CFA Level 1 Sample Questions
The feature of a well-functioning investment industry that gives investors the ability to quickly buy and
sell a significant amount of an investment without having a material impact on the price is described as:
A liquidity
B competitive markets
C risk transfer - Answer-A
According to fundamental ethical and professional principles applicable to the investment industry,
which group should have its interests ranked first?
A Clients
B Employers
C Co-workers - Answer-A
Regulators often seek public consultation prior to the implementation of new regulations in order to:
A ensure the new rules are favorable to those likely to be affected
B educate consumers and service providers on the new rules
C improve the final rules by undertaking a cost-benefit analysis - Answer-C
A financial advisory firm that implements internal policies regarding information barriers, suitability
standards, and restrictions on self-dealing is addressing issues related to which of the following types of
regulation?
A Sales practices rules
,B Trading rules
C Disclosure rules - Answer-A
The best financial statement to use to find information about what a company owns and owes others is
called the:
A income statement
B balance sheet
C cash flow statement - Answer-B
If two variables do not have a strong (linear) relationship, the correlation coefficient between the two
variables will be closest to:
A0
B -1
C +1 - Answer-A
In contrast to forward contracts, futures contracts:
A trade on organized exchanges
B have contract sizes tailored to investor needs
C have negotiable expiration dates - Answer-A
Which type of private equity strategy is most likely used to finance a start-up company?
A Growth equity
B Buyout
C Venture capital - Answer-C
In commercial real estate investment, the amount derived from discounting future cash flows of lease
and rental payments plus capital appreciation represents the value of the:
,A asset
B equity
C liability - Answer-A
The type of bank that is exclusively owned by its members is a:
A savings and loan bank
B commercial bank
C mutual bank - Answer-C
A form of pension plan in which the participant has some ability to determine how pension
contributions are invested is described as a(n):
A defined contribution plan
B endowment plan
C defined benefit plan - Answer-A
An investor attempting to replicate a price-weighted index would hold an equal:
A percentage of outstanding shares of each security in the index
B amount invested in each security in the index
C number of units (shares) of each security in the index - Answer-C
From the standpoint of taxes, investors will benefit from:
A deferring taxes to the future if tax rates will be higher in the future
B realizing gains via stock repurchases as opposed to receiving the same gains as dividends
C selling appreciated shares to meet cash needs instead of borrowing against them - Answer-B
, If a decrease in the selling price of a company's only product results in an increase in the company's total
revenue, the demand for the company's product is:
A elastic
B unit-elastic
C inelastic - Answer-A
Which of the following actions taken by a central bank is expansionary?
A Increasing the reserve requirement
B The purchase of government bonds
C Increasing its policy rate - Answer-B
Which of the following government actions will most likely lead to an increase in the level of aggregate
demand? A reduction in:
A transfer payments
B public spending on social goods and infrastructure
C the capital gains tax - Answer-C
If Mexico is running a large current account deficit with Canada, which of the following will most likely
occur?
A Canada will reduce its imports from Mexico
B The Mexican peso will depreciate relative to the Canadian dollar
C There will be an increase in Canadian exports to Mexico - Answer-B
If a company is liquidated, proceeds from asset sales are distributed to common shareholders:
A before unsecured debt investor and preferred shareholder, claims are paid
B after secured debt investor and preferred shareholder, claims are paid
The feature of a well-functioning investment industry that gives investors the ability to quickly buy and
sell a significant amount of an investment without having a material impact on the price is described as:
A liquidity
B competitive markets
C risk transfer - Answer-A
According to fundamental ethical and professional principles applicable to the investment industry,
which group should have its interests ranked first?
A Clients
B Employers
C Co-workers - Answer-A
Regulators often seek public consultation prior to the implementation of new regulations in order to:
A ensure the new rules are favorable to those likely to be affected
B educate consumers and service providers on the new rules
C improve the final rules by undertaking a cost-benefit analysis - Answer-C
A financial advisory firm that implements internal policies regarding information barriers, suitability
standards, and restrictions on self-dealing is addressing issues related to which of the following types of
regulation?
A Sales practices rules
,B Trading rules
C Disclosure rules - Answer-A
The best financial statement to use to find information about what a company owns and owes others is
called the:
A income statement
B balance sheet
C cash flow statement - Answer-B
If two variables do not have a strong (linear) relationship, the correlation coefficient between the two
variables will be closest to:
A0
B -1
C +1 - Answer-A
In contrast to forward contracts, futures contracts:
A trade on organized exchanges
B have contract sizes tailored to investor needs
C have negotiable expiration dates - Answer-A
Which type of private equity strategy is most likely used to finance a start-up company?
A Growth equity
B Buyout
C Venture capital - Answer-C
In commercial real estate investment, the amount derived from discounting future cash flows of lease
and rental payments plus capital appreciation represents the value of the:
,A asset
B equity
C liability - Answer-A
The type of bank that is exclusively owned by its members is a:
A savings and loan bank
B commercial bank
C mutual bank - Answer-C
A form of pension plan in which the participant has some ability to determine how pension
contributions are invested is described as a(n):
A defined contribution plan
B endowment plan
C defined benefit plan - Answer-A
An investor attempting to replicate a price-weighted index would hold an equal:
A percentage of outstanding shares of each security in the index
B amount invested in each security in the index
C number of units (shares) of each security in the index - Answer-C
From the standpoint of taxes, investors will benefit from:
A deferring taxes to the future if tax rates will be higher in the future
B realizing gains via stock repurchases as opposed to receiving the same gains as dividends
C selling appreciated shares to meet cash needs instead of borrowing against them - Answer-B
, If a decrease in the selling price of a company's only product results in an increase in the company's total
revenue, the demand for the company's product is:
A elastic
B unit-elastic
C inelastic - Answer-A
Which of the following actions taken by a central bank is expansionary?
A Increasing the reserve requirement
B The purchase of government bonds
C Increasing its policy rate - Answer-B
Which of the following government actions will most likely lead to an increase in the level of aggregate
demand? A reduction in:
A transfer payments
B public spending on social goods and infrastructure
C the capital gains tax - Answer-C
If Mexico is running a large current account deficit with Canada, which of the following will most likely
occur?
A Canada will reduce its imports from Mexico
B The Mexican peso will depreciate relative to the Canadian dollar
C There will be an increase in Canadian exports to Mexico - Answer-B
If a company is liquidated, proceeds from asset sales are distributed to common shareholders:
A before unsecured debt investor and preferred shareholder, claims are paid
B after secured debt investor and preferred shareholder, claims are paid
