CFA Level I · CFA Level I Exam · Ethics and Trust in the Investment Profession
If investors come to believe that capital markets are unfair and that only insiders can be successful, they are most likely to:
Investors who believe markets are unfair or rigged for insiders are unlikely to invest or will demand a higher risk premium. Less investment capital can reduce innovation and job creation and harm the economy and society, so loss of trust damages market efficiency.
- Arequire a higher risk premium or decline to investCorrect
- Baccept lower expected returns because of greater transparency
- Cincrease investment capital to offset the perceived risk
Explanation
The text says investors who lose trust in market participants or fairness will be unlikely to invest or, at the least, will require a higher risk premium. Reduced capital can lower innovation and job creation. The other options describe the opposite effect.
Did you get it right without looking?
One question tells you little. A timed set on Ethics and Trust in the Investment Profession shows your real accuracy, how long you take and where you lose marks.
More Ethics and Trust in the Investment Profession questions
- According to the CFA Institute materials on applying an ethical framework, an ethical decision-making framework is most likely intended to h…
- According to the CFA Institute's description of its mission, the phrase "for the ultimate benefit of society" is best described as reflectin…
- The Handbook describes the Code and Standards as serving as a model for measuring the ethics of investment professionals globally. This mode…
- Which of the following is the most likely consequence listed in the Preamble for a member or candidate who violates the Code and Standards?
- Which of the following is most likely a requirement of the CFA Institute Code of Ethics for members and candidates?
- Which statement about ethics for a global investment industry is most accurate?