[CFA] Chartered Financial Analyst Practice Exam
1. Which of the following is NOT one of the six components of the CFA Institute Code of
Ethics and Standards of Professional Conduct?
A) Professionalism
B) Integrity of Capital Markets
C) Duty to Clients
D) Marketing Strategies
Answer: D) Marketing Strategies
Explanation: The six components are Professionalism, Integrity of Capital Markets, Duty to
Clients, Duty to Employers, Investment Analysis and Recommendations, and Conflicts of
Interest. Marketing Strategies is not one of them.
2. According to the CFA Code of Ethics, members must place the interests of clients above
their own. This principle is primarily associated with which Standard of Professional
Conduct?
A) Standard I(A) – Knowledge of the Law
B) Standard II(A) – Material Nonpublic Information
C) Standard III(A) – Loyalty, Prudence, and Care
D) Standard IV(A) – Duties to Employers
Answer: C) Standard III(A) – Loyalty, Prudence, and Care
Explanation: Standard III(A) emphasizes placing the client's interests before the member's own,
ensuring loyalty, prudence, and care in managing client affairs.
Global Investment Performance Standards (GIPS)
3. What is the primary objective of the Global Investment Performance Standards (GIPS)?
A) To regulate investment advisors
B) To ensure consistent and comparable investment performance reporting
C) To provide tax guidelines for investment firms
D) To set ethical standards for client interactions
Answer: B) To ensure consistent and comparable investment performance reporting
,Explanation: GIPS aims to create a standardized framework for investment firms to report their
performance, enhancing transparency and comparability across the industry.
4. Under GIPS, which of the following is NOT a requirement for compliance?
A) Presenting all actual, fee-paying, discretionary portfolios
B) Including all fee-paying, discretionary portfolios in the composite
C) Verifying compliance by an independent third party
D) Reporting performance using internal benchmarks only
Answer: D) Reporting performance using internal benchmarks only
Explanation: GIPS requires the use of appropriate, industry-recognized benchmarks, not just
internal ones, to ensure performance comparisons are meaningful.
Application of the Code and Standards
5. An analyst receives a gift from a client. According to CFA Standards, the analyst should:
A) Accept the gift and report it to the employer
B) Decline the gift
C) Accept the gift if its value is below $100
D) Accept the gift and disclose it to all clients
Answer: B) Decline the gift
Explanation: CFA Standards typically require members to avoid situations that could create
conflicts of interest, including accepting gifts that may influence professional judgment.
6. A CFA member discovers a violation of the Code and Standards by a colleague. The
member should:
A) Ignore it if it's a minor violation
B) Report it through appropriate channels
C) Confront the colleague privately
D) Publicly disclose the violation
Answer: B) Report it through appropriate channels
,Explanation: Members are obligated to report violations of the Code and Standards to maintain
the integrity of the profession.
Ethical Decision-Making Frameworks
7. Which of the following is the first step in most ethical decision-making frameworks?
A) Identifying alternatives
B) Evaluating consequences
C) Recognizing an ethical issue
D) Making a decision
Answer: C) Recognizing an ethical issue
Explanation: The initial step involves identifying that an ethical issue exists before proceeding
with analysis and decision-making.
8. In the context of ethical decision-making, what does the 'utilitarian approach' primarily
focus on?
A) Upholding personal virtues
B) Adhering strictly to rules
C) Maximizing overall happiness or utility
D) Respecting individual rights
Answer: C) Maximizing overall happiness or utility
Explanation: The utilitarian approach seeks the greatest good for the greatest number, focusing
on outcomes that maximize overall benefits.
Quantitative Methods
Time Value of Money
9. What is the future value of $1,000 invested today at an annual interest rate of 5%
compounded annually for 3 years?
A) $1,157.63
B) $1,150.00
, C) $1,215.51
D) $1,300.00
Answer: A) $1,157.63
Explanation: Future Value = PV × (1 + r)^n = $1,000 × (1.05)^3 ≈ $1,157.63
10. If you need $10,000 in 5 years and the annual discount rate is 6%, what is the present
value?
A) $7,472.58
B) $7,000.00
C) $8,000.00
D) $8,500.00
Answer: A) $7,472.58
Explanation: Present Value = FV / (1 + r)^n = $10,000 / (1.06)^5 ≈ $7,472.58
Statistical Concepts and Market Returns
11. Which measure of central tendency is most affected by extreme values in a data set?
A) Mean
B) Median
C) Mode
D) Midrange
Answer: A) Mean
Explanation: The mean is sensitive to extreme values (outliers), whereas the median and mode
are more robust.
