CFA Level 1 Practice Questions — All Questions
AllEthical & Professional StandardsQuantitative MethodsFinancial Reporting & AnalysisCorporate IssuersInvestment Tools (Equity & Fixed Income)
4 questions
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
Bond prices move inversely to interest rates.
Investment Tools (Equity & Fixed Income)
Duration is best described as a measure of a bond's:
- a.Sensitivity to interest-rate changes✓
- b.Credit rating
- c.Coupon frequency
- d.Issue size
Duration estimates price sensitivity to interest-rate changes.
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
Diversification reduces unsystematic, firm-specific risk, not systematic market risk.
Investment Tools (Equity & Fixed Income)
A common valuation approach for equities discounts expected future:
- a.Sunk costs
- b.Coupons only
- c.Book values
- d.Cash flows or dividends✓
Equity valuation often discounts expected future cash flows or dividends to present value.