Chartered Financial Analyst Level I
Exam Practice Questions And Correct
Answers (Verified Answers) Plus
Rationale 2026 Q&A| Instant Download
Pdf
1.Which of the following statements best describes the primary purpose of
the CFA Institute Code of Ethics and Standards of Professional Conduct?
A. To maximize investment returns for all clients regardless of risk
B. To establish mandatory accounting standards for financial reporting
C. To guide ethical behavior and maintain integrity within the investment
profession
D. To replace government securities regulations worldwide
Correct Answer: C
The CFA Institute Code of Ethics and Standards of Professional Conduct
establishes principles that promote honesty, fairness, professionalism, and
integrity among investment professionals. It is designed to protect clients
and maintain confidence in financial markets.
2. An analyst discovers that a company’s management has intentionally
overstated revenue figures. According to CFA ethical standards, the
analyst should most appropriately:
A. Ignore the information because management is responsible for reporting
B. Report the issue through appropriate channels and avoid participating in
,misleading analysis
C. Purchase shares before the information becomes public
D. Disclose the information only to selected clients
Correct Answer: B
CFA professionals must act with integrity and avoid being associated with
false or misleading information. Proper reporting procedures should be
followed while maintaining professional conduct.
3. Under the CFA Standards of Professional Conduct, which action is
most likely a violation related to material nonpublic information?
A. Using publicly available earnings forecasts
B. Analyzing historical financial statements
C. Trading based on confidential merger information received from an
insider
D. Reviewing industry publications
Correct Answer: C
Trading on material nonpublic information gives an unfair advantage and
violates the CFA Institute Standard concerning material nonpublic
information.
4. A portfolio manager receives expensive gifts from a brokerage firm
that executes client trades. The manager should most appropriately:
A. Accept all gifts because they improve relationships
B. Reject or disclose gifts that could impair independence and objectivity
C. Accept gifts only from large institutions
D. Hide the gifts from the employer
Correct Answer: B
,Investment professionals must preserve independence and objectivity.
Gifts that may influence professional judgment must be avoided or
properly disclosed.
5. Which of the following best describes the time value of money?
A. A dollar received today is worth less than a dollar received in the future
B. Money has the same value regardless of timing
C. A dollar received today can earn returns and is therefore worth more
than a future dollar
D. Inflation has no effect on money value
Correct Answer: C
The time value of money recognizes that funds available today can be
invested to generate returns, making present money more valuable than
equivalent future amounts.
6. An investment earns 8% annually for three years. The future value of a
$10,000 investment is closest to:
A. $12,597
B. $11,800
C. $10,800
D. $13,500
Correct Answer: A
The future value is calculated as $10,000 × (1.08)^3, which equals
approximately $12,597 due to compound growth.
7. Which statistical measure represents the average value of a dataset?
A. Median
B. Mean
C. Variance
D. Standard deviation
, Correct Answer: B
The mean is calculated by summing all observations and dividing by the
number of observations, making it the most common measure of central
tendency.
8. A probability distribution that assigns probabilities to all possible
outcomes of a discrete random variable is called:
A. Continuous distribution
B. Frequency distribution
C. Discrete probability distribution
D. Normal distribution
Correct Answer: C
A discrete probability distribution describes possible outcomes that are
countable and assigns a probability to each outcome.
9. Standard deviation is primarily used to measure:
A. Expected return
B. Investment liquidity
C. Dispersion or volatility of returns
D. Market capitalization
Correct Answer: C
Standard deviation measures how widely returns vary around their
average value and is commonly used as a measure of investment risk.
10. A normal distribution is characterized by:
A. Equal mean, median, and mode
B. Only positive outcomes
C. No variability
D. A completely random pattern
Exam Practice Questions And Correct
Answers (Verified Answers) Plus
Rationale 2026 Q&A| Instant Download
1.Which of the following statements best describes the primary purpose of
the CFA Institute Code of Ethics and Standards of Professional Conduct?
A. To maximize investment returns for all clients regardless of risk
B. To establish mandatory accounting standards for financial reporting
C. To guide ethical behavior and maintain integrity within the investment
profession
D. To replace government securities regulations worldwide
Correct Answer: C
The CFA Institute Code of Ethics and Standards of Professional Conduct
establishes principles that promote honesty, fairness, professionalism, and
integrity among investment professionals. It is designed to protect clients
and maintain confidence in financial markets.
2. An analyst discovers that a company’s management has intentionally
overstated revenue figures. According to CFA ethical standards, the
analyst should most appropriately:
A. Ignore the information because management is responsible for reporting
B. Report the issue through appropriate channels and avoid participating in
,misleading analysis
C. Purchase shares before the information becomes public
D. Disclose the information only to selected clients
Correct Answer: B
CFA professionals must act with integrity and avoid being associated with
false or misleading information. Proper reporting procedures should be
followed while maintaining professional conduct.
3. Under the CFA Standards of Professional Conduct, which action is
most likely a violation related to material nonpublic information?
A. Using publicly available earnings forecasts
B. Analyzing historical financial statements
C. Trading based on confidential merger information received from an
insider
D. Reviewing industry publications
Correct Answer: C
Trading on material nonpublic information gives an unfair advantage and
violates the CFA Institute Standard concerning material nonpublic
information.
4. A portfolio manager receives expensive gifts from a brokerage firm
that executes client trades. The manager should most appropriately:
A. Accept all gifts because they improve relationships
B. Reject or disclose gifts that could impair independence and objectivity
C. Accept gifts only from large institutions
D. Hide the gifts from the employer
Correct Answer: B
,Investment professionals must preserve independence and objectivity.
Gifts that may influence professional judgment must be avoided or
properly disclosed.
5. Which of the following best describes the time value of money?
A. A dollar received today is worth less than a dollar received in the future
B. Money has the same value regardless of timing
C. A dollar received today can earn returns and is therefore worth more
than a future dollar
D. Inflation has no effect on money value
Correct Answer: C
The time value of money recognizes that funds available today can be
invested to generate returns, making present money more valuable than
equivalent future amounts.
6. An investment earns 8% annually for three years. The future value of a
$10,000 investment is closest to:
A. $12,597
B. $11,800
C. $10,800
D. $13,500
Correct Answer: A
The future value is calculated as $10,000 × (1.08)^3, which equals
approximately $12,597 due to compound growth.
7. Which statistical measure represents the average value of a dataset?
A. Median
B. Mean
C. Variance
D. Standard deviation
, Correct Answer: B
The mean is calculated by summing all observations and dividing by the
number of observations, making it the most common measure of central
tendency.
8. A probability distribution that assigns probabilities to all possible
outcomes of a discrete random variable is called:
A. Continuous distribution
B. Frequency distribution
C. Discrete probability distribution
D. Normal distribution
Correct Answer: C
A discrete probability distribution describes possible outcomes that are
countable and assigns a probability to each outcome.
9. Standard deviation is primarily used to measure:
A. Expected return
B. Investment liquidity
C. Dispersion or volatility of returns
D. Market capitalization
Correct Answer: C
Standard deviation measures how widely returns vary around their
average value and is commonly used as a measure of investment risk.
10. A normal distribution is characterized by:
A. Equal mean, median, and mode
B. Only positive outcomes
C. No variability
D. A completely random pattern
