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Quizzes > Business & Finance > Finance & Economics

CFA Sample Questions Quiz: See If You Can Get Them All Right

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Difficulty: Moderate
2-5mins
Learning OutcomesCheat Sheet
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Ready to boost your CFA readiness? Take our free chartered financial analyst sample questions quiz to test your skills and confidence with real-style CFA exam practice questions. You'll tackle diverse CFA sample questions designed to mirror exam challenges and identify where to sharpen your approach. Already familiar with cfa financial statement analysis ? Or looking for a quick analytical skills test ? This CFA practice quiz is your one-stop resource. Whether you're aiming to reinforce fundamentals or push for top scores in the chartered financial analyst quiz, jump in now to challenge yourself and track your progress toward acing the CFA!

Which principle states that investors will demand higher expected returns for bearing higher risk?
Conservation principle
Opportunity cost principle
Risk - return tradeoff
Law of one price
The risk - return tradeoff principle holds that potential return rises with an increase in risk because investors require compensation for taking on additional risk. It is a foundational concept in portfolio theory and capital market expectations. For more detail, see CFA Institute on Risk - Return Tradeoff.
You invest $1,000 for one year at an annual rate of 5% compounded annually. What is the future value?
$1,050
$1,025
$1,005
$1,100
Future value under annual compounding is present value multiplied by (1 + rate). Here, $1,000 × (1 + 0.05) = $1,050. You can review time value of money calculations at Investopedia.
Which financial statement shows a company's cash inflows and outflows over a period?
Statement of cash flows
Balance sheet
Income statement
Statement of changes in equity
The statement of cash flows details cash inflows and outflows from operating, investing, and financing activities during a reporting period. It helps assess liquidity and cash management. More details are available at Cash Flow Statement CFA Institute.
What does the current ratio measure?
Profitability
Leverage
Efficiency
Liquidity
Current ratio equals current assets divided by current liabilities and indicates short-term liquidity. A ratio above 1 suggests the firm can cover its short-term obligations. For more, see Investopedia Current Ratio.
If a bond's coupon rate equals its yield to maturity, the bond will trade at:
A discount
Par
Zero
A premium
When coupon rate equals yield to maturity, bond price equals its face value (par). If yield is higher, price falls below par; if lower, price rises above par. Additional details at Khan Academy on Bonds.
Which of these is a yield measure based only on price and coupon, ignoring reinvestment?
Holding period return
Internal rate of return
Current yield
Yield to maturity
Current yield is annual coupon payment divided by current market price. It does not account for reinvestment of coupons or capital gains/losses at maturity. For more, refer to CFA Institute on Current Yield.
Which metric is used to evaluate an investment's risk relative to its return in a single number?
Standard deviation
Alpha
Beta
Sharpe ratio
The Sharpe ratio measures the excess return per unit of risk (standard deviation). It helps compare risk-adjusted performance across investments. See CFA Institute on Sharpe Ratio.
Which concept describes the reinvestment of interest on interest?
Compounding
Amortization
Simple interest
Discounting
Compounding means earning interest on both principal and previously earned interest. Over multiple periods, this increases the future value beyond simple interest. More at CFI Compound Interest.
In technical analysis, a 'head and shoulders' pattern is used to:
Predict volume trends
Signal continuation
Calculate moving averages
Identify reversal signals
The head and shoulders pattern is seen as a reversal indicator when it appears at market tops or bottoms. It consists of two shoulders and a head forming peaks. More on chart patterns at Investopedia.
Which theorem states that a firm's investment decision is separate from its owner's consumption preferences?
Fisher separation theorem
Arbitrage pricing theory
Modigliani - Miller theorem
Capital asset pricing model
The Fisher separation theorem posits that investment decisions should maximize value independently of investors' consumption preferences. It underlies the principle of value maximization in corporate finance. Read more at ScienceDirect.
Duration measures a bond's sensitivity to interest rate changes as:
Yield change per duration
Dollar price change per basis point
Percentage price change per unit yield
Coupon rate per price change
Duration approximates the percentage change in bond price for a 1% change in yield. It is a weighted average time to receive cash flows. The concept is detailed at CFA Institute Fixed Income Course.
Which expense is considered part of the operating expenses on the income statement?
Interest expense
Cost of goods sold
Dividend payments
Loan principal repayments
Cost of goods sold (COGS) is the direct cost attributed to goods sold by a company and is classified under operating expenses. Interest expense is a financing expense. For details, see Investopedia on COGS.
What is the primary purpose of a forward contract?
Standardize contract terms
Traded on an exchange
Hedge specific risk at maturity
Eliminate credit risk
A forward contract is a private agreement to buy or sell an asset at a specified future time at a price agreed upon today. It hedges specific exposures but carries counterparty risk. For more, see CFA Institute on Forwards.
The slope of the Security Market Line (SML) represents:
Market risk premium
Alpha
Beta
Risk-free rate
In the CAPM framework, the SML plots expected return versus beta; its slope equals the market risk premium (expected market return minus risk-free rate). It shows compensation per unit of systematic risk. See CFA Institute on CAPM.
Which macroeconomic indicator is most directly related to monetary policy?
Government spending
Fiscal deficit
Trade balance
Interest rate
Central banks use interest rates as a primary tool for monetary policy to influence inflation and economic growth. Changes in policy rates directly affect borrowing costs in the economy. More information at Federal Reserve Monetary Policy.
In regression analysis, R-squared indicates:
Forecast error
Slope of relationship
Strength of association
Significance of intercept
R-squared measures the proportion of the variance in the dependent variable explained by the independent variables. It shows the goodness of fit of the regression model. Learn more at Statistics by Jim.
