Preparing for the actual CFA® exam is no small feat. The curriculum spans a vast range of financial concepts, from time value of money and marginal cost analysis to ethical and professional standards, portfolio construction, and valuation techniques. Many candidates underestimate just how much information they’re expected to retain and apply under pressure.
But keep in mind, practice isn’t just a supplement; it’s the backbone of an effective study strategy, along with the help of a CFA® exam prep course.
In this guide, I’ve written ten multiple-choice questions, two item sets, and one essay set, all to reflect the setup of each level of the exam (Levels I, II, and III, respectively), to help you study key subjects and pass the CFA®.
Key Takeaways
- Practice Questions: Essential for mastering CFA® concepts and applying them under real exam conditions.
- Mock Exams: Help build test-day endurance and get you familiar with the CFA® Institute’s question style and pacing.
- Curriculum Coverage: Focus strategically on all key areas—ethics, financial analysis, portfolio management, and valuation.
- Answer Explanations: Reviewing detailed solutions strengthens reasoning skills and helps you recognize and avoid common traps.
- Study Strategy: Combining structured study with realistic practice gives you the best possible chance of success on exam day.
What to Study: Key Topics Across the Curriculum
The CFA® Program covers ten topic areas, each weighted differently depending on the level. It’s essential to focus your study time strategically.
For example, in Economics, candidates may encounter scenarios involving rising commodity prices, international trade, or macroeconomic policy responses. In Financial Reporting & Analysis, you should be prepared to calculate and interpret ratios such as the debt-to-equity ratio, or analyze the impact of cash dividends on shareholders’ equity.
When you move into equity investments, your ability to estimate intrinsic value using discounted cash flow models becomes crucial. You’ll also need to understand transaction costs and market microstructure, which can affect portfolio performance. Corporate Finance topics like capital structure decisions and cost of capital calculations frequently appear, alongside Quantitative Methods problems dealing with future value, probability, and hypothesis testing.
Why Realistic Practice is Essential
A high-quality CFA® test bank helps bridge the gap between passive reading and active application. Practicing with questions that mirror exam format improves retention and builds intuition. More importantly, reviewing detailed answer explanations teaches you how to identify traps, justify correct responses, and avoid common mistakes. This approach is far more effective than rote memorization.
Additionally, exposure to a wide variety of topics — from ethics scenarios to complex valuation problems — trains you to switch gears quickly, which is a key skill on exam day. The CFA® Institute doesn’t just test what you know; it tests how well you can apply that knowledge under time pressure.
Multiple Choice Section (10 Questions)
Each question has three answer choices, with one correct answer indicated below.
1. Ethical & Professional Standards
An analyst learns material nonpublic information about a company’s earnings. According to the CFA® Institute Code and Standards, what is the most appropriate action?
A. Trade on the information as long as it benefits clients.
B. Do nothing until the information becomes public.
C. Share the information with colleagues but not clients.
Answer: B
2. Quantitative Methods
A portfolio earns a nominal annual return of 8% and inflation is 3%. What is the real rate of return?
A. 4.85%
B. 5.00%
C. 5.15%
Answer: A
3. Economics
An economy is currently below potential GDP. The central bank lowers interest rates to stimulate spending. This is an example of:
A. Contractionary monetary policy
B. Expansionary monetary policy
C. Fiscal stimulus
Answer: B
4. Financial Reporting & Analysis
Which of the following is most likely to increase a company’s net profit margin?
A. An increase in COGS
B. A decrease in operating expenses
C. An increase in interest expense
Answer: B
5. Corporate Finance
The primary goal of capital budgeting is to:
A. Maximize revenue
B. Minimize costs
C. Maximize shareholder wealth
Answer: C
6. Equity
Which of the following is least likely to be a characteristic of growth stocks?
A. High P/E ratios
B. High dividend yields
C. Low book-to-market ratios
Answer: B
7. Fixed Income
Which bond will be most sensitive to changes in interest rates?
