BOOK 1— ETHICS AND STANDARDS; BEHAVIORAL FINANCE; AND PRIVATE WEALTH MANAGEMENT Reading Assignments and Learning Outcome Statements 9 Study Session 1 — Code of Ethics and Professional Standards 15 Study Session 2 — Ethical and Professional Standards in Practice 74 Concept Checkers and Self-Test - Ethical and Professional Standards us Study Session 3 - Behavioral Finance 159 Self-Test — Behavioral Finance 203 Study Session 4— Private Wealth Management 206 Self-Test ~ Private Wealth Management and Behavioral Finance 280 Index 283If this book does nos have a front and back cover, ic was distributed without permission of Schweser, a Division of Kaplan, Inc.,and is in direct violarion of global copyright laws. Your assistance in pursuing potential violacors of this aw is greatly appreciated, Required GPA nse dclimes “CFA® and Charezed Financial Analy are wademarksovaed by CFA Tastat. CFA Taste (emery the Asociaion for Ivesenent Management and Reseach) does at endose,promove, ew, o waza the acurcyof he prt services ete by Schwese Study Pogram®.” Certain materials contained within this vext are the copyrighted property of CBA Institue. The following i the capyright disclosure for chese materials: "Copyright, 2008, CFA Insitute. Reproduced and republished ftom 2008 Learning Outcome Satements Level 3 questions fiom CFA® Program Materials, CA Instisue Standards of Pofsonal Conduc, aed CFA Institute's Global essen Peformance Standards with permission fiom CFA Instcute. All Rights Reserved.” These materials may not be copied without written permission from the authot. The unauthorized duplication ofthese nots iea violation of lobal copyright laws and the CEA lastinute Code of Ethie, Your assistance a pursuing potential violators of this law is greatly appreciated, Disclaimer: The Schweser Notes shouldbe used in conunccion with the orignal readings a set orc by CFA Insitute i deir 2008 CEA Level 3 Siudy Guide. The information contained in these Notes covers topics contained inthe readings telerenced by CFA Institue and is believed tobe accurate. However, their accuracy cannot be guaranteed not is any warranty conveyed as to your ultimate exam success. The authors ofthe relecenced readings have not endoned or sponsored these Notes, nor are they alfiliated with Schweser Seudy Program. Page 2 (©2008 SchweserWELCOME TO THE 2008 LEVEL 3 SCHWESER STUDY NOTES ‘Thank you for trusting Schweser to help you reach your goals. We are all very pleased to be able to help you prepare for the Level 3 CFA Exam. In this intioduction you will find valuable information about the exam as well as the resources included with the Study Notes, how you can best use Schweser materials to prepare for the exam, and other educational resources you will find helpful. Besides the Study Notes themselves, there are many educational resources available at Schweser.com. Just log in using the individual username and password that you received when you purchased the Notes, and go to Online ‘Access. Alll purchasers of our 2008 Level 3 Schweser Study Notes pack receive: the 5-volume ser of Study Notes, Practice Exams Volume 1, access to five volumes of the Level 3 Schweser library, and access to the Schweser Study Planner. Study Notes — Five volumes that include complete coverage of all 18 Study Sessions (all Learning Outcome Statements). Each topic area has its own examples and Concept Checkers, which are multiple-choice and/or essay ‘questions designed to test your understanding of individual concepts. In addition you will find several Self-Test questions spaced oux through the five volumes that are designed to be more exam-like in coverage and difficulty. This year, in the Level 3 Scudy Notes, I have strategically placed ewo types of study tips: (1) Professor's Notes, which are content-related tips; and (2) For the Exam tips, which are focused on the exam. The new For the Exam tips give you pointers on how to prepare for the exam and how you might see individual topics tested or combined with other topics on the exam. Command Words ~ Over the years I have received countless questions from candidates asking what calculations will be required on the exam. As the Level 3 curriculum becomes more and more qualitative, the answer to this question becomes more and more important. Knowing formulas and being able to crank through calculations (as you did at Levels 1 and 2) is one thing; being able to explain your answers is totally different ‘To help reinforce their importance, I have included the list of CFA Institute command words with this introduction. I have also underlined the command words in every LOS, so as you study the notes, read cach LOS carefully and note what the command word(s) requite(s). You will notice numerous instances where the LOS asks you to discuss or explain, but I have included calculations. I do this because it is sometimes easier to understand the underlying concepts if you sce how they interact quantitatively (e.g., commodity forward prices). Practice Exams Volume 1 ~ Three full-length (G-hour) Level 3 practice exams to help you prepare for the exam as ‘well as to better target your final review efforts. Each exam contains both A.M. (essay questions) and P.M. (item sets) portions. Schweser Library — I have created five videos (to use as extra examples or review) that are available to all Schweser Study Notes purchasers. Each Schweser Library volume is approximately 30 to 60 minutes in length Topics include: “Quantitative Methods,” “Mortgage-Backed Securities,” “Imroduction to Portfolio Theory,” “Constructing a Covered Call using Bond Furutes,” and “Constructing a Protective Put using Bond Futures.” Schweser Study Planner ~ Use your Online Access to tell us when you will start and whae days of the week you can study. Study Planner will create a study plan just for you, breaking each study session into daily and weekly tasks to keep you on track and help you monitor your progress through the curriculurm If you purchased the Schweser Study Notes as part of the Essential or Premium Package, you will also receive access to Faculty Office Hours. Office Hours allow you co get your questions about specified topic areas answered in teal time and see others’ questions (and faculty answers). Office hours arc a text-based, live,