CFA Level 1 - Mock Questions

Question 1 – Ethics: Using material nonpublic information in making investment decisions is prohibited because it violates:

• The Standard on Conflicts of Interest

• The CFA Institute Standard on Material Nonpublic Information

• The Standard on Duties to Employers

Question 2 – Quantitative Methods: The correlation coefficient between two assets ranges between:

• –2 and +2

• –1 and +1

• 0 and +1

Question 3 – Economics: If aggregate demand decreases, in the short run:

• Output rises and prices fall

• Output and prices both fall

• Output and prices both rise

Question 4 – Financial Reporting: Under IFRS, inventories are measured at:

• Replacement cost

• Lower of cost or net realizable value

• Market value only

Question 5 – Corporate Finance: The cost of equity is best estimated using:

• The Weighted Average Cost of Capital (WACC)

• The Capital Asset Pricing Model (CAPM)

• The Payback Period

Question 6 – Equity Investments: A market is considered efficient if:

• Prices never change after new information

• Prices fully reflect all available information

• Prices are determined only by government intervention

Question 7 – Fixed Income: A bond’s duration measures its sensitivity to:

• Inflation only

• Interest rate changes

• Default risk

Question 8 – Derivatives: A call option gives the holder the right to:

• Sell the underlying asset at the strike price

• Borrow the asset at the risk-free rate

• Buy the underlying asset at the strike price

Question 9 – Alternative Investments: Private equity investments are typically:

• Illiquid and long term

• Highly liquid and short term

• Government-guaranteed

Question 10 – Portfolio Management: The risk that can be eliminated through diversification is:

• Unsystematic risk

• Market risk

• Systematic risk