Mock Exam CFA Level 1 Practice Questions

Written by: Nik Ventouris

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Mock Exam CFA Level 1 Practice Questions

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.

CFA Exam 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.

Recommended Study Materials

Interested in commencing your CFA Level 1 studies? We recommend having a look at Kaplan’s in-depth study materials.

4.7 out of 5 starsKaplan Schweser

Alternatively, you can have a look at our in-depth CFA Level 1 overview.

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
  1. 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
  1. 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.

Ready to get started? StateRequirement recommends having a look at Kaplan’s study materials and resources.

4.7 out of 5 starsKaplan Schweser

CFA Exam Experience: What to Expect on Exam Day

On exam day, candidates will experience a computer-based interface at Prometric centers, which is meant to replicate real-world conditions.

The exam spans approximately 2 hours and 15 minutes per session. This is important to keep in mind in order to ensure that you have ample time to address every question effectively on the day of the exam.

Level I of the CFA: Strategies for Success

Success in Level I of the CFA exam requires familiarity with the exam’s structure and weight distribution across different sections. Candidates should also leverage resources like the Qbank and practice quizzes, ensuring they are well-versed in the types of questions they might encounter. Remember, practice is key to acclimatizing to the exam’s format and time constraints.

Maximizing Your Mock Exam Performance

To maximize the benefit of Level I mock exams, candidates should focus on replicating the actual exam conditions. This means timing yourself (2 hours and 15 minutes per mock exam), taking regular breaks (like the actual exam’s 10-minute intermission), and using the mock exam’s analytics feature to understand where you went wrong. Each mock exam offers a unique set of questions, covering the complete curriculum and providing a comprehensive practice experience.

There are a lot of unique mock exams available online that will assist you in the CFA exam structure. Studying mock exam questions can help you do better on the real CFA exam. The following mock exam FAQs can help you understand the actual CFA exams better. They can also help you get a better sense of the overall CFA program curriculum as a whole.

Mock Exam CFA Level 1 Practice Questions FAQ

Are CFA level 1 mock exams harder?

Mock tests for CFA Level 1 may feel more challenging to some candidates due to their comprehensive nature and the fact that they cover a wide range of topics. However, they are designed to mimic the real exam’s difficulty level to provide a realistic practice experience. The difficulty of this can also depend on individual test taking skills. For more information, see our Mock Exam CFA Level 1 article.

How many mock exams for CFA level 1?

The number of mock exams a candidate should attempt can vary based on individual preparation levels. However, it’s generally recommended to take at least 3-4 mock exams to adequately familiarize oneself with the structure, common practice questions, and time management of the actual exam. Have a look at our CFA Level 1 overview for more information.

Is the CFA mock exam free?

The CFA Institute provides one practice exam for each level of the actual CFA exam, which is included in the registration fee. However, additional mock exams or those offered by third-party providers may come at an extra cost. You can also have a look at StateRequirement’s CFA level 1 mock exam free of charge.

Where can I find CFA mock exams?

Mock CFA exams can be accessed through the CFA Institute’s Learning Ecosystem. Additionally, approved prep providers also offer mock exams, and you can find many free and paid options available online. Be sure to choose reputable sources to ensure the mock exams align with the actual exam’s standards. Note: Some mock exams providers may offer exam feedback, such as detailed answer explanations for the correct answer of each question.

What is the total duration of the Level I CFA mock exam?

Level I mock exams are designed to last approximately 2 hours and 15 minutes per session, similar to the actual exam. This duration mirrors the time constraints of the real CFA Level I exam, providing a realistic practice scenario for candidates. By simulating the actual exam’s length, these mock exams help in developing effective time management skills and endurance, both of which are crucial for successfully navigating the intensity and rigor of the actual CFA examination. This replication of the real exam environment ensures that candidates are not only testing their knowledge but also their ability to maintain focus and efficiency over an extended period.

Can I receive feedback on my mock exam performance?

Yes, some mock exam packages include detailed analytics for performance review. This feature provides an in-depth analysis of your strengths and weaknesses, allowing you to identify areas that require more focus. Additionally, the feedback can guide your study plan and help improve your understanding of complex topics, ensuring a more targeted and effective preparation for the CFA exam.

Are there unique questions in each Level I mock exam?

Each mock exam contains unique questions to cover the complete curriculum. These questions are carefully crafted to reflect the diversity and complexity of topics you’ll encounter in the actual exam. This approach ensures that candidates are thoroughly tested on all aspects of the curriculum, providing a comprehensive and challenging practice experience that prepares you for the variety of questions on the real test.

What support is available if I incur issues during my mock exam?

Customer support is typically available for technical issues encountered during mock exams. This support ranges from troubleshooting technical difficulties to answering queries about exam navigation and format. The availability of prompt and effective customer service ensures a smooth and uninterrupted mock exam experience, allowing candidates to focus solely on their performance without being hindered by technical setbacks.

How many questions are in the CFA Practice mock exams?

CFA practice mock exams for Level I typically include 90 questions per session. This design emulates the actual CFA exam structure, providing a realistic and rigorous testing environment. The variety and format of these questions are aligned with the CFA Institute’s guidelines, ensuring that candidates are familiar with the types of questions they will face on the actual exam day.

Is there a platform where I can submit my answers and receive immediate scoring?

Certain platforms offer immediate scoring and performance breakdown upon submission. This instant feedback mechanism is crucial for understanding your performance in real-time. It helps identify areas of improvement immediately, allowing for quick adjustments in your study approach. The detailed breakdown also includes insights into question difficulty and time management, which are vital for refining your exam strategy.

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