CFA Practice Questions - Comprehensive EXAM
300 Original Practice Questions Across All Topics
INTRODUCTION
Welcome to this comprehensive CFA practice question set, designed to help you
prepare for all three levels of the Chartered Financial Analyst examination. This
resource contains 300 carefully crafted questions that mirror the format, difficulty,
and scope of the actual CFA exam.
SECTION 1: ETHICAL & PROFESSIONAL
STANDARDS (45 Questions)
Questions 1-10: Code of Ethics and Standards of Professional
Conduct
1. An investment analyst receives material nonpublic information about
a company from a corporate insider during a casual conversation at a
conference. According to the CFA Institute Standards, the analyst
should:
A) Immediately trade on the information before it becomes public
B) Share the information only with senior management
C) Not act or cause others to act on the information (CORRECT)
D) Wait 24 hours before trading
Explanation: Standard II(A) Material Nonpublic Information prohibits members
from acting or causing others to act on material nonpublic information. The
analyst must not trade or recommend trades based on this information.
2. A portfolio manager consistently places trades for her personal
account before executing similar trades for client accounts. This practice
most likely violates:
A) Standard I(A) Knowledge of the Law
B) Standard III(A) Loyalty, Prudence, and Care
C) Standard VI(B) Priority of Transactions (CORRECT)
D) Standard V(A) Diligence and Reasonable Basis
,Explanation: Standard VI(B) requires that client transactions take priority over
personal transactions. Front-running client orders is a clear violation.
3. Which of the following statements about the CFA Institute Code of
Ethics is MOST accurate?
A) It provides specific rules for all professional situations
B) It establishes fundamental principles that guide professional conduct
(CORRECT)
C) It only applies to CFA charterholders, not candidates
D) It supersedes local laws and regulations
Explanation: The Code of Ethics establishes overarching principles. It applies to
both members and candidates, and local laws take precedence when stricter.
4. An analyst is preparing a research report and discovers that some of
the data used contradicts her conclusion. According to the Standards,
she should:
A) Ignore the contradictory data if it's immaterial
B) Include only data that supports her conclusion
C) Disclose the contradictory data and address it in her analysis
(CORRECT)
D) Remove her conclusion and present only raw data
Explanation: Standard V(B) Communication with Clients and Prospective Clients
requires fair and complete presentation of analysis, including contradictory
information.
5. A CFA charterholder works for a firm with weaker compliance
procedures than required by CFA Institute Standards. The charterholder
should:
A) Follow the firm's policies since they are the employer's requirements
B) Follow the stricter CFA Institute Standards (CORRECT)
C) Report the firm to CFA Institute immediately
D) Resign from the firm
Explanation: Standard I(A) requires members to comply with the stricter of local
laws, regulations, or CFA Institute Standards.
,6. Which scenario would LEAST LIKELY represent a violation of
Standard III(D) Performance Presentation?
A) Presenting gross returns without disclosing fees
B) Cherry-picking only the best-performing accounts
C) Using model results without disclosure
D) Presenting GIPS-compliant composite returns with proper disclosure
(CORRECT)
Explanation: GIPS-compliant presentations with proper disclosure meet the
requirements of fair performance presentation.
7. An investment firm claims in its marketing materials that "all of our
portfolio managers are CFA charterholders." Two managers are
currently candidates. This statement:
A) Is acceptable if the candidates pass their next exam
B) Violates Standard VII(B) Reference to CFA Institute (CORRECT)
C) Is acceptable if disclosed in footnotes
D) Only violates standards if clients complain
Explanation: Making false or misleading claims about CFA designation violates
Standard VII(B). Candidates cannot be represented as charterholders.
8. A research analyst receives a gift valued at $500 from a company she
covers. According to the Standards, she should:
A) Accept it if under $1,000
B) Accept it and disclose it in research reports
C) Obtain written consent from her employer or decline the gift
(CORRECT)
D) Return it only if it influences her judgment
Explanation: Standard I(B) Independence and Objectivity requires disclosure to
and permission from employers for gifts that could impair independence.
9. If a member suspects a colleague of violating the CFA Institute Code
and Standards, the member should FIRST:
A) Report the violation to CFA Institute
B) Confront the colleague publicly
C) Consult with the firm's compliance department or supervisor
(CORRECT)
D) Document the violation and wait for further evidence
, Explanation: Standard I(A) requires members to address violations through
appropriate channels, typically starting with internal compliance procedures.
10. A portfolio manager allocates a "hot" IPO to favored clients while
giving less attractive investments to other clients. This practice violates:
A) Standard VI(B) Priority of Transactions
B) Standard III(B) Fair Dealing (CORRECT)
C) Standard V(A) Diligence and Reasonable Basis
D) Standard II(B) Market Manipulation
Explanation: Standard III(B) requires fair treatment of all clients. Cherry-picking
investments for favored clients violates this standard.
Questions 11-20: Asset Manager Code and Global Investment
Performance Standards (GIPS)
11. Under the Asset Manager Code, managers must:
A) Guarantee positive returns to clients
B) Always outperform benchmarks
C) Act in the client's best interests and place client interests before their
own (CORRECT)
D) Only invest in socially responsible investments
Explanation: The fundamental principle of the Asset Manager Code is loyalty to
clients and placing client interests first.
12. Which of the following is a requirement for GIPS compliance?
A) Only include accounts with positive returns
B) Include all actual, fee-paying discretionary portfolios in composites
(CORRECT)
C) Present only gross-of-fees returns
D) Use model or simulated returns when actual data is unavailable
Explanation: GIPS requires inclusion of all actual, fee-paying discretionary
accounts in appropriate composites to prevent cherry-picking.
