The Chartered Financial Analyst (CFA) is a globally recognized professional designation offered by the CFA Institute. It measures the competence and integrity of financial analysts, and is broken down in three levels.

Our comprehensive Mock Exam CFA Level 1 article will not only equip you with key insights and resources but also provide a simulated mock exam to aid your preparation. Our aim? To bolster your confidence, refine your strategies, and significantly enhance your chances of acing the CFA Level 1 on your exam day.

Let’s get started.

General Overview

As you embark on your CFA Level 1 preparation journey, it’s essential to understand that the mock exam presented in this article isn’t an actual CFA Level 1 exam, but a representation of the real exam that has been designed based on the topic distribution and types of questions that have appeared in previous years.

While it is not a substitute for comprehensive study notes and revision, this mock exam can provide you with valuable insights into your preparation level and the areas where you might need additional focus.

We strongly believe that using this mock exam in conjunction with thorough studying of the CFA program and other recommended resources can significantly enhance your chances of success. It provides an opportunity to apply the concepts you’ve learned in the same exam format, and should be a helpful tool for giving you a practical idea of what to expect during the real exams.

CFA Mock Exam Level 1

Session 1

Ethical and Professional Standards (15-20%)

1. What does the CFA Institute’s Code of Ethics and Standards of Professional Conduct require with regard to disclosing conflicts of interest to clients?

• A. Disclosure only if it impacts the client directly
• B. Full and fair disclosure of all matters
• C. No disclosure required if the conflict is minimal

2. How should a CFA candidate or member handle material nonpublic information?

• A. They can act upon it if it benefits the client
• B. They should disclose it to their superior
• C. They should not act or cause others to act on the information

3. What are the requirements for diligence and reasonable basis in investment actions?

• A. An analyst must always have a supporting document
• B. An analyst must have a thorough understanding and reasonable basis
• C. An analyst can make decisions based on popular trends

Quantitative Methods (8-12%)

1. If the correlation between two variables is -0.8, what does this indicate?

• A. A strong positive relationship
• B. No relationship
• C. A strong negative relationship

2. Which of the following is a type of probability distribution?

• A. Chi-Square
• B. Normal
• C. Both A and B

3. If a portfolio’s standard deviation is zero, then:

• A. The portfolio’s returns are negative
• B. The portfolio’s returns are volatile
• C. The portfolio’s returns are not volatile

Economics (8-12%)

1. What does the law of demand state?

• A. As price decreases, quantity demanded increases
• B. As price increases, quantity demanded decreases
• C. Both A and B

2. In the context of macroeconomics, what is fiscal policy?

• A. It involves the management of interest rates and total supply of money in circulation
• B. It is the use of government revenue collection and expenditure to influence the economy
• C. It is a policy that is concerned with the raising of revenue through taxation

3. What is the primary difference between monopoly and perfect competition?

• A. In a monopoly, there is only one seller
• B. In perfect competition, there are many buyers and sellers
• C. Both A and B

Financial Statement Analysis (13-17%)

1. Which of the following ratios measures a company’s profitability?

• A. Current ratio
• B. Return on equity
• C. Debt-equity ratio

2. What does the quick ratio measure?

• A. A company’s ability to pay off its current liabilities without relying on the sale of inventory
• B. A company’s level of debt compared to its equity
• C. A company’s ability to generate profits from its equity

3. What is the key purpose of the statement of cash flows?

• A. To report a company’s cash receipts and cash payments during a period
• B. To provide a detailed view of a company’s profitability
• C. To provide a snapshot of a company’s financial position at a point in time

Session 2

Corporate Issuers (8-12%)

1. What are the main factors that can influence a company’s capital structure?

• A. Debt ratio and industry benchmarks
• B. CEO’s preference and current interest rates
• C. Market trends and historical performance

2. What does the term ‘dividend yield’ refer to in corporate finance?

• A. It is the dividend per share divided by the market price per share
• B. It is the ratio of a company’s current share price to its per-share earnings
• C. It is the interest rate that a bond issuer will pay to a bondholder

3. What is the difference between preferred stock and common stock?

• A. Preferred stockholders have a higher claim on assets and earnings
• B. Common stockholders have voting rights, but preferred stockholders generally do not
• C. Both A and B

Portfolio Management (5-8%)

1. What is the primary goal of portfolio diversification?

• A. To increase the expected return of a portfolio
• B. To decrease the risk of a portfolio
• C. Both A and B

2. What is the Capital Asset Pricing Model (CAPM)?

• A. A model that calculates the expected return of an asset based on its beta and expected market returns
• B. A model that determines the intrinsic value of a stock
• C. A model that determines the profitability of a project or investment

3. What does a positive alpha indicate in portfolio management?

• A. The portfolio’s return is less than the return predicted by the CAPM
• B. The portfolio’s return is more than the return predicted by the CAPM
• C. The portfolio’s return equals the return predicted by the CAPM

Equity Investments (10-12%)

1. What does the Price/Earnings (P/E) ratio indicate about a stock?

• A. It shows how much investors are willing to pay for each dollar of earnings
• B. It represents the dividend payout of a stock
• C. It displays the stock’s volatility in comparison to the market

2. In a dividend discount model, what is used to estimate the value of a stock?

• A. Future dividend projections
• B. Historical dividend amounts
• C. The average industry dividend payout

3. What does a stock’s beta coefficient measure?

• A. The stock’s volatility relative to the overall market
• B. The stock’s historical return compared to the market
• C. The expected dividend growth rate

Fixed Income (10-12%)

1. What does the term ‘yield to maturity’ refer to in the context of bonds?

• A. The total return anticipated on a bond if it is held until it matures
• B. The annual interest payment to the bondholder
• C. The bond’s current market price

2. How does a bond’s price change in relation to interest rates?

• A. If interest rates rise, bond prices typically fall
• B. If interest rates fall, bond prices rise
• C. Both A and B

3. What is the primary risk associated with holding long-term bonds?

• A. Credit risk
• B. Liquidity risk
• C. Interest rate risk

Derivatives (5-8%)

1. What are the underlying assets in a derivative contract?

• A. Stocks and bonds
• B. Commodities and currencies
• C. Both A and B

2. Why might an investor use a futures contract?

• A. To hedge against price fluctuations
• B. To speculate on future price movements
• C. Both A and B

3. What does it mean when an option is “in the money”?

• A. The option has no intrinsic value
• B. The option can be exercised profitably
• C. The option’s expiration date has passed

Alternative Investments (5-8%)

1. Which of the following is considered an alternative investment?

• A. Corporate bonds
• B. Mutual funds
• C. Real estate

2. Why might investors include alternative investments in their portfolios?

• A. To enhance liquidity
• B. To diversify and potentially enhance returns
• C. To reduce risk

3. In hedge fund strategies, what does the term ‘long/short equity’ mean?

• A. Investing only in equities with long-term growth potential
• B. Taking long positions in undervalued stocks and short positions in overvalued stocks
• C. Avoiding equity investments altogether

The mock exam presented above is a simplified representation and serves as a general guide for those preparing for the CFA Level 1 exam. It is crucial for candidates to thoroughly review the official CFA Institute materials and participate in full-length practice exams to adequately prepare.