12. If the standard deviation of a portfolio is 15%, what is the variance?
A) 0.0225
B) 0.15
C) 2.25
D) 0.225
1. Which of the following is NOT one of the six components of the CFA Institute Code of
Ethics and Standards of Professional Conduct?
A) Professionalism
B) Integrity of Capital Markets
C) Duty to Clients
D) Marketing Strategies
Answer: D) Marketing Strategies
Explanation: The six components are Professionalism, Integrity of Capital Markets, Duty to
Clients, Duty to Employers, Investment Analysis and Recommendations, and Conflicts of
Interest. Marketing Strategies is not one of them.
2. According to the CFA Code of Ethics, members must place the interests of clients above
their own. This principle is primarily associated with which Standard of Professional
Conduct?
A) Standard I(A) – Knowledge of the Law
B) Standard II(A) – Material Nonpublic Information
C) Standard III(A) – Loyalty, Prudence, and Care
D) Standard IV(A) – Duties to Employers
Answer: C) Standard III(A) – Loyalty, Prudence, and Care
Explanation: Standard III(A) emphasizes placing the client's interests before the member's own,
ensuring loyalty, prudence, and care in managing client affairs.
Global Investment Performance Standards (GIPS)
3. What is the primary objective of the Global Investment Performance Standards (GIPS)?
A) To regulate investment advisors
B) To ensure consistent and comparable investment performance reporting
C) To provide tax guidelines for investment firms
D) To set ethical standards for client interactions
Answer: B) To ensure consistent and comparable investment performance reporting
,Explanation: GIPS aims to create a standardized framework for investment firms to report their
performance, enhancing transparency and comparability across the industry.
4. Under GIPS, which of the following is NOT a requirement for compliance?
A) Presenting all actual, fee-paying, discretionary portfolios
B) Including all fee-paying, discretionary portfolios in the composite
C) Verifying compliance by an independent third party
D) Reporting performance using internal benchmarks only
Answer: D) Reporting performance using internal benchmarks only
Explanation: GIPS requires the use of appropriate, industry-recognized benchmarks, not just
internal ones, to ensure performance comparisons are meaningful.
Application of the Code and Standards
5. An analyst receives a gift from a client. According to CFA Standards, the analyst should:
A) Accept the gift and report it to the employer
B) Decline the gift
C) Accept the gift if its value is below $100
D) Accept the gift and disclose it to all clients
Answer: B) Decline the gift
Explanation: CFA Standards typically require members to avoid situations that could create
conflicts of interest, including accepting gifts that may influence professional judgment.
6. A CFA member discovers a violation of the Code and Standards by a colleague. The
member should:
A) Ignore it if it's a minor violation
B) Report it through appropriate channels
C) Confront the colleague privately
D) Publicly disclose the violation
Answer: B) Report it through appropriate channels
,Explanation: Members are obligated to report violations of the Code and Standards to maintain
the integrity of the profession.
Ethical Decision-Making Frameworks
7. Which of the following is the first step in most ethical decision-making frameworks?
A) Identifying alternatives
B) Evaluating consequences
C) Recognizing an ethical issue
D) Making a decision
Answer: C) Recognizing an ethical issue
Explanation: The initial step involves identifying that an ethical issue exists before proceeding
with analysis and decision-making.
8. In the context of ethical decision-making, what does the 'utilitarian approach' primarily
focus on?
A) Upholding personal virtues
B) Adhering strictly to rules
C) Maximizing overall happiness or utility
D) Respecting individual rights
Answer: C) Maximizing overall happiness or utility
Explanation: The utilitarian approach seeks the greatest good for the greatest number, focusing
on outcomes that maximize overall benefits.
Quantitative Methods
Time Value of Money
9. What is the future value of $1,000 invested today at an annual interest rate of 5%
compounded annually for 3 years?
A) $1,157.63
B) $1,150.00
, C) $1,215.51
D) $1,300.00
Answer: A) $1,157.63
Explanation: Future Value = PV × (1 + r)^n = $1,000 × (1.05)^3 ≈ $1,157.63
10. If you need $10,000 in 5 years and the annual discount rate is 6%, what is the present
value?
A) $7,472.58
B) $7,000.00
C) $8,000.00
D) $8,500.00
Answer: A) $7,472.58
Explanation: Present Value = FV / (1 + r)^n = $10,000 / (1.06)^5 ≈ $7,472.58
Statistical Concepts and Market Returns
11. Which measure of central tendency is most affected by extreme values in a data set?
A) Mean
B) Median
C) Mode
D) Midrange
Answer: A) Mean
Explanation: The mean is sensitive to extreme values (outliers), whereas the median and mode
are more robust.
12. If the standard deviation of a portfolio is 15%, what is the variance?
A) 0.0225
B) 0.15
C) 2.25
D) 0.225
