. According to Standards I(B)–Independence and Objectivity and V(A)–Diligence and Reasonable Basis, members and candidates must exercise diligence, independence, objectivity, and thoroughness in analyzing investments, making investment recommen- dations, and taking investment actions. Changing a written recommendation to what a subject company desires is not acting diligently, independently, objectively, and/or thoroughly, and the analyst should immediately revise her recommendation to express her stated opinion of the company.
Changing a written recommendation to what a subject company desires is not acting diligently, independently, objectively, and/or thoroughly.

. The primary reason for crash risks is related to the fact that carry trades are leveraged: The low-yield currency is borrowed, with proceeds invested in the high-yield currency. The leverage magnifies the effect of losses and gains relative to the investors’ equity base. In low-volatility markets, investors can become complacent and allow positions to grow large in a search for yield. This crowded positioning tends to unwind rapidly when a market shock occurs because many traders try to exit their positions almost simultaneously before the leverage effects wipe out their equity. Stop-loss orders are triggered, and given the market uncertainty, there is a flight to safety that further increases demand for the low-yield currency.
. Another factor that accelerates selling is that traders often have stop-loss orders in place that are triggered when price declines reach a certain level. This can lead to cascades of selling in which position liquidation begets further position liquidation.
. During periods of market turmoil, there is generally a flight to safety into assets and currencies that seem to offer the most protection during times of uncer- tainty—typically low interest rate currencies.

The change in revenue recognition to an earlier point, before the product has been produced or delivered, is an aggressive accounting policy that would lower the company’s quality of earnings.
The change in the warranty expense reflects updated information, and failure to act on it would underestimate earnings.
The stock grants are expensed over the estimated service life of the employees, in this case the 3 years till it vests, and does not distort the quality of earnings.

Nanuk is translated under the current rate method, so its translational exposure is its net asset position. The weakening CAD (see Exhibit 2) will generate a re-measurement loss in Sunjet’s other comprehensive income.
It is the net asset position that is exposed to exchange fluctuations under the current rate method. Per Exhibit 2, the CAD is depreciating vs. the USD so would generate a loss. Candidates may think the CAD is strengthening.
Nanuk’s net monetary liability position would generate a re-measurement gain under the temporal method, but it is the net asset position that is exposed to exchange fluctuations under the current rate method.

. Find prices one period from the end. Value at Year 2:
0.5 × [(104/1.0450) + (104/1.0450)] + 4 = 103.522 0.5 × [(104/1.0325) + (104/1.0325)] + 4 = 104.726 0.5 × [(104/1.0235) + (104/1.0235)] + 4 = 105.612
Find prices two periods from the end. Time 1 values are the average of Time 2 dis- counted plus the coupon payment.
0.5 × [(103.522/1.0360) + (104.726/1.0360)] + 4 = 104.506
0.5 × [(104.726/1.0260) + (105.612/1.0260)] + 4 = 106.504
Find prices at Time 0. There is no coupon paid in this node.
0.5 × [(104.506/1.029) + (106.504/1.029)] = 102.532
because the discount rate used is an average across time.
because the calculation omits the 4 coupon in the last period.