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Chartered Financial Analyst (CFA) Level I Exam | Latest
Verified Questions and Detailed Answers
This document comprises a comprehensive set of 180 multiple-choice questions designed for the
Chartered Financial Analyst (CFA) Level I exam. The questions are organized to reflect the 2026
curriculum weightings, with a primary focus on Ethical and Professional Standards, Financial
Statement Analysis, and the four main asset classes (Equity, Fixed Income, Derivatives, and
Alternatives). Each question is presented in the exam's standard format, followed by the correct
answer and a concise, two-sentence expert rationale explaining the underlying principle. This
collection serves as a robust tool for candidates to test their knowledge across all ten topic areas
and practice applying core investment concepts.
QUESTION 1
According to the CFA Institute Code of Ethics, members of the CFA Institute must:
A. Place their clients' interests above their own personal interests.
B. Strive to maintain and improve their competence and the competence of others in
the profession.
C. Ensure that all investment recommendations are based on thorough research and
analysis.
CORRECT ANSWER: A
EXPERT RATIONALE: The duty to place client interests first is a fundamental principle
explicitly outlined in the Code of Ethics. While competence and thorough research are
important, the primary fiduciary duty is to prioritize the client.
QUESTION 2
If a CFA candidate shares material nonpublic information about a company with a family
member who then trades on that information, the candidate has most likely violated
which CFA Institute Standard of Professional Conduct?
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A. Market Manipulation
B. Material Nonpublic Information
C. Priority of Transactions
CORRECT ANSWER: B
EXPERT RATIONALE: Standard II(A) prohibits members from acting on material
nonpublic information or causing others to act on it. The candidate's disclosure, even to
a family member, which leads to a trade is a direct violation.
QUESTION 3
For a portfolio of 15 stocks, an analyst calculates the mean return and the standard
deviation. To best communicate the extent to which the returns of the 15 stocks are
clustered around the mean, the analyst should present the:
A. Coefficient of variation.
B. Variance.
C. Range.
CORRECT ANSWER: B
EXPERT RATIONALE: Variance measures the average squared deviation of each data
point from the mean, directly quantifying the dispersion or clustering of data around the
mean. The standard deviation is the square root of variance and is also a measure of
dispersion.
QUESTION 4
An analyst gathers the following data for a company: Net income of $50 million,
depreciation of $10 million, an increase in accounts receivable of $5 million, and a
decrease in accounts payable of $3 million. Based on this information, the cash flow
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from operations (CFO) is closest to:
A. $48 million.
B. $52 million.
C. $58 million.
CORRECT ANSWER: B
EXPERT RATIONALE: Using the indirect method, CFO begins with net income ($50M),
adds back non-cash charges like depreciation (+$10M), subtracts increases in operating
assets (-$5M for AR), and subtracts decreases in operating liabilities (-$3M for AP). This
results in $50M + $10M - $5M - $3M = $52M.
QUESTION 5
The loss of a company's key patent that leads to a significant decrease in its stock price
is an example of:
A. Systematic risk.
B. Unsystematic risk.
C. Liquidity risk.
CORRECT ANSWER: B
EXPERT RATIONALE: Unsystematic risk, also known as firm-specific risk, is risk that is
unique to a particular company or industry, such as a patent expiration or a
management change. It can be reduced through diversification.
QUESTION 6
Which of the following statements is most accurate regarding the use of a limit order
versus a market order?
A. A limit order guarantees execution but not price, while a market order guarantees
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price but not execution.
B. A market order guarantees execution but not price, while a limit order guarantees
price but not execution.
C. Both a market order and a limit order guarantee both price and execution.
CORRECT ANSWER: B
EXPERT RATIONALE: A market order is an instruction to buy or sell immediately at the
best available current price, prioritizing execution speed. A limit order is an instruction
to buy or sell only at a specified price or better, prioritizing price over speed of
execution.
QUESTION 7
Under U.S. GAAP, which of the following costs related to inventory would most likely be
expensed as incurred rather than capitalized into inventory?
A. Purchase cost of raw materials.
B. Freight-in costs.
C. Abnormal waste costs.
CORRECT ANSWER: C
EXPERT RATIONALE: Inventory costs should include all necessary costs to bring the
inventory to its present location and condition. Abnormal costs, such as those from
unusual waste or spoilage, are considered period costs and must be expensed
immediately.
QUESTION 8
A hedge fund with a net asset value (NAV) of $100 million charges "2 and 20." The
fund's gross return for the year is 15% and it has a high-water mark but no hurdle rate.
