Tài liệu Examwise volume 1 cfa 2008 level i certification

Table of Contents Link                       ExamWise® Volume 1 CFA 2008 Level I Certification With Preliminary Reading Assignments The Candidates Question And Answer Workbook For Chartered Financial Analyst Authors Jane Vessey, CFA M. Afdal Pamilih, CFA David Stewart Published by     TotalRecall Publications, Inc.   1103 Middlecreek  Friendswood, TX 77546  281‐992‐3131           TotalRecall Publications, Inc. This Book Sponsored by The Center For Financial Certification, Inc.  Portions Copyright © 1999‐2008 by TotalRecall Publications, Inc.. Portions Copyright © 2005‐2006 by  Pegasus, Inc.. All rights reserved.  Printed in the United States of America. Except as permitted under  the United States Copyright Act of 1976, No part of this publication may be reproduced, stored in a  retrieval  system,  or  transmitted  in  any  form  or  by  any  means  electronic  or  mechanical  or  by  photocopying, recording, or otherwise without the prior permission of the publisher.  The views expressed in this book are solely those of the author, and do not represent the views of any  other party or parties.   Printed in United States of America, Canada, and England     Paper Back:  ISBN:   978‐1‐59095‐945‐9      UPC:    6‐43977‐93703‐2  EBook:    ISBN:   978‐1‐59095‐948‐0      UPC:    6‐43977‐93763‐6    The sponsoring editor for this book is Bruce Moran and the production supervisor is Corby R. Tate.   This  publication  is  not  sponsored  by,  endorsed  by,  or  affiliated  with  CFA  Institute™,  CFA®,  and  their  logo  are  trademarks  or  registered  trademarks  of  CFA  Institute.org  in  the  United  States  and  certain other countries. All other trademarks are trademarks of their respective owners. Throughout  this book, trademarked names are used. Rather than put a trademark symbol after every occurrence  of  a  trademarked  name,  we  used  names  in  an  editorial  fashion  only  and  to  the  benefit  of  the  trademark owner.  No intention of infringement on trademarks is intended.     The  CFA Institute™  does  not  endorse,  promote  or  review  the  accuracy  of  the  products  or  services  offered  by  organizations  sponsoring  or  providing  CFA®  Exam  preparation  materials  or  programs,  nor  does  CFA Institute™  verify  pass  rates  or  exam  results  claimed  by  such  organizations.  Any  warranty regarding the offered products or services is made solely by TotalRecall Publications, Inc.,  which are not in any way affiliated with CFA Institute™, the Institute of Chartered Financial Analysts  (ICFA),  or  the  Financial  Analysts  Federation  (FAF).  If  you  are  dissatisfied  with  the  products  or  services provided, please contact, TotalRecall Publications, Inc. 1103 Middlecreek, Friendswood, TX  77546 (888‐237‐7849). CFA® is a licensed service mark of CFA Institute™. Used by permission.    Disclaimer Notice: Judgments as to the suitability of the information herein for purchaser’s purposes  are  necessarily  the  purchaser’s  responsibility.  TotalRecall  Publications,  Inc.  and  The  Financial  Certification  Center,  Inc.  extends  no  warranties,  makes  no  representations,  and  assumes  no  responsibility as to the accuracy or suitability of such information for application to the purchaser’s  intended purposes or for consequences of its use.          This book is dedicated to our fantastic children Adam and Julia who we love very much.   Jane Vessey & M. Afdal Pamilih         This Study Guide is dedicated to the widow(er)s and orphans of the “Silent Spring”.  Those who have  sacrificed  loved  ones  to  the  obscurity  of  quiet  study  and  endured  weekend  sacrifice  above  and  beyond  the  call  of  continuing  education.    On  the  alter  of  a  profession’s  highest  accreditation  these  unsung heroes have sacrificed time with their spouse, shopping with Mom, and pitch and catch with  Dad.    These  patient  supporters  have  endured  tense  attitudes,  unfinished  chores,  extra  duties,  and  received the respect and appreciation of all who have studied throughout the “Silent Spring”.  In particular, never ending thanks to:  Carol Lee, Mary Elizabeth, Sophia Victoria, David Todd II  David Stewart        ExamWise® Volume 1 CFA 2008 Level I Certification With Preliminary Reading Assignments The Candidates Question And Answer Workbook For Chartered Financial Analyst BY Authors Jane Vessey, CFA M. Afdal Pamilih, CFA David Stewart Jane Vessey Jane  Vessey  manages  a  training  company  in  the  United  Kingdom  specializing  in  financial  analysis  and  investment.    She  is  a  visiting  lecturer  at  Cass  Business  School  teaching  classes  in  asset  management and valuation. She also teaches a CFA®   revision course at ISMA (the business school at  Reading  University)  and  is  an  associate  at  a  leading  London  financial  training  company  where  she  teaches  courses  covering  investment  management  and  related  topics.    She  has  developed  online  training programs for students taking the CFA examinations and teaches CFA courses for UKSIP (the  UK Society of Investment Professionals).   Jane  graduated  in  Mathematics  from  Oxford  University,  United  Kingdom,  and  is  a  CFA  charter  holder.  She has some eighteen years experience working in the investment industry,  starting out as  an equity analyst before becoming an investment manager.  She was based in London and Tokyo and  took responsibility for managing equity portfolios invested in the Japanese and other Asian markets.  In 1990, Jane moved to Indonesia and established and ran an investment management operation on  behalf  of  Mees  Pierson.    She  took  responsibility  for  all  areas  of  the  business,  including  investment,  operations, marketing and administration.  While in Asia, Jane was involved in providing training to  capital market participants and state officials and teaching in courses provided by local universities.         M. Afdal Pamilih Afdal  has  18  yearsʹ  experience  working  in  the  finance  industry.  