CFA Level I Newest 2025- 2026 Updated
Practice Exam | 100 Actual Most Tested
Questions Collections & Verified
Detailed Answers | Tutor Verified
Success Exam) Graded A+
Question 1
Which of the following best describes the primary purpose of the CFA Code of
Ethics?
A. Maximize investment returns for clients
B. Establish mandatory legal penalties for violations
C. Promote integrity and professional standards in investment practice
D. Guarantee employment for charterholders
Answer: C ✔
Rationale: The CFA Code of Ethics is designed to promote integrity,
professionalism, and ethical conduct in the investment industry, not to guarantee
outcomes or enforce legal penalties.*
Question 2
A firm reports revenue using accrual accounting. This means revenue is recognized
when:
A. Cash is received
B. Goods are ordered
,C. Revenue is earned regardless of cash receipt
D. Expenses are paid
Answer: C ✔
Rationale: Under the accrual basis, revenue is recognized when it is earned, not
when cash is received.*
Question 3
Which of the following is NOT a characteristic of an efficient market?
A. Prices reflect all available information
B. Investors consistently earn abnormal returns
C. Securities are fairly priced
D. Information is rapidly incorporated into prices
Answer: B ✔
Rationale: In an efficient market, consistent abnormal returns are not possible.*
Question 4
If inflation increases unexpectedly, the most likely immediate impact is:
A. Decrease in nominal interest rates
B. Increase in purchasing power
C. Decrease in purchasing power
D. Increase in bond prices
Answer: C ✔
Rationale: Higher inflation reduces purchasing power of money.*
Question 5
Which financial statement reports a company’s financial position at a specific
point in time?
,A. Income Statement
B. Cash Flow Statement
C. Balance Sheet
D. Statement of Changes in Equity
Answer: C ✔
Rationale: The balance sheet shows assets, liabilities, and equity at a specific
date.*
Question 6
A portfolio has a beta of 1.2. This means it is expected to:
A. Move less than the market
B. Move exactly with the market
C. Be more volatile than the market
D. Have no systematic risk
Answer: C ✔
Rationale: A beta greater than 1 indicates higher sensitivity to market
movements.*
Question 7
Which ratio measures liquidity?
A. Debt-to-equity ratio
B. Current ratio
C. Return on equity
D. Net profit margin
Answer: B ✔
Rationale: The current ratio measures ability to meet short-term obligations.*
Question 8
, Time value of money is based on the principle that:
A. Money loses value over time only in inflationary periods
B. Money today is worth more than money in the future
C. Future money is always risk-free
D. Interest rates do not affect valuation
Answer: B ✔
Rationale: Money available today can be invested, making it more valuable than
future money.*
Question 9
If a bond’s yield increases, its price will generally:
A. Increase
B. Decrease
C. Remain unchanged
D. Become zero
Answer: B ✔
Rationale: Bond prices and yields move inversely.*
Question 10
Which of the following is a systematic risk?
A. Company bankruptcy
B. Industry strike
C. Market recession
D. Management change
Answer: C ✔
Rationale: Systematic risk affects the entire market, such as recessions.*
Question 11
Practice Exam | 100 Actual Most Tested
Questions Collections & Verified
Detailed Answers | Tutor Verified
Success Exam) Graded A+
Question 1
Which of the following best describes the primary purpose of the CFA Code of
Ethics?
A. Maximize investment returns for clients
B. Establish mandatory legal penalties for violations
C. Promote integrity and professional standards in investment practice
D. Guarantee employment for charterholders
Answer: C ✔
Rationale: The CFA Code of Ethics is designed to promote integrity,
professionalism, and ethical conduct in the investment industry, not to guarantee
outcomes or enforce legal penalties.*
Question 2
A firm reports revenue using accrual accounting. This means revenue is recognized
when:
A. Cash is received
B. Goods are ordered
,C. Revenue is earned regardless of cash receipt
D. Expenses are paid
Answer: C ✔
Rationale: Under the accrual basis, revenue is recognized when it is earned, not
when cash is received.*
Question 3
Which of the following is NOT a characteristic of an efficient market?
A. Prices reflect all available information
B. Investors consistently earn abnormal returns
C. Securities are fairly priced
D. Information is rapidly incorporated into prices
Answer: B ✔
Rationale: In an efficient market, consistent abnormal returns are not possible.*
Question 4
If inflation increases unexpectedly, the most likely immediate impact is:
A. Decrease in nominal interest rates
B. Increase in purchasing power
C. Decrease in purchasing power
D. Increase in bond prices
Answer: C ✔
Rationale: Higher inflation reduces purchasing power of money.*
Question 5
Which financial statement reports a company’s financial position at a specific
point in time?
,A. Income Statement
B. Cash Flow Statement
C. Balance Sheet
D. Statement of Changes in Equity
Answer: C ✔
Rationale: The balance sheet shows assets, liabilities, and equity at a specific
date.*
Question 6
A portfolio has a beta of 1.2. This means it is expected to:
A. Move less than the market
B. Move exactly with the market
C. Be more volatile than the market
D. Have no systematic risk
Answer: C ✔
Rationale: A beta greater than 1 indicates higher sensitivity to market
movements.*
Question 7
Which ratio measures liquidity?
A. Debt-to-equity ratio
B. Current ratio
C. Return on equity
D. Net profit margin
Answer: B ✔
Rationale: The current ratio measures ability to meet short-term obligations.*
Question 8
, Time value of money is based on the principle that:
A. Money loses value over time only in inflationary periods
B. Money today is worth more than money in the future
C. Future money is always risk-free
D. Interest rates do not affect valuation
Answer: B ✔
Rationale: Money available today can be invested, making it more valuable than
future money.*
Question 9
If a bond’s yield increases, its price will generally:
A. Increase
B. Decrease
C. Remain unchanged
D. Become zero
Answer: B ✔
Rationale: Bond prices and yields move inversely.*
Question 10
Which of the following is a systematic risk?
A. Company bankruptcy
B. Industry strike
C. Market recession
D. Management change
Answer: C ✔
Rationale: Systematic risk affects the entire market, such as recessions.*
Question 11
