CFA Level 1 Practice Questions Practice Test
Frequently asked questions
How many CFA Level 1 Practice Questions practice questions are here?+
A full bank of original CFA Level 1 Practice Questions practice questions across the official content areas, weighted like the real exam, with explanations. Free, no signup.
What is the CFA Level 1 Practice Questions exam like?+
A multiple-choice exam. Practice by topic here, then take the full timed mock exam to gauge readiness.
Are these the real exam questions?+
No. Every question is 100% original, written from public primary sources with explanations. We never copy real exam questions or paid prep material.
Can I study in Chinese or Spanish?+
PrepPass practice is in English, 中文 and Español. The official exam is in English — switch the question language to English any time to rehearse the exact terminology you'll see on test day.
Sample practice questions
A few real questions from this free bank, with full explanations. Use the practice tool above for the whole set.
- 1. Ethical & Professional Standards
Under the CFA Institute Code and Standards, when interests conflict, a member should place first the interests of:
- a.Their employer
- b.The client
- c.Themselves
- d.Regulators
Answer: b
Explanation: Client interests come before the employer's and the member's own.
- 2. Ethical & Professional Standards
Disclosing conflicts of interest to clients is required because it:
- a.Eliminates the conflict entirely
- b.Is optional best practice
- c.Lets clients judge the objectivity of recommendations
- d.Increases fees
Answer: c
Explanation: Full disclosure lets clients assess potential biases in advice.
- 3. Quantitative Methods
The concept that a dollar today is worth more than a dollar in the future is:
- a.Diversification
- b.The time value of money
- c.Arbitrage
- d.Duration
Answer: b
Explanation: Time value of money reflects that money can earn a return over time.
- 4. Quantitative Methods
Standard deviation is a measure of:
- a.Central tendency
- b.Correlation
- c.Dispersion (variability) of returns
- d.The mean only
Answer: c
Explanation: Standard deviation measures how spread out values are around the mean.
- 5. Financial Reporting & Analysis
Which statement reports a company's financial position at a point in time?
- a.Income statement
- b.Balance sheet
- c.Cash flow statement
- d.Statement of changes in equity
Answer: b
Explanation: The balance sheet shows assets, liabilities, and equity at a point in time.
- 6. Financial Reporting & Analysis
The basic accounting equation is:
- a.Assets = Revenue - Expenses
- b.Assets = Liabilities - Equity
- c.Assets = Liabilities + Equity
- d.Equity = Assets + Liabilities
Answer: c
Explanation: Assets equal liabilities plus owners' equity.
- 7. Corporate Issuers
WACC (weighted average cost of capital) represents:
- a.Only the cost of equity
- b.The blended required return on a firm's debt and equity
- c.The dividend yield
- d.The risk-free rate
Answer: b
Explanation: WACC blends the after-tax cost of debt and the cost of equity by their weights.
- 8. Corporate Issuers
All else equal, increasing financial leverage tends to:
- a.Reduce both risk and return
- b.Have no effect
- c.Increase both potential returns and risk to equity holders
- d.Guarantee higher profits
Answer: c
Explanation: Leverage magnifies gains and losses, raising equity risk and potential return.
- 9. Investment Tools (Equity & Fixed Income)
When market interest rates rise, the price of an existing fixed-rate bond generally:
- a.Rises
- b.Falls
- c.Stays the same
- d.Doubles
Answer: b
Explanation: Bond prices move inversely to interest rates.
- 10. Investment Tools (Equity & Fixed Income)
Diversification reduces which type of risk?
- a.Systematic (market) risk
- b.Interest-rate risk of every bond
- c.Unsystematic (firm-specific) risk
- d.Inflation entirely
Answer: c
Explanation: Diversification reduces unsystematic, firm-specific risk, not systematic market risk.