He  started  his  career  with  J.P.  Morgan,  and  then  with  County  NatWest  Government  Securities,  in  New  York  specializing  in  the  development  of  quantitative  products  for  foreign  exchange  and  fixed  income  markets.  After  returning  to  Indonesia  in  1989  he  was  responsible  for  the  development  of  investment  services  and  subsequently treasury management for leading banks in Jakarta.   Afdal has developed web‐based training programs for the CFA examinations and has wide teaching  experience,    including  instructing  at  the  School  of  Management,  University  of  Surrey,  United  Kingdom.  He  obtained  a  MSc  in  Mathematics  from  the  University  of  Texas  at  Arlington  and  holds  the  Chartered Financial Analyst (ʺCFAʺ) qualification.          David Stewart: David Stewart has extensive experience in venture capital and business structural reorganizations. As  president  of  a  private  client  broker  dealer  firm,  he  has  business  valuation  and  project  valuation  experience on the venture capital side and portfolio management on the asset management side. His  analysis,  commentary,  books,  and  study  guides  have  appeared  in  the  financial  management,  securities, and exam prep industries.   David  has  collaborated  with  experts  in  the  field  to  produce  the  2001  through  2006  editions  of  this  study guide. His extensive research into the CFA exam program and past exam histories, field work,  and  consistent  review  of  CFA  Institute  information  allows  him  and  his  co‐authors  to  deliver  high  quality and up to date information.         About the Book: ExamWise  Volume  1  For  CFA  Level  I  Concept  Check  Q&A  Workbook  With  Preliminary  Reading  Assignments is designed to give you plenty of practice questions to test your readiness for the CFA  exam.  It  offers  400+  concept  check  questions  based  18  exam  study  sessions  that  cover  the  Learning  Outcome Statements and their associated CFA Assigned Readings. For additional practice, there is an  accompanying free download test engine that generates multiple mock exams similar in design and  difficulty to the real CFA exam. The questions and explanations have references to the page number  in the related Reading and to the related LOS.  Use this workbook to test your understanding of the basic concepts covered in the CFA Readings and  identify your strengths and weaknesses. Then you can move on to more advanced study materials to  sharpen your weakest knowledge areas.   This book is divided into Study Sessions (1 – 18) that cover the 76 Learning Outcome Statements and  the  associated  Assigned  Readings.  Appendix  A  (Exhibits  1  –  4),  is  a  collection  of  exhibits  and  flow  charts  for  condensed  reference  and  review,  including  examples  of  accounting  statements,  puts  and  calls, PE breakdown, and financial ratios.    The 18 2008 CFA Level I Study Sessions breakout is as follows: Ethical and Professional Standards 1. Study Session 1: Ethical and Professional Standards  Investment Tools 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Study Session 2. Quantitative Methods: Basic Concepts  Study Session 3. Quantitative Methods: Application  Study Session 4. Economics: Microeconomic Analysis  Study Session 5. Economics: Market Structure and Macroeconomic Analysis   Study Session 6. Economics: Monetary and Fiscal Economics  Study Session 7. Financial Statement Analysis: Introduction   Study Session 8. Financial Statement Analysis: Income Statement, Balance Sheet, Cash  Study Session 9. Financial Statement Analysis: Inventories, Assets, Taxes, and Debt   Study Session 10. Financial Statement Analysis: Techniques, Apps, & International  Study Session 11. Corporate Finance  Portfolio Management 12. Study Session 12. Portfolio Management  Asset Valuation 13. 14. 15. 16. 17. 18. Study Session 13. Analysis of Equity Investments: Securities Markets  Study Session 14. Analysis of Equity Investments: Industry and Company Analysis  Study Session 15. Analysis of Fixed Income Investments: Basic Concepts  Study Session 16. Analysis of Fixed Income Investments: Analysis and Valuation  Study Session 17. Derivative Investments  Study Session 18. Alternative Investments Equity Investments: Securities Markets         Online Information: 1. What is CFA Institute http://www.cfainstitute.org/aboutus/index.html 2. CFA Program: http://www.cfainstitute.org/cfaprogram 3. The Code of Ethics (Full Text) http://www.cfainstitute.org/centre/ethics/code/ The Standards of Professional Conduct Standard I: Fundamental Responsibilities Standard II: Relationships with and Responsibilities to the Profession Standard III: Relationships with and Responsibilities to the Employer Standard IV: Relationships with and Responsibilities to Clients and Prospects Standard V: Relationships with and Responsibilities to the Public 4. Why The CFA Designation Matters to You: Individual Investor FAQ http://www.cfainstitute.org/aboutus/investors/articles/cfamatters.html 5. Soft Dollar Standards http://www.cfainstitute.org/centre/ethics/softdollar/ 6. CFA Institute-PPSTM AIMR Performance Presentation Standards http://www.cfapubs.org/doi/ref/10.2469/faj.v57.n2.2433 7. Global Investment Performance Standards http://www.cfainstitute.org/centre/ips/ Click the picture and link to a free CFA Candidates online glossary.        List of Chapters Study Session 01: Ethical and Professional Standards: Study session 02: Quantitative Methods: Study Session 03: Quantitative Methods: Study Session 4: Introduction Study Session 04: Economics: Study Session 05: Economics: Study Session 06: Economics: Study Session 7: Introduction Study Session 07: Financial Statement Analysis: Study Session 08: Financial Statement Analysis: Study Session 09: Financial Statement Analysis: Study Session 10: Financial Statement Analysis: Study Session 11: Corporate Finance: Study Session 12: Portfolio Management: Study Session 13: Equity Investments: Study Session 14: Equity Investments: Study Session 15: Fixed Income Investments: Study Session 16: Fixed Income Investments: Study Session 17: Derivative Investments: Study Session 18: Alternative Investments: Terminology: Appendix A: Download Instructions 14 34 60 84 112 136 160 184 198 222 248 274 300 330 354 378 402 426 450 474 501 503 526 With the purchase of this book you get FREE Author Collaberation: Now that you have purchased this product you have access to the Instructors/Authors that authored  this book. Send you questions to us and we will answer them for you.       