Which type of ratio is EBIT divided by interest expense?
Current ratio
Times interest earned
Cash ratio
Debt ratio
The times interest earned ratio is EBIT divided by interest expense and measures a firm's ability to meet interest payments. A higher ratio indicates greater coverage of interest obligations. More at Investopedia.
Covered interest arbitrage is possible when:
Interest rate parity holds
Forward premium differs from interest rate differential
Spot and forward rates are equal
There is no transaction cost
Covered interest arbitrage exploits differences between forward premium and interest rate differential. When the forward rate does not reflect the interest rate differential, arbitrage profits arise. For more, see Investopedia.
Which inventory method results in the highest net income during rising prices?
FIFO
Specific identification
Average cost
LIFO
Under FIFO, the oldest (cheapest) costs are matched against current revenues when prices rise, resulting in lower cost of goods sold and higher net income. This contrasts with LIFO, which yields lower net income in inflationary environments. Read more at CFA Institute.
Which Greek measures the rate of change of an option's delta with respect to changes in the underlying asset price?
Rho
Vega
Gamma
Theta
Gamma is the second derivative of the option price with respect to the underlying asset price and measures the sensitivity of delta. A high gamma indicates delta will change rapidly as the underlying moves. Detailed explanation at Options Education Greek Values.
Z-spread is best described as:
Zero-volatility spread over the spot rate curve
Difference between repo and reverse repo rates
Spread over the Treasury yield curve
Option-adjusted spread
The Z-spread is the constant spread that, when added to each spot rate on the Treasury curve, discounts a bond's cash flows to its market price. It accounts for the entire yield curve rather than a single benchmark. More at Investopedia on Z-spread.
Under equity method accounting, how are an investor's share of the investee's profits recognized?
Increasing the investment account
As a dividend income
Deferred until sale
Expensed in the income statement
Under the equity method, the investor recognizes its share of the investee's net income by increasing the carrying value of the investment on the balance sheet. Dividends received reduce the investment account. For more, see CFA Institute Equity Method.
When pricing European options on dividend-paying stocks, the underlying forward price used in Black - Scholes is adjusted by:
Using expected dividend yield
Decreasing spot price by PV of dividends
Increasing spot price by PV of dividends
Ignoring dividends
For dividend-paying stocks, the present value of dividends to be paid during the option's life is subtracted from the spot price to derive the forward price. This ensures the model accounts for cash distributions. See OptionsPricing Black - Scholes Adjustments.
A bond portfolio is immunized against interest rate risk if duration equals:
Portfolio convexity
Modified duration
Macaulay duration
Investment horizon
Immunization requires that the portfolio's duration matches the investor's investment horizon so that price risk and reinvestment risk offset. Macaulay duration is often used as the matching metric. More at CFA Institute Immunization.
Variance - covariance matrix is required primarily to calculate:
Beta of an asset
Portfolio variance
Portfolio expected return
Sharpe ratio
The variance - covariance matrix contains variances on the diagonal and covariances off-diagonal, enabling calculation of the overall portfolio variance. It captures how asset returns move together. For more, see Investopedia.
Monte Carlo simulation in portfolio management is used to:
Model a range of possible outcomes
Find exact analytical solutions
Eliminate all model risk
Forecast actual future returns
Monte Carlo simulation generates numerous random return paths based on defined distributions and correlations to model a range of potential outcomes. It is used for risk assessment and scenario analysis. Details at CFA Institute on Monte Carlo.
Which statistical test is nonparametric?
Z-test
Chi-square test
t-test
ANOVA
The chi-square test is a nonparametric test used for categorical data to assess how likely it is that an observed distribution is due to chance. Parametric tests like t-test assume underlying distributions for data. More at Statistics by Jim.
Agency costs arise when:
There is no information asymmetry
Shareholders manage the firm directly
Agents pursue personal goals over principals' goals
Principals and agents share the same interests
Agency costs stem from conflicts of interest between principals (owners) and agents (managers) when agents may act in their own interest rather than maximizing shareholder value. Monitoring and incentive alignment help mitigate these costs. Read more at CFA Institute on Agency Theory.
Bootstrapping the zero-coupon yield curve involves:
Ignoring coupon payments
Using only par yields
Applying forward rates directly
Solving for spot rates sequentially
Bootstrapping extracts spot rates from market prices of coupon-bearing bonds by solving sequentially for zero-coupon yields. Each spot rate is derived to match observed bond prices. More detail at Investopedia.
In the multi-factor arbitrage pricing theory, returns are modeled as a function of:
Single market factor
Multiple macroeconomic factors and sensitivities
Only firm size and value factors
Historical average returns
A multi-factor APT model expresses expected asset returns as a linear function of various macroeconomic factors, each with its own sensitivity or factor loading. It is more flexible than CAPM's single-factor approach. See CFA Institute on APT.
Collateralized debt obligations (CDOs) tranche structuring primarily manages:
Credit risk allocation among investors
Equity risk only
Currency risk
Operational risk
CDO tranches divide pooled debt instruments into slices with varying risk and return profiles, allocating credit risk among senior, mezzanine, and equity investors. This structure attracts investors with different risk appetites. For more, see Investopedia on CDOs.
Dynamic hedging of an option position involves continuously adjusting hedges to:
Eliminate gamma risk
Match portfolio duration
Neutralize delta as underlying price changes
Maintain zero vega exposure
Dynamic hedging focuses on adjusting the hedge ratio to keep delta neutral as the underlying asset price moves. This strategy reduces directional risk but may increase transaction costs and exposure to gamma. More at CFA Institute Dynamic Hedging.
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Study Outcomes

