C FA I N S T I T U T E — L E V E L I
CFA Exam 4
Comprehensive Practice Questions with Detailed Rationales
CFA Level 1 — Exam 4 — 34 Practice Questions
Edition 1 · July 2026 · 34 Practice Questions
✓ Institution: CFA Institute — Chartered Financial Analyst Level 1 Examination
Table of Contents
1. Instructions for Use 2
2. Practice Questions with Answers & Rationales 2
,CFA Level 1 · CFA Institute Page 1
, CFA EXAM 4 INSTRUCTIONS & PRACTICE QUESTIONS
How to Use This Guide
Read each stem, choose your answer, then check the rationale directly below it. The correct
option is marked, and each wrong option is explained so you understand why it's wrong — not
just that it is. This guide contains 34 practice questions covering key content areas for the CFA
Level 1 Exam 4.
Category: CFA Level 1 — Exam 4
1 When working on a goals-based approach question, how can you determine which
portfolio to pick among a few?
A Whichever portfolio has the highest expected return.
B Whichever portfolio has the lowest standard deviation.
C Whichever portfolio has the highest expected return given your needed probability
of success.
D Whichever portfolio has the lowest probability of failure.
Why C is correct: In a goals-based approach to portfolio selection, the optimal portfolio is
the one that maximizes expected return while meeting the required probability of success
for achieving the client's goals. The focus is on achieving specific financial objectives with a
given level of confidence, rather than simply maximizing return or minimizing risk in
isolation.
A — Highest expected return alone does not consider the probability of achieving the goal.
B — Lowest standard deviation alone ignores return requirements and goal probability.
D — Lowest probability of failure is not the selection criterion; the focus is on maximizing
return given the required probability of success.
CFA Exam 4
Comprehensive Practice Questions with Detailed Rationales
CFA Level 1 — Exam 4 — 34 Practice Questions
Edition 1 · July 2026 · 34 Practice Questions
✓ Institution: CFA Institute — Chartered Financial Analyst Level 1 Examination
Table of Contents
1. Instructions for Use 2
2. Practice Questions with Answers & Rationales 2
,CFA Level 1 · CFA Institute Page 1
, CFA EXAM 4 INSTRUCTIONS & PRACTICE QUESTIONS
How to Use This Guide
Read each stem, choose your answer, then check the rationale directly below it. The correct
option is marked, and each wrong option is explained so you understand why it's wrong — not
just that it is. This guide contains 34 practice questions covering key content areas for the CFA
Level 1 Exam 4.
Category: CFA Level 1 — Exam 4
1 When working on a goals-based approach question, how can you determine which
portfolio to pick among a few?
A Whichever portfolio has the highest expected return.
B Whichever portfolio has the lowest standard deviation.
C Whichever portfolio has the highest expected return given your needed probability
of success.
D Whichever portfolio has the lowest probability of failure.
Why C is correct: In a goals-based approach to portfolio selection, the optimal portfolio is
the one that maximizes expected return while meeting the required probability of success
for achieving the client's goals. The focus is on achieving specific financial objectives with a
given level of confidence, rather than simply maximizing return or minimizing risk in
isolation.
A — Highest expected return alone does not consider the probability of achieving the goal.
B — Lowest standard deviation alone ignores return requirements and goal probability.
D — Lowest probability of failure is not the selection criterion; the focus is on maximizing
return given the required probability of success.