Table of Contents   IX  Table of Contents About the Book:........................................................................................................................... VI Online Information:..................................................................................................................... VII Study Session 01: Ethical and Professional Standards: 14 Reading 1: Code of Ethics and Standards of Professional Conduct ..........................................14 Reading 2: “Guidance” for Standards I–VII.................................................................................14 Reading 3: Introduction to the Global Investment Performance Standards (GIPS) ...................14 Reading 4: Global Investment Performance Standards (GIPS) .................................................14 Study session 02: Quantitative Methods: 34 Basic Concepts ................................................................................................................................34 Reading 5: The Time Value of Money ........................................................................................34 Reading 6: Discounted Cash Flow Applications .........................................................................34 Reading 7: Statistical Concepts and Market Returns .................................................................34 Reading 8: Probability Concepts.................................................................................................34 Study Session 03: Quantitative Methods: 60 Application .......................................................................................................................................60 Reading 9: Common Probability Distributions ............................................................................60 Reading 10: Sampling and Estimation........................................................................................60 Reading 11: Hypothesis Testing .................................................................................................60 Reading 12: Technical Analysis ..................................................................................................60 Study Session 4: Introduction 84 Introductory Readings......................................................................................................................84 Supply, Demand, and the Market Process CH 5.............................................................................84 Introduction..................................................................................................................................84 Consumer choice and the Law of Demand.................................................................................85 Producer choice and the Law of Supply .....................................................................................85 Price changes and demand and supply......................................................................................86 Shifts in demand .........................................................................................................................87 Shifts in supply ............................................................................................................................88 Impact of changes in demand and supply ..................................................................................88 Supply and Demand: Applications and Extensions CH 4................................................................90 Introduction..................................................................................................................................90 Resources ...................................................................................................................................90 Elasticity and the incidence of tax ...............................................................................................91 Taking the Nation’s Economic Pulse CH 7 ......................................................................................92   X   Table of Contents  Introduction ................................................................................................................................. 92 Gross domestic product.............................................................................................................. 92 Working with Our Basic Aggregate Demand/ Aggregate Supply Model CH 10.............................. 96 Introduction ................................................................................................................................. 96 Aggregate demand ..................................................................................................................... 96 Keynesian Foundations of Modern Macroeconomics CH 11........................................................ 100 Introduction ............................................................................................................................... 100 Keynesian economics............................................................................................................... 100 Introductory Readings Concept Check Questions ............................................................... 104 Introductory Readings Concept Check Answers.................................................................. 108 Study Session 04: Economics: 112 Microeconomic Analysis................................................................................................................ 