UUS Practice Tests⌕ Search
Financial Services

CFA Program Level I Examination Practice Test

The CFA Program Level I Examination practice material covers foundational investment analysis, including financial statement interpretation, quantitative methods, economics, and asset valuation. Sample questions use applied scenarios involving portfolio returns, currency hedging, earnings adjustments, pension risk, equity options, and bond pricing.

Exam overview

Exam providerCFA Institute
Exam codeNot listed
CategoryFinancial Services

About the CFA Program Level I Examination Exam

The questions call for translating financial information into investment judgments. Quantitative work includes calculating weighted portfolio returns, gross margins, and option payoffs, while fixed-income analysis requires recognizing how discount rates affect a zero-coupon bond’s present value. Scenarios also test the purpose and limits of adjusted earnings, the allocation of investment risk in defined-benefit plans, and the use of forward contracts to manage foreign-currency exposure. Other items address sampling methods and trade execution instructions. Together, these exercises help develop accuracy with financial calculations, interpretation of accounting and market information, and the ability to connect a financial instrument or analytical method to a practical investment problem.

Sample Practice Questions

Review a selection from this exam's published US Practice Tests practice bank.

Question 1

An investor buys a call option with a strike price of $50. At expiration, the underlying share price is $58. Before considering the premium paid, what is the option's payoff per share?

  1. A$0
  2. B$8
  3. C$50
  4. D$58
Show answerCorrect answer: B

A call option's payoff at expiration is the greater of zero and the market price minus the strike price. Here, max(0, $58 − $50) = $8 per share.

Question 2

A researcher selects a sample of companies by choosing every tenth firm from an ordered list after a randomly selected starting point. Which sampling method is being used?

  1. AStratified random sampling
  2. BCluster sampling
  3. CSystematic sampling
  4. DConvenience sampling
Show answerCorrect answer: C

Systematic sampling selects observations at a regular interval from an ordered list, typically after a random start. Stratified sampling samples within defined subgroups, while cluster sampling selects groups or clusters.

Question 3

A portfolio manager gives a broker discretion to choose the exact timing and price within stated limits for executing a large order. Which type of order instruction has the manager most likely provided?

  1. AMarket order
  2. BLimit order
  3. CDiscretionary order
  4. DStop order
Show answerCorrect answer: C

A discretionary order authorizes the broker to use judgment over execution details, such as timing and price, within the client's specified parameters. The other order types principally define execution price or triggering conditions.

Question 4

A company has revenue of $500,000 and cost of goods sold of $320,000. What is its gross profit margin?

  1. A36%
  2. B56%
  3. C64%
  4. D180%
Show answerCorrect answer: A

Gross profit is revenue minus cost of goods sold: $500,000 − $320,000 = $180,000. Gross profit margin is $180,000 divided by $500,000, or 36%.

Question 5

A zero-coupon bond pays no periodic interest and will pay $1,000 in five years. If its required annual return is positive, how does its value today compare with $1,000?

  1. AIt is less than $1,000 because the payment is received in the future.
  2. BIt equals $1,000 because the payment amount is fixed.
  3. CIt is greater than $1,000 because no coupons are paid.
  4. DIt cannot be valued without knowing the issuer's dividend policy.
Show answerCorrect answer: A

A future payment is discounted to determine its present value. With a positive required return, the present value of $1,000 received in five years is below $1,000.

Question 6

A portfolio has 60% invested in an asset with a 10% expected return and 40% in an asset with a 5% expected return. What is the portfolio's expected return?

  1. A6.0%
  2. B7.0%
  3. C8.0%
  4. D15.0%
Show answerCorrect answer: C

The portfolio expected return is the weighted average: (0.60 × 10%) + (0.40 × 5%) = 8%.

Question 7

A fund reports a 9% return before fees. Its annual management fee is 1%, charged as a percentage of beginning assets. Approximately what is the return after this fee, ignoring other expenses?

  1. A7%
  2. B8%
  3. C9%
  4. D10%
Show answerCorrect answer: B

The fee reduces the gross return by approximately one percentage point, giving an approximate net return of 9% − 1% = 8%. This approximation is appropriate when the fee is charged on beginning assets.

How to use this practice test

Practice is free. A session draws up to 20 random questions from the available bank and displays results after completion. Use the questions to check calculations and reasoning, then revisit any missed concept—such as forward hedging, margin analysis, or bond valuation—before trying another session.

Preparation tips

  • For portfolio-return questions, multiply each asset’s expected return by its portfolio weight and sum the contributions.
  • Distinguish an option’s payoff at expiration from its profit after accounting for the premium.
  • Practice pricing zero-coupon bonds by discounting the maturity value at the required return.
  • When comparing reported and adjusted earnings, identify the excluded item and consider how its removal changes the interpretation of performance.
  • For currency-forward scenarios, identify which currency must be bought or sold to meet the future payment obligation.
Official sourceOfficial exam page ↗