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CFA MCQ With Answers

40 practice questions · Last updated on Jan 10, 2023

Q&A guide Share:

The Chartered Financial Analyst (CFA®) charter is awarded to those who have completed the CFA® Program and have acquired acceptable work experience.

In the CFA Program, the candidate is tested on investment tools, valuing assets, portfolio management, and wealth planning. 

Furthermore, they are then qualified to work in senior and executive positions in investment management, risk management, asset management, and more.

A large part of your post-CFA job preparation would be to prepare for the interviews. Job interviews for designations like financial analysis, investment banking, or portfolio management are often intensive and consist of both behavioral and technical questions.

CFA MCQ

1.What does the CAPM state about an asset's expected return?

2.What does beta measure?

3.Which risk cannot be eliminated through diversification?

4.What does the Sharpe ratio measure?

5.What happens to bond prices when market yields rise?

6.What does Macaulay duration represent?

7.What does convexity capture that duration does not?

8.What is the yield to maturity of a bond?

9.In the semi-strong form of market efficiency, what is reflected in prices?

10.What is the primary purpose of a discounted cash flow valuation?

11.What is free cash flow to the firm?

12.What discount rate is appropriate for free cash flow to equity?

13.What does the Gordon growth model calculate?

14.What is enterprise value?

15.Why is EV/EBITDA often preferred to P/E for cross-company comparison?

16.What does the DuPont analysis decompose return on equity into?

17.What does the Modigliani-Miller proposition state in a world without taxes?

18.What is the efficient frontier in portfolio theory?

19.What effect does adding an asset with low correlation have on a portfolio?

20.What is Value at Risk (VaR)?

21.What is a call option?

22.What does put-call parity relate?

23.What is the difference between a forward and a futures contract?

24.What is an interest rate swap?

25.What does a normal (upward-sloping) yield curve typically imply?

26.What is a credit spread?

27.What does the CFA Institute Code of Ethics require regarding client interests?

28.Under the Standards of Professional Conduct, what must a member do with material non-public information?

29.What is required when presenting investment performance under the Standards?

30.What is the purpose of an Investment Policy Statement?

31.What is strategic asset allocation?

32.What does rebalancing a portfolio involve?

33.What is a real return?

34.What is the difference between an accounting profit and an economic profit?

35.What does a high price-to-book ratio typically suggest?

36.What is survivorship bias in performance data?

37.What does behavioural finance suggest about investor decision-making?

38.What is the payback period's main weakness as an investment criterion?

39.When NPV and IRR conflict for mutually exclusive projects, which should be preferred?

40.What is the purpose of scenario and sensitivity analysis in valuation?

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