  1. Assess Your Exam Readiness -

    Evaluate your grasp of core topics by working through targeted chartered financial analyst sample questions and gauge your current CFA exam preparedness.

  2. Apply Key CFA Concepts -

    Practice solving real-world scenarios using CFA sample questions that reinforce fundamental theories in ethics, portfolio management, and financial analysis.

  3. Identify Strengths and Weaknesses -

    Analyze your quiz results to pinpoint areas of confidence and topics requiring more review, boosting study efficiency for the actual exam.

  4. Familiarize Yourself with Question Formats -

    Gain exposure to the style and structure of CFA exam practice questions, improving your comfort level with multiple-choice and vignette formats.

  5. Enhance Time Management Skills -

    Practice pacing strategies through this CFA practice quiz to improve speed and accuracy under timed conditions, essential for exam day success.

Cheat Sheet

  1. Time Value of Money (TVM) -

    Master the PV and FV formulas (FV = PV × (1 + r)n; PV = FV ÷ (1 + r)n) to tackle chartered financial analyst sample questions with confidence. A helpful mnemonic is "A stitch in time saves nine" to remind you that early investment growth compounds significantly. You'll see these equations repeatedly in CFA exam practice questions, so practice on a financial calculator.

  2. DuPont ROE Decomposition -

    Break down Return on Equity into Profit Margin × Asset Turnover × Financial Leverage to analyze firms like a pro. For example, ROE = (Net Income ÷ Sales) × (Sales ÷ Assets) × (Assets ÷ Equity). This trifecta appears in many CFA sample questions, so use DuPont analysis in your next CFA practice quiz to reinforce the link between operations and shareholder returns.

  3. Bond Duration and Convexity -

    Understand Macaulay and Modified duration as measures of a bond's price sensitivity to yield changes: Modified Duration ≈ Macaulay Duration ÷ (1 + y). Convexity adjustment further refines your estimate under larger yield shifts. These tools are featured in chartered financial analyst sample questions on fixed income, so test yourself in a CFA practice quiz to lock in mastery.

  4. CAPM and Systematic Risk (β) -

    Learn the Capital Asset Pricing Model: E(Ri) = Rf + βi×(E(Rm) − Rf) to price risky assets. β measures an asset's sensitivity to market movements, so a higher beta implies greater return volatility. You'll encounter CAPM in CFA exam practice questions, so apply it in a few chartered financial analyst quiz problems to build confidence.

  5. Option Valuation and Put-Call Parity -

    Memorize Put-Call Parity: C − P = S − K·e−rT to link European call and put prices. This relationship is foundational for derivatives pricing and risk management. Tackle related problems in your CFA sample questions and CFA practice quiz to ensure you can price options under exam conditions.

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