforts to achieve public dissemination of material information.

Correct Answer: B

Answer Explanation:

Under the guidance of “Criterion II (A) – Material Nonpublic Information,” members and candidates are responsible for ensuring that they are not requesting or acting on confidential information from outside experts in violation of security regulations and laws or obligations to others.

Accordingly, financial analysts cannot act on material non-public information provided by industry experts.

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