medium · CFA Level I ethics
A research report for Lumen Credit analyzes a corporate bond using a proprietary credit-scoring model. The report states: "Lumen bonds are estimated to yield 6.2% next year, which will result in a total return of 8.5% for investors." The analyst fails to mention that the model assumes no change in interest rates, which is a critical input to the total return calculation. By stating the return as a certainty, the analyst has most likely violated:
- Standard III(C) Suitability.
- Standard I(C) Misrepresentation regarding the use of facts vs. opinions.
- Standard VI(B) Priority of Transactions.
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