CFA LEVEL 1 EXAM QUESTIONS
WITH CORRECT ANSWERS 100%
2024
What are the 4 types of measurement scales? - CORRECT ANSWERS-1. Nominal
Scales
2. Ordinal Scales (Assigned to a category)
3. Interval Scales (Relative ranking)
4. Ratio Scales (Equal differences between scale values)
NOIR
When do we use geometric and arithmetic means to analyze investment returns? -
CORRECT ANSWERS-Arithmetic Mean: To estimate next year's return
Geometric Mean: Measure of past performance
What are the 3 different types of probabilities? - CORRECT ANSWERS-1. Empirical
Probability (Past data)
2. Priori Probability (Formal reasoning)
3. Subjective Probability (Use of personal judgement)
What is the difference between time-series data and cross-sectional data? - CORRECT
ANSWERS-Time-Series: Data taken over a period of time
Cross-Sectional: Data taken at a single point in time
What are the 3 desirable properties of an estimator? - CORRECT ANSWERS-1.
Unbiased (Expected value of estimator is equal to the parameter)
2. Efficient (Variance of its sampling distribution is small)
3. Consistent (Accuracy of parameter estimate increases as sample size increases)
What are the steps of Hypothesis Testing? - CORRECT ANSWERS-1. State the
hypothesis
2. Select the appropriate test statistic
3. Specify the level of significance
4. State the decision rule regarding the hypothesis
5. Collect the sample and calculate the sample statistics
6. Make a decision regarding the hypothesis
7. Make a decision based on the results of the test
What is a Type 1 and Type 2 Error? - CORRECT ANSWERS-Type I: Rejection of null
when it is actually true
, Type II: Failure to reject null when it is actually false
What are the 3 reasons why statistical significance does not imply economic
significance? - CORRECT ANSWERS-1. Transaction Costs
2. Taxes
3. Risk
What is the key assumption of technical analysis? - CORRECT ANSWERS-Market
prices reflect both rational and irrational investor behavior
What are the 4 different types of Oscillators? - CORRECT ANSWERS-1. Rate of
Change Oscillator (100x the difference between the latest closing price and the closing
price n periods earlier)
2. Relative Strength Index (Ratio of total price increases to price decreases)
3. Moving Average Convergence/Divergence
4. Stochastic Oscillator (Latest closing price and highest and lowest prices reached in a
period)
What are the different types of auctions? - CORRECT ANSWERS-1. English Auction
(Ascending Price Auction)
2. Vickrey Auction (Second Price Sealed Bid Auction)
3. Dutch Auction (Descending Price Auction)
What are the 3 rules of indifference curves? - CORRECT ANSWERS-1. Slope
downward
2. Convex towards the origin
3. Curves cannot cross
Distinguish between Normal, Inferior, Giffen and Veblen Goods? - CORRECT
ANSWERS-Normal: Positive income effect
Inferior: Income effect is negative
Giffen: Negative income effect outweighs positive substitution effect
Veblen: Higher price makes the good more desirable
What are the 4 models of oligopoly? - CORRECT ANSWERS-1. Kinked Demand Curve
Model (Only a decrease in price will be followed by competitors)
2. Cournot Duopoly Model
3. Nash Equilibrium Model
4. Stackelberg Dominant Firm Model
What is necessary for price discrimination to work? - CORRECT ANSWERS-1. Face a
downward-sloping demand curve
2. Have at least two identifiable groups of customers with different elasticities
3. Be able to prevent reselling
WITH CORRECT ANSWERS 100%
2024
What are the 4 types of measurement scales? - CORRECT ANSWERS-1. Nominal
Scales
2. Ordinal Scales (Assigned to a category)
3. Interval Scales (Relative ranking)
4. Ratio Scales (Equal differences between scale values)
NOIR
When do we use geometric and arithmetic means to analyze investment returns? -
CORRECT ANSWERS-Arithmetic Mean: To estimate next year's return
Geometric Mean: Measure of past performance
What are the 3 different types of probabilities? - CORRECT ANSWERS-1. Empirical
Probability (Past data)
2. Priori Probability (Formal reasoning)
3. Subjective Probability (Use of personal judgement)
What is the difference between time-series data and cross-sectional data? - CORRECT
ANSWERS-Time-Series: Data taken over a period of time
Cross-Sectional: Data taken at a single point in time
What are the 3 desirable properties of an estimator? - CORRECT ANSWERS-1.
Unbiased (Expected value of estimator is equal to the parameter)
2. Efficient (Variance of its sampling distribution is small)
3. Consistent (Accuracy of parameter estimate increases as sample size increases)
What are the steps of Hypothesis Testing? - CORRECT ANSWERS-1. State the
hypothesis
2. Select the appropriate test statistic
3. Specify the level of significance
4. State the decision rule regarding the hypothesis
5. Collect the sample and calculate the sample statistics
6. Make a decision regarding the hypothesis
7. Make a decision based on the results of the test
What is a Type 1 and Type 2 Error? - CORRECT ANSWERS-Type I: Rejection of null
when it is actually true
, Type II: Failure to reject null when it is actually false
What are the 3 reasons why statistical significance does not imply economic
significance? - CORRECT ANSWERS-1. Transaction Costs
2. Taxes
3. Risk
What is the key assumption of technical analysis? - CORRECT ANSWERS-Market
prices reflect both rational and irrational investor behavior
What are the 4 different types of Oscillators? - CORRECT ANSWERS-1. Rate of
Change Oscillator (100x the difference between the latest closing price and the closing
price n periods earlier)
2. Relative Strength Index (Ratio of total price increases to price decreases)
3. Moving Average Convergence/Divergence
4. Stochastic Oscillator (Latest closing price and highest and lowest prices reached in a
period)
What are the different types of auctions? - CORRECT ANSWERS-1. English Auction
(Ascending Price Auction)
2. Vickrey Auction (Second Price Sealed Bid Auction)
3. Dutch Auction (Descending Price Auction)
What are the 3 rules of indifference curves? - CORRECT ANSWERS-1. Slope
downward
2. Convex towards the origin
3. Curves cannot cross
Distinguish between Normal, Inferior, Giffen and Veblen Goods? - CORRECT
ANSWERS-Normal: Positive income effect
Inferior: Income effect is negative
Giffen: Negative income effect outweighs positive substitution effect
Veblen: Higher price makes the good more desirable
What are the 4 models of oligopoly? - CORRECT ANSWERS-1. Kinked Demand Curve
Model (Only a decrease in price will be followed by competitors)
2. Cournot Duopoly Model
3. Nash Equilibrium Model
4. Stackelberg Dominant Firm Model
What is necessary for price discrimination to work? - CORRECT ANSWERS-1. Face a
downward-sloping demand curve
2. Have at least two identifiable groups of customers with different elasticities
3. Be able to prevent reselling