112 Reading 13: Elasticity ............................................................................................................... 112 Reading 14: Efficiency and Equity............................................................................................ 112 Reading 15: Markets in Action.................................................................................................. 112 Reading 16: Organizing Production.......................................................................................... 112 Reading 17: Output and Costs ................................................................................................. 112 Study Session 05: Economics: 136 Market Structure and Macroeconomic Analysis............................................................................ 136 Reading 18: Perfect Competition.............................................................................................. 136 Reading 19: Monopoly.............................................................................................................. 136 Reading 20: Monopolistic Competition and Oligopoly.............................................................. 136 Reading 21: Demand and Supply in Factor Markets................................................................ 136 Reading 22: Monitoring Cycles, Jobs, and the Price Level ...................................................... 136 Reading 23: Aggregate Supply and Aggregate Demand ......................................................... 136 Study Session 06: Economics: 160 Monetary and Fiscal Economics ................................................................................................... 160 Reading 24: Money, Banks, and the Federal Reserve............................................................. 160 Reading 25: Money, Interest, Real GDP, and the Price Level ................................................. 160 Reading 26: Inflation................................................................................................................. 160 Reading 27: Fiscal Policy ......................................................................................................... 160 Reading 28: Monetary Policy.................................................................................................... 160 Study Session 7: Introduction 184 Introductory Readings ................................................................................................................... 184 Measuring Business Income ......................................................................................................... 184 Introduction ............................................................................................................................... 184   Table of Contents   XI  Accounting methods..................................................................................................................184 Financial Reporting and Analysis ..................................................................................................185 Introduction................................................................................................................................185 Balance Sheet ...........................................................................................................................185 Income statement......................................................................................................................186 Inventories .....................................................................................................................................187 Introduction................................................................................................................................187 Inventory....................................................................................................................................187 Inventory cost ............................................................................................................................187 Effect of inventory accounting method......................................................................................188 Current Liabilities and the Time Value of Money...........................................................................190 Introduction................................................................................................................................190 Liabilities....................................................................................................................................190 Contributed Capital ........................................................................................................................191 Introduction................................................................................................................................191 Contributed capital ....................................................................................................................191 Accounting for dividends ...........................................................................................................191 Common stock ..........................................................................................................................191 Preferred stock ..........................................................................................................................191 Stock issuance ..........................................................................................................................192 Treasury stock...........................................................................................................................192 The Corporate Income Statement and the Statement of Stockholders’ Equity .............................192 Introduction................................................................................................................................192 Retained earnings .....................................................................................................................192 Accounting for stock dividends and stock splits........................................................................192 Introduction Concept Check Questions................................................................................193 Introduction Concept Check Answers ..................................................................................195 Study Session 07: Financial Statement Analysis: 198 An Introduction...............................................................................................................................198 Reading 29: Financial Statement Analysis: An Introduction .....................................................198 Reading 30: Financial Reporting Mechanics ............................................................................198 Reading 31: Financial Reporting Standards .............................................................................198 Study Session 08: Financial Statement Analysis: 222 The Income Statement, Balance Sheet, and Cash Flow Statement .............................................222 Reading 32: Understanding the Income Statement ..................................................................222 Reading 33: Understanding the Balance Sheet........................................................................222   XII   Table of Contents  Reading 34: Understanding the Cash Flow Statement ............................................................ 222 Study Session 09: Financial Statement Analysis: 248 Inventories, Long-Term Assets, Deferred Taxes, and On- and Off-Balance Sheet Debt ............. 248 Reading 35: Analysis of Inventories ......................................................................................... 248 Reading 36: Analysis of Long-Lived Assets: ............................................................................ 248 Part I—The Capitalization Decision.......................................................................................... 248 Reading 37: Analysis of Long-Lived Assets: ............................................................................ 248 Part II—Analysis of Depreciation and Impairment.................................................................... 248 Reading 38: Analysis of Income Taxes .................................................................................... 248 Reading 39: Analysis of Financing Liabilities ........................................................................... 248 Reading 40: Leases and Off-Balance-Sheet Debt ................................................................... 248 Study Session 10: Financial Statement Analysis: 274 Techniques, Applications, and International Standards Convergence ......................................... 274 Reading 41: Financial Analysis Techniques............................................................................. 274 Reading 42: Financial Statement Analysis: Applications ......................................................... 274 Reading 43: International Standards Convergence ................................................................. 274 Study Session 11: Corporate Finance: 300 Reading 44: Capital Budgeting ................................................................................................. 300 Reading 45: Cost of Capital...................................................................................................... 300 Reading 46: Working Capital Management.............................................................................. 300 Reading 47: Financial Statement Analysis ............................................................................... 300 Reading 48: The Corporate Governance of Listed Companies: .............................................. 300 A Manual for Investors.............................................................................................................. 300 Study Session 12: Portfolio Management: 330 Reading 49: The Asset Allocation Decision.............................................................................. 330 Reading 50: An Introduction to Portfolio Management............................................................. 330 Reading 51: An Introduction to Asset Pricing Models .............................................................. 330 Study Session 13: Equity Investments: 354 Securities Markets ......................................................................................................................... 354 Reading 52: Organization and Functioning of Securities Markets ........................................... 354 Reading 53: Security-Market Indexes ...................................................................................... 354 Reading 54: Efficient Capital Markets ...................................................................................... 354 Reading 55: Market Efficiency and Anomalies ......................................................................... 354 Study Session 14: Equity Investments: 378 Industry and Company Analysis.................................................................................................... 378 Reading 56: An Introduction to Security Valuation: Part I ........................................................ 