CFA Level I · CFA Level I Exam · Guidance for Standard II: Integrity of Capital Markets
Which of the following is the most accurate description of how ethical conduct benefits investors who provide capital?
Ethical conduct supports trust in efficient capital markets, which let investors transfer and transform risk. Such markets act as an information exchange, create investment products, provide liquidity and limit transaction costs. Ethics does not guarantee positive returns.
- AIt guarantees that investments will earn positive returns
- BIt supports efficient markets that let investors transfer and transform risk, with liquidity and limited transaction costsCorrect
- CIt removes the need for markets to act as an information exchange
Explanation
Efficient capital markets, supported by trust, let investors transfer and transform risk. Markets serve as an information exchange, create products, provide liquidity and limit transaction costs. Ethics does not guarantee positive returns or remove the information role.
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