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Study Materials for 2023 CFA®, FRM®, Actuarial, GMAT® and EA® Exams

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CFA Level 1 Practice Questions by AnalystPrep

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To truly excel in the CFA® Program exam, you need more than just knowledge—you must be intimately familiar with the exam format and the types of questions you’ll encounter. That’s why, at AnalystPrep, we’ve developed CFA exam sample questions that precisely mimic the structure of the actual exam. 

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To ensure you achieve a comprehensive understanding of the curriculum, our CFA test bank is meticulously divided into specific topics, including:

✅ Ethical and Professional Standards
✅ Quantitative Methods
✅ Economics
✅ Financial Statement Analysis
✅ Corporate Issuers
✅ Portfolio Management
✅ Equity Investments
✅ Fixed Income
✅ Derivatives
✅ Alternative Investments

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Note! The Level I exam includes multiple-choice questions, each with three possible answers. Some questions are straightforward statements, while others require looking at and evaluating data and information.

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Some Free Exam-style Level I CFA Program Practice Questions offered by AnalystPrep

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Attempt the CFA level 1 practice questions below to assess your exam readiness. Then, read the detailed answers to understand the concept.

 

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Question 1

Ethical and Professional Standards

Nayri Avaikan, CFA, is working as an investment advisor with Allstar Investors. She has recently finished her report on Ocado Inc. and concluded that it is a great ‘buy’ with 35% upside potential at the current market price. She wrote to all her suitable clients: “At current market prices, based on my research, I believe Ocado Inc. is massively underpriced, and I would recommend a ‘strong buy’ with 35% upside potential. Please find attached my detailed research report. I have also included all the relevant data used in my research and formed the basis for this decision. Please let me know if you need further explanation or documentation.” After sending the email, she informed her major clients about Ocado Ins. by calling them individually.

Avaikan has most likely:

A) violated Standard III(B): Fair Dealing.

B) violated Standard I(C): Misrepresentation.

C) not violated any CFA Institute Code and Standards.

Question 2

Ethical and Professional Standards

Melissa Jacobs is an Analyst for ABC Investments. She is an expert in the area of agriculture production in the United States. In her free time, Jacobs maintains a blog related to the food industry. She uses a pseudonym for the blog, in order to maintain her privacy. Her latest blog post includes a negative review of Market Basket Corporation in which she suggested to her readers that they sell the company’s stock. Jacobs knows from inside sources that within the following week, Market Basket’s stock will be listed as a ‘sell’.

With regard to the CFA Institute Code and Standards, which of the following is least likely accurate?

A) Jacobs violated no standards since she maintains her blog under an artificial identity.

B) Jacobs violated IV(A): Loyalty by sharing private information that is proprietary to Market Basket Corporation.

C) Jacobs violated Standard II(A): Material Non-public Information by making a recommendation based on the knowledge that was material and non-public.

Question 3

Quantitative Methods

You have a choice to take your retirement benefit either as a lump sum or as an annuity. You can take a lump sum of $4.5 million or an annuity with 15 payments of $400,000 a year with the first payment starting today. The interest rate is 7% per year compounded annually. Which option is preferable, on the basis that it has the greater present value?

A) Annuity payment.

B) Lump-sum payment.

C) There is no significant difference between the two options.

Question 4

Economics

The following table shows the number of hours necessary to produce one unit of electronics in both England and India:

\begin{array}{c|c|c}\textbf{Country} & \textbf{Ipads} & \textbf{Personal Computers} \\ \hline \text{England} & 200 & 170 \\ \hline \text{India} & 160 & 150 \\ \end{array}
Which of the following statements is the most accurate?

A) India has an absolute advantage in producing both iPads and personal computers.

B) England has an absolute advantage in producing both iPads and personal computers.

C)  England should specialize in the production of personal computers and exchange them for iPads produced in India.

Question 5

Financial Reporting & Analysis

An analyst gathered the following information from a company’s 2018 financial statements (in $ millions): \begin{array}{l|r|r} \textbf{Balances as of Year Ended 31 Dec} & \textbf{2017} & \textbf{2018} \\ \hline \text{Retained Earnings} & \text{150} & \text{175} \\ \text{Accounts Receivable} & \text{68} & \text{73} \\ \text{Inventory} & \text{75} & \text{78} \\ \text{Accounts Payable} & \text{66} & \text{59} \\ \end{array} In 2018, the company paid cash dividends of $40 million and recorded $55 million in depreciation expense. The company considers dividends paid a financing activity. Given this information, the company’s 2018 cash flow from operations (in $ millions) was closest to:

A) $105.

B) $110.

C) $112.

Question 6

Corporate Issuers

Which of the following is the most likely effect on the WACC if the tax rate decreases? WACC will:

A) increase.

B) decrease.

C) not be affected.

Question 7

Portfolio Management

Bruce Craig is in the business of trading steel in Chicago, which he inherited from his father one month ago. His financial adviser notes the following aspects of his situation:

  • He is 24 years old;
  • His investment horizon is 10-20 years;
  • His primary objective for investing is aggressive growth;
  • His business returns are not stable as he is not being able to take prudent business decisions.

Given the information above, which of the following statements is most likely correct? Craig has a:

A) low ability to take risk, but a high willingness to take risk.

B) high ability to take risk, but a low willingness to take risk.

C) high ability to take risk, but a high willingness to take risk.

Question 8

Equity Investments

Joe Timberlake is a trader who trades equities in the United Arab Emirates (UAE). Timberlake is consistently able to earn abnormal profits by using fundamental data, but when he uses only technical analysis, he is not profitable. UAE’s market efficiency is most likely?

A) Weak-form efficient.

B) Strong-form efficient.

C) Semi-strong form efficient.

Question 9

Fixed Income

A 3-year bond offers a 7% coupon rate with interests paid annually. Assuming the following sequence of spot rates, the price of the bond is closest to:
\begin{array}{c|c|c} \textbf{Time to Maturity (Years)} & \textbf{Spot Rate (%)} \\ \hline \text{1} & \text{4} \\ \text{2} & \text{5} \\ \text{3} & \text{5.5} \\ \end{array}

A) 98.24

B) 104.05

C) 104.20

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