CFA Level I Practice Exam 2026
Course: CFA Program Level I
Subject: All Core Topic Areas
Level: Professional Certification
Format: Four-Option Multiple Choice
Number of Questions: 190
Instructions: Select the best answer for each question. All questions are equally weighted.
There is no penalty for inCorrect Answers.
Ethical and Professional Standards
Question 1
A portfolio manager guarantees a client an annual return of 12% with no possibility of loss.
Which CFA Institute Standard of Professional Conduct is most likely violated?
A. Standard I(C) – Misrepresentation
B. Standard III(B) – Fair Dealing
C. Standard V(A) – Diligence and Reasonable Basis
D. Standard VI(A) – Disclosure of Conflicts
Correct Answer: A
Explanation: Guaranteeing returns misrepresents the risks of investing, directly violating
Standard I(C) which prohibits false or misleading statements.
,Question 2
An analyst receives material nonpublic information about a pending merger from a
corporate insider at a social event. According to the Code and Standards, the analyst should
most appropriately:
A. Execute a trade before the information becomes public
B. Share the information only with her employer’s trading desk
C. Refrain from trading and urge the insider to publicly disclose the information
D. Use the information to update her financial model without trading
Correct Answer: C
Explanation: Standard II(A) requires members to avoid acting on material nonpublic
information and to encourage public dissemination before trading.
Question 3
A member who manages a pension fund owes fiduciary duties primarily to:
A. The company’s shareholders
B. The plan’s participants and beneficiaries
C. The pension fund’s asset manager
D. The company’s board of directors
Correct Answer: B
,Explanation: Under Standard III(A), loyalty is owed to the beneficiaries of the pension plan,
not corporate management or shareholders.
Question 4
Which of the following best describes the purpose of the Global Investment Performance
Standards (GIPS)?
A. To establish ethical guidelines for investment professionals
B. To provide a framework for calculating and presenting investment performance
C. To regulate the marketing of hedge funds to institutional investors
D. To mandate disclosure of all conflicts of interest in research reports
Correct Answer: B
Explanation: GIPS provides ethical standards for firms to calculate and present investment
performance to ensure fair, global comparability.
Question 5
An investment advisor allocates a hot IPO to favored clients while leaving other suitable
clients unfilled. This action most likely violates:
A. Standard III(B) – Fair Dealing
B. Standard III(C) – Suitability
C. Standard IV(A) – Loyalty to Employer
D. Standard V(B) – Communication with Clients
Correct Answer: A
, Explanation: Fair Dealing requires treating all clients equitably when allocating investment
opportunities and disseminating recommendations.
Question 6
A candidate for the CFA designation is arrested for participating in a peaceful political
protest. Under Standard I(D) – Misconduct, this behavior:
A. Violates the standard because it involves breaking the law
B. Violates the standard because it damages professional reputation
C. Does not violate the standard because it is unrelated to professional activities
D. Does not violate the standard only if charges are dismissed
Correct Answer: C
Explanation: Standard I(D) targets conduct involving dishonesty, fraud, or deceit, not
peaceful civil disobedience unrelated to professional integrity.
Question 7
An analyst changes a “sell” recommendation to “hold” after pressure from her employer’s
investment banking division. To comply with the Standards, she should most appropriately:
A. Comply with the request to avoid losing her job
B. Maintain independence and disclose the pressure if overruled
C. Resign immediately without further action
D. Escalate the matter only if the change harms clients financially
Course: CFA Program Level I
Subject: All Core Topic Areas
Level: Professional Certification
Format: Four-Option Multiple Choice
Number of Questions: 190
Instructions: Select the best answer for each question. All questions are equally weighted.
There is no penalty for inCorrect Answers.
Ethical and Professional Standards
Question 1
A portfolio manager guarantees a client an annual return of 12% with no possibility of loss.
Which CFA Institute Standard of Professional Conduct is most likely violated?
A. Standard I(C) – Misrepresentation
B. Standard III(B) – Fair Dealing
C. Standard V(A) – Diligence and Reasonable Basis
D. Standard VI(A) – Disclosure of Conflicts
Correct Answer: A
Explanation: Guaranteeing returns misrepresents the risks of investing, directly violating
Standard I(C) which prohibits false or misleading statements.
,Question 2
An analyst receives material nonpublic information about a pending merger from a
corporate insider at a social event. According to the Code and Standards, the analyst should
most appropriately:
A. Execute a trade before the information becomes public
B. Share the information only with her employer’s trading desk
C. Refrain from trading and urge the insider to publicly disclose the information
D. Use the information to update her financial model without trading
Correct Answer: C
Explanation: Standard II(A) requires members to avoid acting on material nonpublic
information and to encourage public dissemination before trading.
Question 3
A member who manages a pension fund owes fiduciary duties primarily to:
A. The company’s shareholders
B. The plan’s participants and beneficiaries
C. The pension fund’s asset manager
D. The company’s board of directors
Correct Answer: B
,Explanation: Under Standard III(A), loyalty is owed to the beneficiaries of the pension plan,
not corporate management or shareholders.
Question 4
Which of the following best describes the purpose of the Global Investment Performance
Standards (GIPS)?
A. To establish ethical guidelines for investment professionals
B. To provide a framework for calculating and presenting investment performance
C. To regulate the marketing of hedge funds to institutional investors
D. To mandate disclosure of all conflicts of interest in research reports
Correct Answer: B
Explanation: GIPS provides ethical standards for firms to calculate and present investment
performance to ensure fair, global comparability.
Question 5
An investment advisor allocates a hot IPO to favored clients while leaving other suitable
clients unfilled. This action most likely violates:
A. Standard III(B) – Fair Dealing
B. Standard III(C) – Suitability
C. Standard IV(A) – Loyalty to Employer
D. Standard V(B) – Communication with Clients
Correct Answer: A
, Explanation: Fair Dealing requires treating all clients equitably when allocating investment
opportunities and disseminating recommendations.
Question 6
A candidate for the CFA designation is arrested for participating in a peaceful political
protest. Under Standard I(D) – Misconduct, this behavior:
A. Violates the standard because it involves breaking the law
B. Violates the standard because it damages professional reputation
C. Does not violate the standard because it is unrelated to professional activities
D. Does not violate the standard only if charges are dismissed
Correct Answer: C
Explanation: Standard I(D) targets conduct involving dishonesty, fraud, or deceit, not
peaceful civil disobedience unrelated to professional integrity.
Question 7
An analyst changes a “sell” recommendation to “hold” after pressure from her employer’s
investment banking division. To comply with the Standards, she should most appropriately:
A. Comply with the request to avoid losing her job
B. Maintain independence and disclose the pressure if overruled
C. Resign immediately without further action
D. Escalate the matter only if the change harms clients financially
