Sample Questions

CFA Level 1 Sample Questions

6 practice questions with complete answer explanations.

Sample Questions

Question 1time-value

An analyst invests $10,000 today at 8% annual interest compounded quarterly. What is the value after 3 years?

A.$12,682✓ Correct

B.$12,597

C.$12,702

D.$12,653

Explanation

FV = 10,000 × (1 + 0.08/4)^(4×3) = 10,000 × (1.02)^12 = $12,682.

Question 2ethics

An analyst receives a free trip to a company's headquarters to attend a presentation. Under CFA Standards, she should:

A.Accept and disclose to her employer✓ Correct

B.Decline because gifts from issuers are prohibited

C.Accept because it's educational

D.Accept and disclose to clients only

Explanation

Standard I(B): Independence — modest gifts are acceptable if disclosed to employer. Educational trips are generally permitted.

Question 3cash-flow

A company reports net income of $500,000 and depreciation of $80,000. Working capital increased by $30,000 and it repaid $100,000 in long-term debt. Operating cash flow is:

A.$550,000✓ Correct

B.$450,000

C.$650,000

D.$400,000

Explanation

OCF (indirect) = Net income + D&A – increase in WC = 500 + 80 – 30 = $550,000. Debt repayment is financing, not operating.

Question 4ddm

A stock pays a $2 dividend next year, growing at 4% perpetually. The required return is 10%. The Gordon Growth Model value is:

A.$33.33✓ Correct

B.$25.00

C.$40.00

D.$20.00

Explanation

P = D1 / (r – g) = 2 / (0.10 – 0.04) = 2 / 0.06 = $33.33.

Question 5fixed-income

A bond with a 5% coupon trades at a yield of 6%. Its price is:

A.Below par✓ Correct

B.At par

C.Above par

D.Cannot determine without maturity

Explanation

When yield > coupon, bond trades below par (discount bond). Basic bond pricing principle.

Question 6portfolio-theory

Which of the following best describes the Capital Market Line (CML)?

A.All efficient portfolios combining the risk-free asset and the market portfolio✓ Correct

B.The trade-off between systematic and unsystematic risk

C.All portfolios on the efficient frontier

D.The relationship between beta and expected return

Explanation

The CML extends the efficient frontier by adding a risk-free asset, showing all optimal combinations.

Test-Taking Tips

1.Ethics is the highest-weighted topic — start and end your studies with it.
2.Use the CFA Institute curriculum or SchweserNotes; don't rely on third-party alone.
3.Do 1,000+ practice questions before exam day.
4.Master the BA II Plus calculator shortcuts (NPV, IRR, TVM, statistics).
5.Review wrong answers, not just right ones — understand the reasoning.
6.Take at least 3 mock exams under timed conditions in the final two weeks.

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