CFA Prep - Investment Foundations Exam Questions &
Answers 2025 Update
Which of the following represents the reward-to-risk ratio relative to a benchmark - ANS ✔ - reward-
to-risk ratio
an investment advisor would most likely provide standardized services - ANS ✔ - retail clients
Which of the following is most likely an outcome of a successful diversity, equity and inclusion DEI
programs - ANS ✔ - staff survey showing improvement in inclusive behaviors of managers and
leaders
Which of the following is the best example of a noneconomic benefit that a listed investment company
can realize from its employees acting ethically - ANS ✔ - improved customer satisfaction
Offers framework for ethical behavior regardless of the country in which the investment professional
operates - ANS ✔ - CFA institute code of ethics
Which of the following types of engagement with companies is often described as purposeful
dialogue with a specific objective in mind - ANS ✔ - shareholder engagement
A framework for ethical decision making most likely requires - ANS ✔ - identification of conflicts of
interest
Adhering to sustainable business practices most likely reduces costs when a business focuses on -
ANS ✔ - water conservation
The triple bottom line factors are - ANS ✔ - people, plant, and profile
Which of the following environmental factors most likely impacts an ESG investor's decisions? - ANS
✔ - Climate change
, Active investment managers tend to be chosen when - ANS ✔ - they have the skill to outperform the
market after fees and commissions are taken into account
The investment industry mostly benefits the economy by - ANS ✔ - assisting in the allocation of
capital
A market participant who is willing to trade on demand and make a market in a security is most likely
called - ANS ✔ - a dealer
Portfolio managers often begin their professional careers as - ANS ✔ - research assistants
Clients taking a total return perspective would most likely - ANS ✔ - make no distinction between
income and capital gains
The Sharpe ratio is a measure of - ANS ✔ - reward-to-risk
The arithmetic mean - ANS ✔ - does not consider compounding
The performance evaluation process is most likely to examine - ANS ✔ - both performance relative
to market benchmarks and manager risk taking
Alpha is best described as the outperformance of a portfolio over - ANS ✔ - a relevant market
benchmark
Compared to an index of the 20 largest biotechnology stocks, the S&P 500 index has - ANS ✔ - less
unsystematic risk
The type of active investment manager most likely to estimate intrinsic asset value is - ANS ✔ -
fundamental
Which of the following is an example of operational risk? - ANS ✔ - rogue trading
Answers 2025 Update
Which of the following represents the reward-to-risk ratio relative to a benchmark - ANS ✔ - reward-
to-risk ratio
an investment advisor would most likely provide standardized services - ANS ✔ - retail clients
Which of the following is most likely an outcome of a successful diversity, equity and inclusion DEI
programs - ANS ✔ - staff survey showing improvement in inclusive behaviors of managers and
leaders
Which of the following is the best example of a noneconomic benefit that a listed investment company
can realize from its employees acting ethically - ANS ✔ - improved customer satisfaction
Offers framework for ethical behavior regardless of the country in which the investment professional
operates - ANS ✔ - CFA institute code of ethics
Which of the following types of engagement with companies is often described as purposeful
dialogue with a specific objective in mind - ANS ✔ - shareholder engagement
A framework for ethical decision making most likely requires - ANS ✔ - identification of conflicts of
interest
Adhering to sustainable business practices most likely reduces costs when a business focuses on -
ANS ✔ - water conservation
The triple bottom line factors are - ANS ✔ - people, plant, and profile
Which of the following environmental factors most likely impacts an ESG investor's decisions? - ANS
✔ - Climate change
, Active investment managers tend to be chosen when - ANS ✔ - they have the skill to outperform the
market after fees and commissions are taken into account
The investment industry mostly benefits the economy by - ANS ✔ - assisting in the allocation of
capital
A market participant who is willing to trade on demand and make a market in a security is most likely
called - ANS ✔ - a dealer
Portfolio managers often begin their professional careers as - ANS ✔ - research assistants
Clients taking a total return perspective would most likely - ANS ✔ - make no distinction between
income and capital gains
The Sharpe ratio is a measure of - ANS ✔ - reward-to-risk
The arithmetic mean - ANS ✔ - does not consider compounding
The performance evaluation process is most likely to examine - ANS ✔ - both performance relative
to market benchmarks and manager risk taking
Alpha is best described as the outperformance of a portfolio over - ANS ✔ - a relevant market
benchmark
Compared to an index of the 20 largest biotechnology stocks, the S&P 500 index has - ANS ✔ - less
unsystematic risk
The type of active investment manager most likely to estimate intrinsic asset value is - ANS ✔ -
fundamental
Which of the following is an example of operational risk? - ANS ✔ - rogue trading