13. A firm claims GIPS compliance for the first time. The firm must
present a minimum of:
300 Original Practice Questions Across All Topics
INTRODUCTION
Welcome to this comprehensive CFA practice question set, designed to help you
prepare for all three levels of the Chartered Financial Analyst examination. This
resource contains 300 carefully crafted questions that mirror the format, difficulty,
and scope of the actual CFA exam.
SECTION 1: ETHICAL & PROFESSIONAL
STANDARDS (45 Questions)
Questions 1-10: Code of Ethics and Standards of Professional
Conduct
1. An investment analyst receives material nonpublic information about
a company from a corporate insider during a casual conversation at a
conference. According to the CFA Institute Standards, the analyst
should:
A) Immediately trade on the information before it becomes public
B) Share the information only with senior management
C) Not act or cause others to act on the information (CORRECT)
D) Wait 24 hours before trading
Explanation: Standard II(A) Material Nonpublic Information prohibits members
from acting or causing others to act on material nonpublic information. The
analyst must not trade or recommend trades based on this information.
2. A portfolio manager consistently places trades for her personal
account before executing similar trades for client accounts. This practice
most likely violates:
A) Standard I(A) Knowledge of the Law
B) Standard III(A) Loyalty, Prudence, and Care
C) Standard VI(B) Priority of Transactions (CORRECT)
D) Standard V(A) Diligence and Reasonable Basis
,Explanation: Standard VI(B) requires that client transactions take priority over
personal transactions. Front-running client orders is a clear violation.
3. Which of the following statements about the CFA Institute Code of
Ethics is MOST accurate?
A) It provides specific rules for all professional situations
B) It establishes fundamental principles that guide professional conduct
(CORRECT)
C) It only applies to CFA charterholders, not candidates
D) It supersedes local laws and regulations
Explanation: The Code of Ethics establishes overarching principles. It applies to
both members and candidates, and local laws take precedence when stricter.
4. An analyst is preparing a research report and discovers that some of
the data used contradicts her conclusion. According to the Standards,
she should:
A) Ignore the contradictory data if it's immaterial
B) Include only data that supports her conclusion
C) Disclose the contradictory data and address it in her analysis
(CORRECT)
D) Remove her conclusion and present only raw data
Explanation: Standard V(B) Communication with Clients and Prospective Clients
requires fair and complete presentation of analysis, including contradictory
information.
5. A CFA charterholder works for a firm with weaker compliance
procedures than required by CFA Institute Standards. The charterholder
should:
A) Follow the firm's policies since they are the employer's requirements
B) Follow the stricter CFA Institute Standards (CORRECT)
C) Report the firm to CFA Institute immediately
D) Resign from the firm
Explanation: Standard I(A) requires members to comply with the stricter of local
laws, regulations, or CFA Institute Standards.
,6. Which scenario would LEAST LIKELY represent a violation of
Standard III(D) Performance Presentation?
A) Presenting gross returns without disclosing fees
B) Cherry-picking only the best-performing accounts
C) Using model results without disclosure
D) Presenting GIPS-compliant composite returns with proper disclosure
(CORRECT)
Explanation: GIPS-compliant presentations with proper disclosure meet the
requirements of fair performance presentation.
7. An investment firm claims in its marketing materials that "all of our
portfolio managers are CFA charterholders." Two managers are
currently candidates. This statement:
A) Is acceptable if the candidates pass their next exam
B) Violates Standard VII(B) Reference to CFA Institute (CORRECT)
C) Is acceptable if disclosed in footnotes
D) Only violates standards if clients complain
Explanation: Making false or misleading claims about CFA designation violates
Standard VII(B). Candidates cannot be represented as charterholders.
8. A research analyst receives a gift valued at $500 from a company she
covers. According to the Standards, she should:
A) Accept it if under $1,000
B) Accept it and disclose it in research reports
C) Obtain written consent from her employer or decline the gift
(CORRECT)
D) Return it only if it influences her judgment
Explanation: Standard I(B) Independence and Objectivity requires disclosure to
and permission from employers for gifts that could impair independence.
9. If a member suspects a colleague of violating the CFA Institute Code
and Standards, the member should FIRST:
A) Report the violation to CFA Institute
B) Confront the colleague publicly
C) Consult with the firm's compliance department or supervisor
(CORRECT)
D) Document the violation and wait for further evidence
, Explanation: Standard I(A) requires members to address violations through
appropriate channels, typically starting with internal compliance procedures.
10. A portfolio manager allocates a "hot" IPO to favored clients while
giving less attractive investments to other clients. This practice violates:
A) Standard VI(B) Priority of Transactions
B) Standard III(B) Fair Dealing (CORRECT)
C) Standard V(A) Diligence and Reasonable Basis
D) Standard II(B) Market Manipulation
Explanation: Standard III(B) requires fair treatment of all clients. Cherry-picking
investments for favored clients violates this standard.
Questions 11-20: Asset Manager Code and Global Investment
Performance Standards (GIPS)
11. Under the Asset Manager Code, managers must:
A) Guarantee positive returns to clients
B) Always outperform benchmarks
C) Act in the client's best interests and place client interests before their
own (CORRECT)
D) Only invest in socially responsible investments
Explanation: The fundamental principle of the Asset Manager Code is loyalty to
clients and placing client interests first.
12. Which of the following is a requirement for GIPS compliance?
A) Only include accounts with positive returns
B) Include all actual, fee-paying discretionary portfolios in composites
(CORRECT)
C) Present only gross-of-fees returns
D) Use model or simulated returns when actual data is unavailable
Explanation: GIPS requires inclusion of all actual, fee-paying discretionary
accounts in appropriate composites to prevent cherry-picking.
13. A firm claims GIPS compliance for the first time. The firm must
present a minimum of:
