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2016LevelIIMockExam:AfternoonTheafternoonsessionofthe2016LevelIICharteredFinancialAnalyst®MockExaminationhas60questions.Tobestsimulatetheexamdayexperience,candidatesareadvisedtoallocateanaverageof18minutesperitemset(vignetteand6multiplechoicequestions)foratotalof180minutes(3hours)forthissessionoftheexam.1-EthicalandProfessional7-13-Financial2016LevelIIMockExam:AfternoonTheafternoonsessionofthe2016LevelIICharteredFinancialAnalyst®MockExaminationhas60questions.Tobestsimulatetheexamdayexperience,candidatesareadvisedtoallocateanaverageof18minutesperitemset(vignetteand6multiplechoicequestions)foratotalof180minutes(3hours)forthissessionoftheexam.1-EthicalandProfessional7-13-FinancialReportingand19-FinancialReportingand25-31-37-Fixed43-49-Alternative55-PortfolioByaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.AllrightsEthics-LindseyCarlyle,CFAEthics-LindseyCarlyle,CFAisaresearchanalystwithWoodstockBrothers(Woodstock),adivisionofWoodstockGroup.Woodstockisafullservicebrokerageandinvestmentfirm.TheWoodstockGroupandallofitsdivisionshaveadoptedtheCFAInstitute’sCodeofEthicsandStandardsofProfessionalConduct.CarlyleiswritingaresearchreportonPaladinShippers(Paladin),aspecialtytransportationcompany.Fromtimetotime,severalofWoodstock’sseniormanagershaveservedontheBoardofDirectorsofPaladin,althoughnoneofthemcurrentlyserveonPaladin’sBoard.Additionally,Woodstock’sinvestmentbankingdivision,separatedbyaChinesewallfromtheresearchdivision,representedPaladinintheirinitialpublicofferingseveralyearsago.CarlyleinitiatescoverageofPaladinwitha“StrongBuy”recommendationforaccountswithahightoleranceoverthenextsixmonths.Inthereportsheidentifiesthemainfactorssheutilizedindeterminingherrecommendation.ShedoesnotmentionthepreviousrelationshipsWoodstockhadwithPaladinastheynolongerexist.ThereportwasapprovedbyhersupervisorbeforebeingdisseminatedtoallclientswithahighriskprofileincludingMariettaInvestments(Marietta)theassetmanagementdivisionofWoodstockBrothers.ScottRobinson,CFAisaportfoliomanagerforMarietta.HestartedatMariettaasajuniorworkinghiswayuptohiscurrentpositionasaportfoliomanager.Whenhefirstjoinedtheportfoliomanagementgroupheworkedwiththehighgrowthequityteam.RobinsonnowspecializesinmanagingsmallcapvaluestocksforU.S.pensionfundsandafewhighnetworthindividuals.RobinsonknewCarlylefromhispreviousdaysintheresearchdepartment.BasedonlyonCarlyle’srecommendation,RobinsonreviewstheaccountsunderhismanagementandpurchasesPaladinstockwheresuitable.AllofRobinson’saccountshavegivenhimfulldiscretioninmanagingtheirfunds.GivenhisdecisionpurchasePaladin,hedeterminesthetotalnumberofsharesthatneedtobepurchasedforallofhisaccountsandsubmitstheblockbuyordertoMarietta’stradingdepartment.IttakesseveralhourstofullyexecutethetradesandthesharesareallocatedaccordingtoMarietta’sTradeAllocationPolicy.Thepolicystates,“Clientaccountsparticipatinginablocktradeshallreceivethesameexecutionpriceandbechargedthesamecommission,ifany.Alltradeallocationsshallbemadeonaproratabasispriortoorimmediatelyfollowingapartialorcompleteblocktrade.”Aspartoftheblocktrade,RobinsonpurchasesPaladinShippersforamutualfundheReviewingallthetradesexecutedinthemutualfundistheresponsibilityofReneeStevens,CFA,Marietta’sChiefComplianceOfficer.GivenPaladin’srichvaluation,sheisconcernedaboutRobinson’spurchaseofthestockforthefundandrequestsheprovidejustificationforthepurchase.RobinsongivesStevensthefollowingexplanation:“Subsequenttothe“StrongBuy”recommendationfromWoodstockBrothersresearchanalystCarlyle,PaladinShipperswaspurchasedduetoitsexcellentreturnprofileandgrowthopportunities.WhilethepurchaseofwhatappearstobealargecapgrowthstockinasmallcapvalueportfoliomightByaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.Allrightsbequestionable,itfitsnicelywithintheoverallbequestionable,itfitsnicelywithintheoverallpurposeandobjectivesofthefund.Additionally,portfoliocharacteristicsofthefund,evenwiththeinclusionofPaladin,clearlyplacethefundinthesmallcapvaluestylecategory.”Followingtheendofmonthreporting,RobinsonreceivedanemailfromoneofhisclientsthepurchaseofPaladinforhisportfolio.TheclientfeltthepurchasewasnotincompliancewithhisInvestmentPolicyStatement.Robinsonagainreviewstheclient’sinvestmentpolicyandpreparesaresponse.HealsoplanstoinvitetheclienttoanupcomingmeetinghehopestoschedulewithCarlyletodiscussherrecommendationonPaladin.CarlyleremainsimpressedwithPaladin’sgrowthopportunitiesandattentiontocustomerRobinsonasksCarlyletomeetwithseveralpotentialnewclientsforMarietta.HebelievesthatdemonstratinghisdirectaccesstoStreetresearchanalystswillhelphimgainnewclients.SeveralminutespriortothestartofthemeetingRobinsonintroducesCarlyletooneofhisexistingclients.CarlylereviewswiththemarecentconversationshehadwiththePaladinCFOregardingnewgrowthopportunitieswhichsheplanstoincludeinhernextresearchreport.CarlylemeetswithRobinson’spotentialclientsanddiscussesthestockresearchprocess.WithregardstoCarlyle’sresearchreportonPaladin,whichoftheCFAInstituteStandardsProfessionalConductdidshemostlikelyA.CommunicationwithClientsandProspectiveDisclosureofC.Answer=Woodstock’spreviousbusinessrelationshipsneedstobedisclosedinCarlyle’sinitialreportinordertomaintainindependenceandobjectivity.AlthoughnoofficersarecurrentlyservingontheboardandaChinesewallexists,itdoesnoteliminatetheneedfortheclienttoassessthepotentialconflictofinterestbetweenWoodstockandPaladinandthereasonbehindCarlyle’sinvestmentrecommendation.StandardVI(A)–DisclosureofConflictsrequirescharterholdersandcandidatestodiscloseallmattersthatcouldreasonablybeexpectedtoimpairtheirobjectivityandabilitytojudgemotivesandpossiblebiases.ThereforeCarlyleviolatedStandardVI(A).CFALevel“GuidancetoStandardsI–VII,”byCFAInstituteStandardVI(A)–DisclosureofConflictsByaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.AllrightsBypurchasingPaladinstockforhisclientaccounts,didBypurchasingPaladinstockforhisclientaccounts,didRobinsonmostlikelycomplywithCFAInstituteStandardsofProfessionalNo,becauseheisfamiliarwithWoodstock'sresearchNo,becausehebasedhispurchaseonCarlyle'sAnswer=RobinsonreliedsolelyonCarlyle’s“StrongBuy”recommendationtomakethedecisiontopurchasePaladin’sstockandthusdidnotcomplywithStandardV(A)–DiligenceandReasonableBasis.EventhoughheisfamiliarwithCarlyleandWoodstock’sinvestmentmethodology,StandardV(A)requiresthathemakeareasonableanddiligentefforttodeterminewhetherherresearchissound,herassumptionsarereasonable,theanalysisistimely,andherrecommendationisobjective.CFALevel“GuidancetoStandardsI–VII,”byCFAInstituteStandardV(A)–DiligenceandReasonableBasisDoesthemannerinwhichRobinsonallocatesthepurchaseofPaladinsharesfortheunderhismanagementmostlikelyviolatetheCFAInstituteStandardsofProfessionalYes,becausetradesshouldnotbeallocateduntiltheblockisfullyYes,Marietta'stradingpolicydoesnotdifferentiatebetweendiscretionaryandnon-discretionaryaccounts.Answer=Thereisnoviolation.StandardIII(B)–FairDealingstatesthatmembersmustdealfairlyobjectivelywithallclientsregardlessofwhethertheyarediscretionaryornon-discretionaryaccounts.Marietta’stradeallocationpolicytreatsallclientsfairlyintermsofbothtradeexecutionorderandprice.CFALevel“GuidancetoStandardsI–VII”,byCFAInstituteStandardIII(B)–FairDealingDoestheinclusionofPaladin’sstockinthesmall-capvaluemutualfundmostlikelyviolateoftheCFAInstituteStandardsofProfessionalA.Yes,RobinsonviolateswithrespecttoByaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.AllrightsYes,StevensviolateswithrespecttoherresponsibilitiestoYes,StevensviolateswithrespecttoherresponsibilitiestoAnswer=Noviolationhastakenplace.StandardIII(A)–Loyalty,Prudence,andCarestatesthatdecisionsmaybejudgedinthecontextofthetotalportfolioratherthanbyindividualinvestmentswithintheportfolio.RobinsonhassatisfiedhisdutybythoroughlyconsideringPaladin’splaceintheoverallportfolio.CFALevel“GuidancetoStandardsI–VII,”byCFAInstituteStandardIII(A)–Loyalty,PrudenceandCareWhatisRobinson’sbestactionwithregardtotheemailhereceivedfromhisclientaboutpurchaseofPaladin?Robinsonadvisehimthatthetradeswerereviewedbythefirm’schiefcomplianceasktomeetwithhimtoreviewand,ifnecessary,revisehisinvestmentpolicystatement.liquidatethesharesofPaladinintheclient’sportfolio.Answer=StandardIII(C)–Suitabilityrequiresmembersinanadvisoryrelationshiptoregularlyupdateclient’sinvestmentpolicystatementtoreflectanychangesintheclient’scircumstances.Updatingtheinvestmentpolicystatementshouldberepeatedatleastannually.Withouteffortstoupdateinformationconcerningclientfactors,oneormorefactorscouldchangewithouttheinvestmentmanager’sknowledge.CFALevel“GuidancetoStandardsI–VII,”byCFAInstituteStandardIII(C)–SuitabilityDuringCarlyle’smeetingwithRobinson’spotentialclients,whomostlikelycommittedviolationoftheCFAInstituteStandardsofProfessionalNeitherCarlylenorRobinsonAnswer=Byaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.AllrightsNeitherCarlylenorNeitherCarlylenorRobinsonhasviolatedtheCFAInstituteStandardsofProfessionalduringthemeetingwithRobinson’spotentialclients.ByaskingCarlyletomeetwithseveralpotentialnewclientsRobinsonissimplyattemptingtogrowhisclientbase.BymerelydiscussingherresearchapproachCarlylehasnotgivenpreferentialtreatmenttothesepotentialclients.Carlylehasnotviolatedthestandardsasshehasonlydiscussedtheresearchprocessanddidnotdisclosehermostcurrentresearch.CFALevel“GuidancetoStandardsI–VII,”byCFAInstituteStandardIII(B)FairDealing专业提供CFA/FRM各级全套视频课程资料微信：Byaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.AllrightsQuant-RolfHahnisananalystwithWeissdornGmbH.HeispuzzledQuant-RolfHahnisananalystwithWeissdornGmbH.Heispuzzledbythemostrecentreportofhisstatisticalanalysisofoneofitsinvestments,VeriZoom,Inc.ThereportedcorrelationofVeriZoomwiththemarketseemstobetoohigh.Hesuspectsthatthenewsoftwarethefirminstalledthepreviousweekisnotprogrammedtocorrectlycalculatecorrelations.Hahndecidestodoublecheckthevaluesgiveninthereport.HahnaccessesWeissdorn'sreturnsdatabaseanddownloadstheappropriatemonthlyreturnsneededtoestimatethecorrelationofVeriZoomandtheMSCIEuropeLargeCapIndex,theindexWeissdornusesasthemarketproxy.Usingaspreadsheetprogram,HahnestablishesthevarianceandcovariancedatashowninExhibit1.GiventheresultsinExhibit1,Hahn'ssuspicionthatthesoftwareisincorrectwiththecorrelationsconfirmed.Heaskshisassistant,AngelaGreene,tohelphimrecalculatethestatisticsforeachfirmWeissdorncovers.Whileworkingtocompletethistask,GreeneasksHahnwhycorrelationissoimportantinportfoliomanagement.Hahnrepliesthatcorrelationcanestablishthestrengthoftherelationshipbetweentwovariables.Hestatesthatcorrelationscloseto;123+1indicatethereisastrongdirectrelationshipbetweenthe0indicatethereisnorelationshipbetweenthevariables,-1indicatethereisastrongoffsettingrelationshipbetweentheGreenerespondsbyaskingiftheonlymeansofevaluatingwhetherthecorrelationiscloseto0isjudgmentoftheanalyst.Hahnsaysthatthereisastatisticaltesttodeterminewhetherasamplecorrelationisstatisticallysignificantlydifferentfrom0.HahntakestheresultsforanotherfirmthatWeissdornfollows,Anchor-Wise,Inc.(AWI),andusesthemtodemonstratethetest.ThedataforAnchor-WiseareshowninExhibit2.Byaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.AllrightsExhibitVarianceandCovarianceDataRelatedtoVarianceofCovariancewiththeMSCIEuropeLargeCapIndexMSCIEuropeLargeCapGreeneasksHahnifthereareothertechniquesthatcanGreeneasksHahnifthereareothertechniquesthatcanbeusedtoevaluatetherelationshiptwovariables.Hahnanswersthatregression,atechniquecloselyrelatedtocorrelationanalysis,canbeusedtoestablishtherelationshipbetweentwovariableswithintheassumptionsoftheanalysis.Forexample,hesaysthattheymightwanttoevaluatethewhereRAWIisthemonthlytotalreturnonAWI,RMSCIisthemonthlytotalreturnontheMSCILargeCapIndex,representstheerrorterm.GreeneandHahnusethedatatheydownloadedAWIandtheMSCIindexandruntheregression.TheresultsaregiveninExhibitByaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.Allrights专业提供CFA/FRM各级全套视频课程资料微信：ExhibitCorrelationofAnchor-WisewithMSCIEuropeLargeCapNumberofCriticalValueat5%LevelofHahnnextconsidersthetopicofmultipleregression.ToprovideanexamplethatheandGreenereview,hedownloadsdatathatallowhimHahnnextconsidersthetopicofmultipleregression.ToprovideanexamplethatheandGreenereview,hedownloadsdatathatallowhimtoestablishthewhereRAWIisthequarterlyreturnforAWI,ΔGDPUSAisthechangeinUSrealGDPforthequarter,andYCUSAistheslopeoftheyieldcurve(measuredasthedifferencebetweenthe1-monthUSTreasuryrateandthe10-yearTreasuryrate)attheendofthequarter.TheresultsoftheregressionarereportedinExhibit4.Byaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.AllrightsExhibitResultsofaSimpleRegressionMultipleStandarderrorofAnalysisofDegreesofSumofSquares1StandardHahnpointsouttoGreenethatinterpretationoftheresultsfromamultipleregressioncanbeunlessvariousconditionsaremet.Hementionsthreesuchconditions.TheHahnpointsouttoGreenethatinterpretationoftheresultsfromamultipleregressioncanbeunlessvariousconditionsaremet.Hementionsthreesuchconditions.Theerrorterm•••haveanexpectedvaluethatislessthanbestronglypositivelycorrelatedacrossobservations,andbenormallydistributed.Byaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.AllrightsExhibitResultsofaMultipleMultipleerrorofAnalysisofDegreesofFreedomSumofSquares(SS)2p-BasedonthedatainExhibit1,thecorrelationBasedonthedatainExhibit1,thecorrelationbetweenVeriZoomandtheMSCIEuropeCapIndexisclosestAnswer=ThecorrelationiscalculatedInthisCFALevel"CorrelationandRegression,"RichardA.DeFusco,DennisW.McLeavey,JeraldE.Pinto,andDavidE.RunkleSectionWhichofHahn'sthreestatementsregardingcorrelationisleastStatementStatementStatementAnswer=Correlationmeasuresthelinearassociationbetweentwovariables.Variableswithacloseto0cannonethelessexhibitastrongrelationship—justnotalinearCFALevel"CorrelationandRegression,"RichardA.DeFusco,DennisW.McLeavey,JeraldE.Pinto,andDavidE.RunkleSectionByaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.Allrights AssumingthatthereturnsforAnchor-WiseandthereturnsfortheMSCIEuropeLargeIndexcome AssumingthatthereturnsforAnchor-WiseandthereturnsfortheMSCIEuropeLargeIndexcomefromabivariatenormaldistribution,theresultsshowninExhibit2mostindicatetheircorrelationisstatisticallysignificantlydifferentfromthereisanon-linearrelationshipbetweenthetheircorrelationisnotstatisticallysignificantlydifferentfromAnswer=CFALevel"CorrelationandRegression,"RichardA.DeFusco,DennisW.McLeavey,JeraldE.Pinto,andDavidE.RunkleSectionBasedontheresultsreportedinExhibit3,theF-statistictotestwhethertheslopeofregressionlineisdifferentfromzeroisclosestAnswer=Foraregressionwithoneindependentvariable,asisthecasehere,theF-statisticiswhereRSSistheregressionsumofsquares,SSEistheresidualsumofsquares,andnisnumberofCFALevelByaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.Allrights专业提供CFA/FRM各级全套视频课程资料微信：Theteststatistic,t,𝑡𝑡=𝑟𝑟√𝑛𝑛−√1−𝑡𝑡=0.267√60−2=𝟐𝟐.√1−where𝑟𝑟isthecorrelationand𝑛𝑛isthenumberofobservations.Because2.110isgreaterthanthecriticalvalueof1.670,werejectthenullhypothesisthatthecorrelationis0."CorrelationandRegression,"RichardA.DeFusco,DennisW.McLeavey,Jerald"CorrelationandRegression,"RichardA.DeFusco,DennisW.McLeavey,JeraldE.Pinto,DavidE.RunkleSection3.6Atthe5%levelofsignificance,Exhibit4indicatesonlyb1isstatisticallysignificantlydifferentfromnoneofthecoefficientsintheregressionaresignificantlydifferentfromb0andb1arebothstatisticallysignificantlydifferentfromzero,butb2isnotAnswer=Allthreecoefficientsarenotstatisticallysignificantlydifferentfromzeroatthe5%level;theirvaluesaretoohigh.Toacceptthehypothesesthattheyarestatisticallydifferentfromzero,thereportedp-valueneedstobeequaltoorlessthan0.05.CFALevel"MultipleRegressionandIssuesinRegressionAnalysis,"RichardA.DeFusco,DennisW.McLeavey,JeraldE.Pinto,andDavidE.RunkleSection"CorrelationandRegression,"RichardA.DeFusco,DennisW.McLeavey,JeraldE.Pinto,DavidE.RunkleSection3.5WhichofHahn'sconditionsrelatingtotheerrorterminamultipleregressionisTheconditionthatrelatestotheexpectedTheconditionthatrelatestothecorrelationTheconditionthatrelatestotheAnswer=Multiplelinearregressionassumesthattheerrortermisnormallydistributed,hasanvalueofzero,andisuncorrelatedacrossCFALevel"MultipleRegressionandIssuesinRegressionAnalysis,"RichardA.DeFusco,DennisW.McLeavey,JeraldE.Pinto,andDavidE.RunkleSectionByaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.AllrightsFinancialReportingandAnalysis–ClaireMunroe,theseniorpublishinganalystatNorthStarFinancialReportingandAnalysis–ClaireMunroe,theseniorpublishinganalystatNorthStarSecurities,hasbeguntoreviewthefinancialperformanceofSuburbanPublishers,Inc.Suburban,whichreportsunderUSGAAP,hasahistoryofpurchasingcommunitynewsgroupsfromaroundthecountryandholdingthemforseveralyearseveniftheyarenotinitiallyprofitable.Thegrowthoftheinternethasbeendifficultonmanymajornewspapers,butcommunitynewspapershavebeenparticularlyresilient.Atthestartof2010,Suburbanpurchased24%ofthe1millionoutstandingsharesofWestCommunityNewsGroupfor$12,000thousand.WestReach’sincomeanddividendsthroughtheendof2013areshowninExhibit1.ExhibitWestReachCommunityNewsGroupIncomeandDividends,2010-AsMunroereviewedherworkingpapers,shecameacrossanotationthatshehadmadefollowingacquisition:“Averystrangelong-termacquisitionforSuburban.WestReach’smajorityholder,WilliamFrench(whoisnow81yearsold),holds62%ofthesharesandcontrolstheboardwithanironhand.Dividendsarepaidoutaccordingtohisneedsandpreferences.SuburbanwasunsuccessfulingettinganyofitspreferredcandidateselectedtotheboardorexertinganyinfluenceonWestReach’sdividendpolicy.”JustbeforeMonroeclosedherfileonthisfirm,sheadded,“Nothinghaschangedsince2010,except,ofcourse,thatMr.Frenchisnowafewyearsolder”.Atthestartof2011,Suburbanpurchased32.5%oftheoutstanding2millionsharesofGreatLakesPress,Inc.,for$1,365thousand.GreatLakesownedcommunitynewspapersinmostofthenortheasternstates.Althoughthemajorityofthesepaperswereprovidedfreeofcharge,theyhadhistoricallymaintainedstrongrevenuestreamswiththeirfocusonpersonalintereststoriesaboutlocalindividualsandlocalbusinessadvertisingprimarilyfromtheautomotivesector.Exhibit2providesdetailsofthisacquisition(PartA)andsubsequentresults(PartB).GreatLakesstruggledin2012and2013withmountinglossesandtheeliminationofitsdividend.Byaccessingthismockexam,youagreetothefollowingtermsofuse:Thismockexamisprovidedtocurrently-registeredCFAcandidates.Candidatesmayviewandprinttheexamforpersonalexampreparationonly.Thefollowingactivitiesarestrictlyprohibitedandmayresultindisciplinaryand/orlegalaction:accessingorpermittingaccessbyanyoneotherthancurrently-registeredCFAcandidates;copying,postingtoanywebsite,emailing,distributingand/orreprintingthemockexamforanypurpose.©2016CopyrightedbyCFAInstitute.Allrights($ExhibitGreatLakesFreePressValuesatAcquisitionandSubsequentPerformance,2011-Munroe’scalculationsforSuburban’sholdingsofGreatLakesattheendof2013aresummarizedExhibit3.Shebelievedthatevenwithgovernmentbail