378   Table of Contents   XIII  Reading 57: Industry Analysis...................................................................................................378 Reading 58: Equity: Concepts and Techniques........................................................................378 Reading 59: Company Analysis and Stock Valuation...............................................................378 Reading 60: An Introduction to Security Valuation: Part II........................................................378 Reading 61: Introduction to Price Multiples ..............................................................................378 Study Session 15: Fixed Income Investments: 402 Basic Concepts ..............................................................................................................................402 Reading 62: Features of Debt Securities ..................................................................................402 Reading 63: Risks Associated with Investing in Bonds ............................................................402 Reading 64: Overview of Bond Sectors and Instruments .........................................................402 Reading 65: Understanding Yield Spreads...............................................................................402 Reading 66: Monetary Policy in an Environment of Global Financial Markets .........................402 Study Session 16: Fixed Income Investments: 426 Analysis and Valuation...................................................................................................................426 Reading 67: Introduction to the Valuation of Debt Securities ...................................................426 Reading 68: Yield Measures, Spot Rates, and Forward Rates ................................................426 Reading 69: Introduction to the Measurement of Interest Rate Risk ........................................426 Study Session 17: Derivative Investments: 450 Reading 70: Derivative Markets and Instruments .....................................................................450 Reading 71: Forward Markets and Contracts ...........................................................................450 Reading 72: Futures Markets and Contracts ............................................................................450 Reading 73: Option Markets and Contracts..............................................................................450 Reading 74: Swap Markets and Contracts ...............................................................................450 Reading 75: Risk Management Applications of Option Strategies ...........................................450 Study Session 18: Alternative Investments: 474 Reading 76: Alternative Investments ........................................................................................474 Terminology: Appendix A: Download Instructions 501 503 526     14   Study Session 01:   Study Session 01: Ethical and Professional Standards:   The  readings  in  this  study  session  present  a  framework  for  ethical  conduct  in  the  investment  profession by focusing on the CFA Institute Code of Ethics and Standards of Professional Conduct as  well as the Global Investment Performance Standards (GIPS®).  The principles and guidance presented in the CFA Institute Standards of Practice Handbook (SOPH)  form  the  basis  for  the  CFA  Institute  self‐regulatory  program  to  maintain  the  highest  professional  standards  among  investment  practitioners.  “Guidance”  in  the  SOPH  addresses  the  practical  application of the Code of Ethics and Standards of Professional Conduct. The guidance reviews the  purpose  and  scope  of  each  standard,  presents  recommended  procedures  for  compliance,  and  provides examples of the standard in practice.  The  Global  Investment  Performance  Standards  (GIPS)  facilitate  efficient  comparison  of  investment  performance  across  investment  managers  and  country  borders  by  prescribing  methodology  and  standards  that  are  consistent  with  a  clear  and  honest  presentation  of  returns.  Having  a  global  standard for reporting investment performance minimizes the potential for ambiguous or misleading  presentations.    Reading 1: Code of Ethics and Standards of Professional Conduct  Reading 2: “Guidance” for Standards I–VII  Reading 3: Introduction to the Global Investment Performance Standards (GIPS)  Reading 4: Global Investment Performance Standards (GIPS)        Ethical and Professional Standards   1  1.  Jason Vasco, CFA, is the director for a major Talia‐owned investment management firm branch in  Rasen. Talia is known as the world’s centre of investment management with securities laws stricter  than  the  CFA  Institute  Code  and  Standards,  and  Vasco  is  governed  by  Talia’s  laws.  In  Rasen,  an  emerging  market,  the  local  securities  laws  and  regulations  are  lenient.  They  are  very  vague  in  the  definition of insider trading and have no provision regulating soft‐dollars. Which of the following is  most accurate?  A.  Vasco must comply with Talia’s law.   B.  Vasco only has to comply with Rasen’s law and therefore can take the fullest advantage  of soft‐dollar arrangements.  C.  Vasco should not worry about Rasen’s law, it is an early stage emerging market and the  law enforcement will be lax, if any at all.  D.  As a CFA Institute member, Vasco must only comply with the Code and Standards  regarding insider trading and soft‐dollar arrangements.        2.  As an expression of gratitude, Tracy Blanc, CFA, a portfolio manager, is invited to spend a three‐ week vacation valued at $10,000 with her spouse in a luxurious resort owned by a wealthy private  client after she skillfully protected the value of the client’s capital during a severe market downturn.  The private client is a fee‐paying client of Blanc’s firm. According to Standard IV(B) – Disclosure of  Additional Compensation Arrangements:  A.  Blanc must refuse the invitation as it may jeopardize her investment judgment.  B.  Blanc is recommended to donate the monetary value of the vacation to a charity of her  choice.  C.  Blanc may accept such an invitation as long as she reports it in writing to her employer  and gains their approval.  D.  Blanc may accept the invitation if she reports it in writing to CFA Institute citing the full  monetary value of the vacation.      2   Study Session 01:   1.  Jason Vasco, CFA, is the director for a major Talia‐owned investment management firm branch in  Rasen. Talia is known as the world’s centre of investment management with securities laws stricter  than  the  CFA  Institute  Code  and  Standards,  and  Vasco  is  governed  by  Talia’s  laws.  