CHARTERED FINANCIAL ANALYST (CFA)
EXAM — 150 ORIGINAL PRACTICE
QUESTIONS
1. Which CFA Institute Standard requires members to
place client interests before their own?
A. Standard I(A) Knowledge of the Law
B. Standard III(A) Loyalty, Prudence, and Care
C. Standard IV(A) Loyalty
D. Standard V(A) Diligence and Reasonable Basis
Correct Answer: B
Rationale: Standard III(A) requires members to act with
loyalty, prudence, and care toward clients and place client
interests before their own.
2. An analyst discovers that a colleague has deliberately
altered a valuation model to support an investment-banking
client. What is the most appropriate action?
A. Ignore the issue unless a client complains
B. Report the conduct through appropriate supervisory or
compliance channels
,C. Modify the analyst's own model without informing anyone
D. Immediately publish the allegation publicly
Correct Answer: B
Rationale: Suspected misconduct should be addressed
through appropriate internal or regulatory channels rather
than ignored or publicly disclosed without proper process.
3. Which situation most clearly represents a material
nonpublic information problem?
A. An analyst reads a company's annual report
B. An analyst attends a public earnings presentation
C. An analyst receives confidential information about an
upcoming acquisition
D. An analyst speaks with a supplier about industry conditions
Correct Answer: C
Rationale: Confidential information concerning a significant
corporate transaction can be both material and nonpublic.
4. A portfolio manager receives an expensive personal gift
from a broker immediately after directing substantial
client trades to that broker. The primary concern is:
A. Currency risk
B. Conflict of interest
C. Liquidity risk
D. Model risk
Correct Answer: B
,Rationale: The gift may create an incentive for the manager
to favor the broker rather than act solely in clients'
interests.
5. Fair dealing primarily requires an investment
professional to:
A. Give every client identical investment advice
B. Treat clients fairly when disseminating investment
recommendations and taking investment action
C. Guarantee equal investment returns
D. Avoid communicating with institutional clients
Correct Answer: B
Rationale: Fair dealing concerns equitable treatment in
disseminating recommendations and executing investment
actions, not identical outcomes.
6. Which activity is most likely to violate the prohibition
against plagiarism?
A. Using a public company's reported revenue figures
B. Quoting a source with attribution
C. Presenting another analyst's original research as one's own
D. Performing an independent calculation
Correct Answer: C
Rationale: Presenting someone else's work as one's own
without appropriate acknowledgment is plagiarism.
, 7. A CFA charterholder is asked to perform an analysis
outside their area of competence. The most appropriate
response is to:
A. Complete it regardless of qualifications
B. Obtain appropriate assistance or develop sufficient
competence before proceeding
C. Delegate it without reviewing the result
D. Refuse all future analytical work
Correct Answer: B
Rationale: Professionals should recognize limitations and
obtain assistance or acquire the necessary competence.
8. An investment recommendation should have a reasonable
and adequate basis. This requirement is primarily
addressed by:
A. Diligence and Reasonable Basis
B. Independence and Objectivity
C. Fair Dealing
D. Confidentiality
Correct Answer: A
Rationale: Standard V(A) requires reasonable and adequate
investigation supporting recommendations and actions.
9. Which is most likely to threaten an analyst's
independence and objectivity?
A. Reviewing historical financial statements
EXAM — 150 ORIGINAL PRACTICE
QUESTIONS
1. Which CFA Institute Standard requires members to
place client interests before their own?
A. Standard I(A) Knowledge of the Law
B. Standard III(A) Loyalty, Prudence, and Care
C. Standard IV(A) Loyalty
D. Standard V(A) Diligence and Reasonable Basis
Correct Answer: B
Rationale: Standard III(A) requires members to act with
loyalty, prudence, and care toward clients and place client
interests before their own.
2. An analyst discovers that a colleague has deliberately
altered a valuation model to support an investment-banking
client. What is the most appropriate action?
A. Ignore the issue unless a client complains
B. Report the conduct through appropriate supervisory or
compliance channels
,C. Modify the analyst's own model without informing anyone
D. Immediately publish the allegation publicly
Correct Answer: B
Rationale: Suspected misconduct should be addressed
through appropriate internal or regulatory channels rather
than ignored or publicly disclosed without proper process.
3. Which situation most clearly represents a material
nonpublic information problem?
A. An analyst reads a company's annual report
B. An analyst attends a public earnings presentation
C. An analyst receives confidential information about an
upcoming acquisition
D. An analyst speaks with a supplier about industry conditions
Correct Answer: C
Rationale: Confidential information concerning a significant
corporate transaction can be both material and nonpublic.
4. A portfolio manager receives an expensive personal gift
from a broker immediately after directing substantial
client trades to that broker. The primary concern is:
A. Currency risk
B. Conflict of interest
C. Liquidity risk
D. Model risk
Correct Answer: B
,Rationale: The gift may create an incentive for the manager
to favor the broker rather than act solely in clients'
interests.
5. Fair dealing primarily requires an investment
professional to:
A. Give every client identical investment advice
B. Treat clients fairly when disseminating investment
recommendations and taking investment action
C. Guarantee equal investment returns
D. Avoid communicating with institutional clients
Correct Answer: B
Rationale: Fair dealing concerns equitable treatment in
disseminating recommendations and executing investment
actions, not identical outcomes.
6. Which activity is most likely to violate the prohibition
against plagiarism?
A. Using a public company's reported revenue figures
B. Quoting a source with attribution
C. Presenting another analyst's original research as one's own
D. Performing an independent calculation
Correct Answer: C
Rationale: Presenting someone else's work as one's own
without appropriate acknowledgment is plagiarism.
, 7. A CFA charterholder is asked to perform an analysis
outside their area of competence. The most appropriate
response is to:
A. Complete it regardless of qualifications
B. Obtain appropriate assistance or develop sufficient
competence before proceeding
C. Delegate it without reviewing the result
D. Refuse all future analytical work
Correct Answer: B
Rationale: Professionals should recognize limitations and
obtain assistance or acquire the necessary competence.
8. An investment recommendation should have a reasonable
and adequate basis. This requirement is primarily
addressed by:
A. Diligence and Reasonable Basis
B. Independence and Objectivity
C. Fair Dealing
D. Confidentiality
Correct Answer: A
Rationale: Standard V(A) requires reasonable and adequate
investigation supporting recommendations and actions.
9. Which is most likely to threaten an analyst's
independence and objectivity?
A. Reviewing historical financial statements