Chartered Financial Analyst (CFA) Level I Exam | Latest
Verified Questions and Detailed Answers
This document comprises a comprehensive set of 180 multiple-choice questions designed for the
Chartered Financial Analyst (CFA) Level I exam. The questions are organized to reflect the 2026
curriculum weightings, with a primary focus on Ethical and Professional Standards, Financial
Statement Analysis, and the four main asset classes (Equity, Fixed Income, Derivatives, and
Alternatives). Each question is presented in the exam's standard format, followed by the correct
answer and a concise, two-sentence expert rationale explaining the underlying principle. This
collection serves as a robust tool for candidates to test their knowledge across all ten topic areas
and practice applying core investment concepts.
QUESTION 1
According to the CFA Institute Code of Ethics, members of the CFA Institute must:
A. Place their clients' interests above their own personal interests.
B. Strive to maintain and improve their competence and the competence of others in
the profession.
C. Ensure that all investment recommendations are based on thorough research and
analysis.
CORRECT ANSWER: A
EXPERT RATIONALE: The duty to place client interests first is a fundamental principle
explicitly outlined in the Code of Ethics. While competence and thorough research are
important, the primary fiduciary duty is to prioritize the client.
QUESTION 2
If a CFA candidate shares material nonpublic information about a company with a family
member who then trades on that information, the candidate has most likely violated
which CFA Institute Standard of Professional Conduct?
,2|Page
A. Market Manipulation
B. Material Nonpublic Information
C. Priority of Transactions
CORRECT ANSWER: B
EXPERT RATIONALE: Standard II(A) prohibits members from acting on material
nonpublic information or causing others to act on it. The candidate's disclosure, even to
a family member, which leads to a trade is a direct violation.
QUESTION 3
For a portfolio of 15 stocks, an analyst calculates the mean return and the standard
deviation. To best communicate the extent to which the returns of the 15 stocks are
clustered around the mean, the analyst should present the:
A. Coefficient of variation.
B. Variance.
C. Range.
CORRECT ANSWER: B
EXPERT RATIONALE: Variance measures the average squared deviation of each data
point from the mean, directly quantifying the dispersion or clustering of data around the
mean. The standard deviation is the square root of variance and is also a measure of
dispersion.
QUESTION 4
An analyst gathers the following data for a company: Net income of $50 million,
depreciation of $10 million, an increase in accounts receivable of $5 million, and a
decrease in accounts payable of $3 million. Based on this information, the cash flow
,3|Page
from operations (CFO) is closest to:
A. $48 million.
B. $52 million.
C. $58 million.
CORRECT ANSWER: B
EXPERT RATIONALE: Using the indirect method, CFO begins with net income ($50M),
adds back non-cash charges like depreciation (+$10M), subtracts increases in operating
assets (-$5M for AR), and subtracts decreases in operating liabilities (-$3M for AP). This
results in $50M + $10M - $5M - $3M = $52M.
QUESTION 5
The loss of a company's key patent that leads to a significant decrease in its stock price
is an example of:
A. Systematic risk.
B. Unsystematic risk.
C. Liquidity risk.
CORRECT ANSWER: B
EXPERT RATIONALE: Unsystematic risk, also known as firm-specific risk, is risk that is
unique to a particular company or industry, such as a patent expiration or a
management change. It can be reduced through diversification.
QUESTION 6
Which of the following statements is most accurate regarding the use of a limit order
versus a market order?
A. A limit order guarantees execution but not price, while a market order guarantees
, 4|Page
price but not execution.
B. A market order guarantees execution but not price, while a limit order guarantees
price but not execution.
C. Both a market order and a limit order guarantee both price and execution.
CORRECT ANSWER: B
EXPERT RATIONALE: A market order is an instruction to buy or sell immediately at the
best available current price, prioritizing execution speed. A limit order is an instruction
to buy or sell only at a specified price or better, prioritizing price over speed of
execution.
QUESTION 7
Under U.S. GAAP, which of the following costs related to inventory would most likely be
expensed as incurred rather than capitalized into inventory?
A. Purchase cost of raw materials.
B. Freight-in costs.
C. Abnormal waste costs.
CORRECT ANSWER: C
EXPERT RATIONALE: Inventory costs should include all necessary costs to bring the
inventory to its present location and condition. Abnormal costs, such as those from
unusual waste or spoilage, are considered period costs and must be expensed
immediately.
QUESTION 8
A hedge fund with a net asset value (NAV) of $100 million charges "2 and 20." The
fund's gross return for the year is 15% and it has a high-water mark but no hurdle rate.