In  Rasen,  an  emerging  market,  the  local  securities  laws  and  regulations  are  lenient.  They  are  very  vague  in  the  definition of insider trading and have no provision regulating soft‐dollars. Which of the following is  most accurate?  A. Vasco must comply with Talia’s law. B. Vasco only has to comply with Rasen’s law and therefore can take the fullest advantage of softdollar arrangements. C. Vasco should not worry about Rasen’s law, it is an early stage emerging market and the law enforcement will be lax, if any at all. D. As a CFA Institute member, Vasco must only comply with the Code and Standards regarding insider trading and soft-dollar arrangements. Correct Answer:  A  LOS: Reading 2‐b  Standard I (A) stipulates that in foreign jurisdictions members must comply with the stricter of the applicable laws and the Code of Standards, in this case Talia’s law is the strictest. Reference: CFA® Program Curriculum, Volume 1, pp. 15‐17.      2.  As an expression of gratitude, Tracy Blanc, CFA, a portfolio manager, is invited to spend a three‐ week vacation valued at $10,000 with her spouse in a luxurious resort owned by a wealthy private  client after she skillfully protected the value of the client’s capital during a severe market downturn.  The private client is a fee‐paying client of Blanc’s firm. According to Standard IV(B) – Disclosure of  Additional Compensation Arrangements:  A. Blanc must refuse the invitation as it may jeopardize her investment judgment. B. Blanc is recommended to donate the monetary value of the vacation to a charity of her choice. C. Blanc may accept such an invitation as long as she reports it in writing to her employer and gains their approval. D. Blanc may accept the invitation if she reports it in writing to CFA Institute citing the full monetary value of the vacation. Correct Answer:  C ...................................................................................................... Reading 2‐b  Blanc needs to report in writing the additional compensation so her supervisor and the firm can assess whether it is potentially a conflict of interest. If there is no objection she is free to accept the invitation. Reference: CFA® Program Curriculum, Volume 1, pp. 75‐76.    Ethical and Professional Standards   3  3.  Kevin  Dudman,  CFA,  has  just  been  offered  an  exciting  new  position  with  Walton  Asset  Management and decides that he will resign from his current position with Trust Asset Management.  Before he resigns he decides to ensure that he uses some of the skills and materials he has developed  at Trust Asset Management. He is least likely to violate the Code and Standards, if he takes:   A. stock market analysis prepared by Dudman when he was working at Trust Asset Management. B. internal contact information on Trust Asset Management‘s major clients which is available from other eternal sources. C. computer models developed to identify mispriced securities developed by Dudman and a colleague at Trust Asset Management. D. experience in pricing unlisted securities which he gained while attending training courses which were paid for by Trust Asset Management.       4.  Joseph  Morgon,  CFA,  is  a  research  analyst  covering  the  Bourgogne  Vineyard  Corporation.  Morgon’s parents bought $50 worth of Bourgogne Vineyard Corporation shares for his two‐year old  son on his birthday. Under Standard VI(A), Disclosure of Conflicts, Morgon:  A. must file a report with the SEC. B. must sell the shares immediately. C. must disclose the ownership of the shares by a member of his immediate family. D. does not need to disclose the fact that his son owns the shares of Bourgogne Vineyard Corporation.   4   Study Session 01:   3.  Kevin  Dudman,  CFA,  has  just  been  offered  an  exciting  new  position  with  Walton  Asset  Management and decides that he will resign from his current position with Trust Asset Management.  Before he resigns he decides to ensure that he uses some of the skills and materials he has developed  at Trust Asset Management. He is least likely to violate the Code and Standards, if he takes:   A. stock market analysis prepared by Dudman when he was working at Trust Asset Management. B. internal contact information on Trust Asset Management‘s major clients which is available from other eternal sources. C. computer models developed to identify mispriced securities developed by Dudman and a colleague at Trust Asset Management. D. experience in pricing unlisted securities which he gained while attending training courses which were paid for by Trust Asset Management. Correct Answer:  D ........................................................................................... LOS: Reading  2‐b  Models and research which he worked on when employed by Trust Asset Management belong to Trust Asset Management. Client contact details should not be taken from his employer, although he is not prohibited from collecting client information from outside sources. However skills and experience gained at Trust Asset Management can be used in his new job, so D is the correct answer. Reference: CFA® Program Curriculum, Volume 1, pp. 69‐74.        4.  Joseph  Morgon,  CFA,  is  a  research  analyst  covering  the  Bourgogne  Vineyard  Corporation.  Morgon’s parents bought $50 worth of Bourgogne Vineyard Corporation shares for his two‐year old  son on his birthday. Under Standard VI(A), Disclosure of Conflicts, Morgon:  A. B. C. D. must file a report with the SEC. must sell the shares immediately. must disclose the ownership of the shares by a member of his immediate family. does not need to disclose the fact that his son owns the shares of Bourgogne Vineyard Corporation. Correct Answer:  D ........................................................................................... LOS: Reading  2‐b  The share ownership is not likely to be material and therefore will not reasonably affect Morgon’s ability to make unbiased and objective recommendation according to Standard VI(A) Disclosure of Conflicts. Reference: CFA® Program Curriculum, Volume 1, pp. 89‐94.