Texas Chartered Financial Analyst (CFA)
Exam With Actual Questions & Verified
Answers, Plus Explained
Rationales/Expert Verified For
Guaranteed 100% Pass 2026/Latest
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1. Which of the following is considered a leading economic
indicator?
A. Unemployment rate
B. Consumer Price Index
C. Stock market returns
D. GDP growth
C. Stock market returns
Stock market returns often reflect investor expectations about future
economic activity, making them a leading indicator.
2. The price-to-earnings (P/E) ratio is primarily used to assess:
A. A company’s liquidity
B. A company’s profitability relative to its stock price
C. Market interest rates
D. Economic growth
B. A company’s profitability relative to its stock price
P/E ratio compares a company's current stock price to its earnings per
share, indicating how much investors are willing to pay for earnings.
, 3. In portfolio theory, diversification is used to:
A. Eliminate systematic risk
B. Eliminate unsystematic risk
C. Increase market risk
D. Reduce market return
B. Eliminate unsystematic risk
Diversification reduces company-specific or unsystematic risk but
cannot eliminate market-wide (systematic) risk.
4. Which of the following bonds is most sensitive to interest rate
changes?
A. A 1-year Treasury bill
B. A 10-year Treasury note
C. A 30-year Treasury bond
D. A floating-rate bond
C. A 30-year Treasury bond
Longer-duration bonds are more sensitive to interest rate changes
because their cash flows are further in the future.
5. The primary goal of the CFA Institute’s Code of Ethics is to:
A. Maximize returns
B. Protect investors
C. Minimize taxes
D. Predict market trends
B. Protect investors
The Code of Ethics promotes integrity, transparency, and
professionalism to protect investors and the capital markets.
6. Which financial statement shows a company’s financial position at
a point in time?
A. Income statement
, B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
C. Balance sheet
The balance sheet reports assets, liabilities, and equity at a specific
point in time, reflecting financial position.
7. A company issues new common stock. Which of the following
statements is true?
A. Liabilities increase
B. Cash decreases
C. Equity increases
D. Retained earnings decrease
C. Equity increases
Issuing common stock raises equity because investors provide capital
in exchange for ownership.
8. The Weighted Average Cost of Capital (WACC) represents:
A. The average return required by all investors
B. The historical cost of debt
C. The stock market index
D. The total revenue of a company
A. The average return required by all investors
WACC weights the cost of equity and debt according to their
proportions in the capital structure to reflect the average required
return.
9. Which of the following is a measure of market risk?
A. Alpha
B. Beta
, C. Standard deviation of residuals
D. Sharpe ratio
B. Beta
Beta measures a security’s sensitivity to overall market movements,
representing systematic risk.
10. In discounted cash flow (DCF) valuation, the terminal value
is used to:
A. Estimate future cash flows for the first year
B. Represent all future cash flows beyond the projection period
C. Adjust for inflation
D. Compute book value
B. Represent all future cash flows beyond the projection period
Terminal value captures the present value of cash flows beyond the
explicit forecast period, often using a perpetuity or exit multiple.
11. Which type of analysis examines economic, industry, and
company factors?
A. Technical analysis
B. Fundamental analysis
C. Quantitative analysis
D. Sentiment analysis
B. Fundamental analysis
Fundamental analysis evaluates financial statements, industry trends,
and macroeconomic factors to determine intrinsic value.
12. Which of the following is a characteristic of a defensive
stock?
A. High beta
B. High cyclicality
Exam With Actual Questions & Verified
Answers, Plus Explained
Rationales/Expert Verified For
Guaranteed 100% Pass 2026/Latest
Update/Instant Download Pdf
1. Which of the following is considered a leading economic
indicator?
A. Unemployment rate
B. Consumer Price Index
C. Stock market returns
D. GDP growth
C. Stock market returns
Stock market returns often reflect investor expectations about future
economic activity, making them a leading indicator.
2. The price-to-earnings (P/E) ratio is primarily used to assess:
A. A company’s liquidity
B. A company’s profitability relative to its stock price
C. Market interest rates
D. Economic growth
B. A company’s profitability relative to its stock price
P/E ratio compares a company's current stock price to its earnings per
share, indicating how much investors are willing to pay for earnings.
, 3. In portfolio theory, diversification is used to:
A. Eliminate systematic risk
B. Eliminate unsystematic risk
C. Increase market risk
D. Reduce market return
B. Eliminate unsystematic risk
Diversification reduces company-specific or unsystematic risk but
cannot eliminate market-wide (systematic) risk.
4. Which of the following bonds is most sensitive to interest rate
changes?
A. A 1-year Treasury bill
B. A 10-year Treasury note
C. A 30-year Treasury bond
D. A floating-rate bond
C. A 30-year Treasury bond
Longer-duration bonds are more sensitive to interest rate changes
because their cash flows are further in the future.
5. The primary goal of the CFA Institute’s Code of Ethics is to:
A. Maximize returns
B. Protect investors
C. Minimize taxes
D. Predict market trends
B. Protect investors
The Code of Ethics promotes integrity, transparency, and
professionalism to protect investors and the capital markets.
6. Which financial statement shows a company’s financial position at
a point in time?
A. Income statement
, B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
C. Balance sheet
The balance sheet reports assets, liabilities, and equity at a specific
point in time, reflecting financial position.
7. A company issues new common stock. Which of the following
statements is true?
A. Liabilities increase
B. Cash decreases
C. Equity increases
D. Retained earnings decrease
C. Equity increases
Issuing common stock raises equity because investors provide capital
in exchange for ownership.
8. The Weighted Average Cost of Capital (WACC) represents:
A. The average return required by all investors
B. The historical cost of debt
C. The stock market index
D. The total revenue of a company
A. The average return required by all investors
WACC weights the cost of equity and debt according to their
proportions in the capital structure to reflect the average required
return.
9. Which of the following is a measure of market risk?
A. Alpha
B. Beta
, C. Standard deviation of residuals
D. Sharpe ratio
B. Beta
Beta measures a security’s sensitivity to overall market movements,
representing systematic risk.
10. In discounted cash flow (DCF) valuation, the terminal value
is used to:
A. Estimate future cash flows for the first year
B. Represent all future cash flows beyond the projection period
C. Adjust for inflation
D. Compute book value
B. Represent all future cash flows beyond the projection period
Terminal value captures the present value of cash flows beyond the
explicit forecast period, often using a perpetuity or exit multiple.
11. Which type of analysis examines economic, industry, and
company factors?
A. Technical analysis
B. Fundamental analysis
C. Quantitative analysis
D. Sentiment analysis
B. Fundamental analysis
Fundamental analysis evaluates financial statements, industry trends,
and macroeconomic factors to determine intrinsic value.
12. Which of the following is a characteristic of a defensive
stock?
A. High beta
B. High cyclicality
