10/11/2018 Learning Management System Question #1 of Carla Smitz, CFA, is working with new, young clients Terry and Janice Dillard to develop their investment policy statement (IPS) Smitz should most likely take into consideration: A) their risk tolerance B) their human capital C) both their human capital and risk tolerance .in Explanation (Study Session 3, Module 5.2, LOS 5.b) Related Material bo ok c SchweserNotes - Book en tre If they not have an IPS, the manager should consider everything that relates to their complete nancial situation Question #2 of m Which of the following is not part of an e ective investment governance model? o A) Determining manager compensation w w B) Establishing client objectives C) The process of setting an asset allocation w Explanation Determining manager compensation is not directly one of the elements The six elements are: Establish long-term and short-term investment objectives Allocate the rights and responsibilities of all the involved parties Specify processes for creating an investment policy statement (IPS) Specify processes for creating a strategic asset allocation Apply a reporting framework to monitor the investment program's stated goals and objectives Include periodic review of the governance policies by an independent third party (Study Session 3, Module 5.2, LOS 5.c) Related Material https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83415627/print 1/4 10/11/2018 Learning Management System SchweserNotes - Book Question #3 of What process is used to revise and update the CFA Institute Global Body of Investment Knowledge to ensure that it is globally relevant and re ects current best practice in the investment profession? A) Member engagement .in B) Competency review Explanation en tre C) Practice analysis Practice analysis is the process used to update the Global Body of Investment Knowledge and the Candidate Body of Knowledge bo ok c (Study Session 3, Module 6.1, LOS 6.b) Related Material o Question #4 of m SchweserNotes - Book w w Which of the following future trends poses a challenge to the investment profession? w A) Standardization B) Segmentation C) Consumerism Explanation Four global trends that present challenges to investment professionals include consumerism, regulations, globalization, and technological innovation (Study Session 3, Module 6.1, LOS 6.c) Related Material SchweserNotes - Book https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83415627/print 2/4 10/11/2018 Learning Management System Question #5 of Which of the following statements regarding the investment management process is most accurate? A) The IPS is the working document between the investment advisor and client B) The portfolio is only rebalanced when client circumstances change C) The IPS should be reviewed annually Explanation (Study Session 3, Module 5.2, LOS 5.b) Related Material bo ok c SchweserNotes - Book en tre in The IPS is a working document that continually evolves Any material change in client circumstances or market outlook can require rebalancing At least annually reviewed is appropriate but could be required for any material changes in client circumstances or market conditions Question #6 of m Decision-reversal risk is likely to: o A) occur in large institutional portfolios with exposure to alternative investments w w B) occur when a manager panics during a market crisis C) create a skewed distribution of portfolio return w Explanation Decision-reversal risk is thoughtlessly reversing a previous investment decision at the worst time It commonly occurs when less knowledgeable investors get into complex positions they not understand, panic when things don't go well, and sell Thoughtless selling when an asset is down would likely reduce upside recovery and create negative (cut of the upside) skew in the returns It refers primarily to the client panicking and is presumably less common in more knowledgeable institutional investors who have more access to investment information (Study Session 3, Module 5.2, LOS 5.c) Related Material SchweserNotes - Book https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83415627/print 3/4 10/11/2018 Learning Management System Question #7 of Which of the following comments regarding major industry trends is most correct? A) Robo-advisors o er wealth management services without direct contact between the client and manager B) The use of big data is tied to the growth of arti cial intelligence C) Passive management is a declining portion of the investment business Explanation Related Material bo ok c SchweserNotes - Book en tre (Study Session 3, Module 5.1, LOS 5.a) in The growth of AI has allowed machines to rapidly search big data for relationships at a scale that was not formerly possible Robo-advising can also include some client interaction with the manager Passive management has been a growing portion of the investment business Question #8 of Which of the following is least likely to be an e ective method for professions to establish m trust? o A) Maintain a consistent body of expert knowledge w w B) Emphasize regulation as the mechanism to monitor professional conduct C) Have high entry requirements w Explanation Professions should establish high entry requirements and be self-regulating through the monitoring of and imposing of sanctions on members Although the profession must work with regulators and follow all applicable laws, they should not allow regulators to be the sole arbiters of professional conduct A body of relevant knowledge is important, and it must continually evolve, particularly in a changing industry such as investments (Study Session 3, Module 6.1, LOS 6.a) Related Material SchweserNotes - Book https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83415627/print 4/4 ... https://www.kaplanlearn.com/education/dashboard/index /66 a9ea0d62bb71ab4 959 2 56 150 29a3fd/practice /qbank/ 24 038 51 8/quiz/ 834 1 56 27/print 2/4 10/11/2018 Learning Management System Question #5 of Which of the following statements regarding the. .. https://www.kaplanlearn.com/education/dashboard/index /66 a9ea0d62bb71ab4 959 2 56 150 29a3fd/practice /qbank/ 24 038 51 8/quiz/ 834 1 56 27/print 3/ 4 10/11/2018 Learning Management System Question #7 of Which of the following comments regarding major industry trends is most correct?... upside recovery and create negative (cut of the upside) skew in the returns It refers primarily to the client panicking and is presumably less common in more knowledgeable institutional investors