the exam is insane! Anyone with me?
Ridiculous! I can’t get above a 56.
AM-01 TL, a portfolio manager with over 20 years of investment experience, has decided to leave his position at a major brokerage firm and start his own investment advisory firm. TL will need to run a streamlined operation until he can greatly increase his assets under management. For his clinets, TL is planning on providing a minimum level of research material, mainly on the economy and the market in general. TL’s intended approach is to subscribe to several different analytical and reserach reporting services, sifting through the research, and repackage it for his own clients. TL’s method of providing research data to his clients: A. is not in violation of any standard because TL performed his own analysis on the data B. is not in violation of any standard because TL paid for the research and may use it as he deems appropriate C. is in violation of CFAIS because he does not have permission from the creators of the original research D. is in violation of CFAIS because he has not disclosed to his client that the research came from an outside source. AM-40 Assume that real GDP and potential GDP in the U.S are currently equal at $13T, and that there is currently a budget deficit of $50B. Indicate whether this deficit is structural or cyclical, and whether government intervention in the form of discretionary fiscal policy is appropriate or not? Budge deficit; Government intervention A. structual; No B. Cyclical; No C. Strucutual; Yes D. Cyclical; Yes
AM-01 TL, a portfolio manager with over 20 years of investment experience, has decided to leave his position at a major brokerage firm and start his own investment advisory firm. TL will need to run a streamlined operation until he can greatly increase his assets under management. For his clinets, TL is planning on providing a minimum level of research material, mainly on the economy and the market in general. TL’s intended approach is to subscribe to several different analytical and reserach reporting services, sifting through the research, and repackage it for his own clients. TL’s method of providing research data to his clients: A. is not in violation of any standard because TL performed his own analysis on the data B. is not in violation of any standard because TL paid for the research and may use it as he deems appropriate C. is in violation of CFAIS because he does not have permission from the creators of the original research D. is in violation of CFAIS because he has not disclosed to his client that the research came from an outside source. I would say D. He needs to indicate in his repackaging that he has used materials from different sources.
D and A respectively.
d, a
would also go with d,a
I checked the handbook. It says that repackaging is allowed as long as the analyst does NOT imply he is the original author… It doesn’t require analyst disclose the source of the research, though it says analyst should consider doing so. In this case, TL, by no means, indicates that he created the research. So it does not necessarily mean TL is in violation with I©. Am I right?
if the analyst does not recognize the source – he is in violation of misrepresentation (specifically Plagiarism)
That’s good point! I got it. thank you, cpk 123
AM-72 SC recently filed for chapter 11 reorganization. A combination of poor economic conditions and managment incompetence are to blame for the failure of the company. Indicate whether SC’s creditors or shareholders would mostly likely recover their full investment under a reorganization, and state whether a potential liquidation would most likely be the result of operating or financial leverage? Reorgazination; liquidation A. creditor; operating B. shareholder; operating C. creditor; financial D. shareholder; financial The answer is A. Isn’t it true that bankruptcy results from heavy financial leverage (Debt) and management failure to cover the interest due? and that’s why there are so many “CREDITORs” waiting for liquidation, right?
One more AM-119 Joe is a highly paid corporate executive who will retire in two years. over 25 year ago, Joe bought a large portfolio of growth stocks that has performed quite well. Joe has asked his financial adviser to consider switching from stocks to high- yielding bonds. The invesmtnet issue of greatest concern in implementing this strategy will be A. liquidity needs B. time horizon C. legal and regulatory factors D. tax consideration. Could someone please explain?
since Joe is going to retire in two years… getting out of stocks to bonds might end up giving him capital gains… so tax considerations?? my guess.
B?
Since Joe is retiring, he would need a steady stream of income that growth stocks do not provide. High yield bonds would do just that. --> I would go with A: Liquidity needs I don’t think it should be D: Tax consideration, since Joe’s portfolio has done really well, he wants to sell it, he will incur a big tax liability, if taxes were the primary concern, he wouldn’t sell it now and wait till later when he moves to a lower tax bracket (after retirement–> less current income) I have no idea how legal & regulatory factors figure in here. Option B is interesting, since he is about to retire, he should move a certain % of his portfolio into bonds (Capital preservation). The only reason I ruled this option out was because these are high-yield bonds and not treasury securities. High yield bonds tend to have higher Vol and thus their price fluctuate quite a bit…I could be wrong on this one though…
I would say B also. Since he retires in 2 years his investment horizon is small and will not be long enough to correct any market down-turns, should he face any.
I vote for B too . Reasoning same as Amtrak’s
AM-106 An auto company announced a new plant to be constructed. The company will partly finance the project with a dual currency bond offering. The $200M offering will have a 6% coupon payable in Yen and mature in 2021 with the final principle payment in U.S dollars. On the date of the bond offering, the market rate was 5.5%. The bond contains a sinking fund provision. Beginning in 2011, the company will retire $15M each year until the bond matures. State whether the investor only or both the investor and the company assume any potential currency risk and indicate whether the bonds are repurchased at par or at a premium under the sinking fund provision. Currency exchange risk; sinking fund provision A. Investor only; Par B. Both investor and the company; Par C. Investor only; premium D. Both investor and the company; premium I don’t understand the sinking fund provision. the notes only say deliver bonds when they are below par value; deliver cash when they are at premium. How it works? any example?
Joe whats the ans for AM: 119?
>Isn’t it true that bankruptcy results from heavy financial leverage (Debt) and >management failure to cover the interest due? >and that’s why there are so many “CREDITORs” waiting for liquidation, right? It’s true that financial leverage is a result of debt, but specifically it is the sensitivity of earnings to changes in operating income. Operating leverage can be more dire because it threatens your ability to achieve even positive EBIT in adverse conditions. At least you can tell your creditors to back the %&*@ up while you’re reorganizing, which is a great relief on financial leverage. See Delta Airlines for an example. So if you have to “state whether a potential liquidation would most likely be the result of operating or financial leverage” then OL, if out of hand, is worse because it jeopardizes your ability to sell enough units to be profitable; out-of-control FL can be negotiated, recapitalized, etc. HTH