A. A 10-year zero-coupon bond
B. A 10-year 5% coupon bond
C. A 5-year zero-coupon bond
Answer: A
8. Derivatives
A forward contract has a zero value at initiation because:
A. The notional amount is zero.
B. The contract is marked to market daily.
C. The forward price is set to make the initial value zero.
Answer: C
9. Alternative Investments
A key advantage of private equity relative to public equity is:
A. Higher liquidity
B. Greater regulatory transparency
C. Greater potential for operational improvements
Answer: C
10. Portfolio Management & Wealth Planning
A risk-averse investor would most likely prefer a portfolio with:
A. Higher return, higher risk
B. Lower return, lower risk
C. Higher return regardless of risk
Answer: B
Item Set Section (2 Vignettes × 4 Questions Each)
Vignette 1 – Quantitative Methods / Portfolio Management
Olivia Chang, CFA®, is evaluating the risk-return characteristics of two portfolios for her client. Portfolio A has an expected return of 10% and a standard deviation of 15%. Portfolio B has an expected return of 8% and a standard deviation of 10%. The risk-free rate is 3%.
She also evaluates the correlation between the portfolios, which is 0.4. The client has a moderate risk tolerance and is particularly interested in Sharpe ratios and diversification benefits.
Olivia considers creating a 50/50 combination of Portfolios A and B.
Q1. The Sharpe ratio of Portfolio A is closest to:
A. 0.47
B. 0.53
C. 0.58
Answer: A
Q2. The variance of the combined portfolio is most likely to be:
A. Lower than the average of individual variances
B. Higher than Portfolio A alone
C. Equal to the weighted average of variances
Answer: A
Q3. The expected return of the 50/50 combination portfolio is:
A. 8%
B. 9%
C. 9.5%
Answer: B
Q4. Given the client’s moderate risk tolerance and interest in Sharpe ratios, which portfolio is most appropriate?
A. Portfolio A
B. Portfolio B
C. 50/50 Combination
Answer: C
Vignette 2 – Ethics / Corporate Finance / FRA
Raj Patel, CFA®, is an analyst at Norwood Advisors. He covers a small-cap company, Pine Grove Ltd. Raj recently learned from a company executive, during a private lunch, that Pine Grove will announce a major acquisition next week that will significantly increase revenues. Raj immediately shares this information with his portfolio manager, who places a large buy order.
Separately, Raj is evaluating Pine Grove’s financials. The firm uses LIFO for inventory. In the current inflationary environment, LIFO has resulted in lower reported income compared to FIFO. Raj is also evaluating a capital budgeting project with an NPV of $1.5 million and an IRR of 11%, while the company’s WACC is 9%.
Q1. Raj’s actions regarding the acquisition information are most likely a violation of:
A. Standard II(A) – Material Nonpublic Information
B. Standard III(B) – Fair Dealing
C. Standard VI(A) – Disclosure of Conflicts
Answer: A
Q2. If Pine Grove switched from LIFO to FIFO in an inflationary period, the reported net income would:
A. Increase
B. Decrease
C. Remain unchanged
Answer: A
Q3. Which capital budgeting decision is most appropriate?
A. Reject the project because IRR < WACC
B. Accept the project because NPV > 0
C. Reject because IRR = WACC
Answer: B
Q4. Raj should most appropriately:
A. Refrain from acting until the information is public
B. Trade but disclose after
C. Inform other clients privately
Answer: A
Essay Set (Constructed Response)
Scenario – Portfolio Management & Wealth Planning
Helena Ortega, CFA®, manages investments for the Westmore Foundation, a charitable organization with a long-term investment horizon. The foundation’s IPS specifies a moderate risk tolerance, an inflation + 4% total return objective, and liquidity needs of 2% per year for grant distributions. The current strategic asset allocation is 70% equities, 25% fixed income, and 5% alternatives.
Helena is considering three adjustments:
- Increasing equities to 80% to meet the return target.
- Allocating 10% to private equity (reducing fixed income) to enhance long-term growth.
- Implementing an active currency overlay to hedge foreign equity exposure.
Additionally, Helena notes the foundation recently received a $10 million donation, which must be allocated in line with the IPS.
Essay Questions
1. Evaluate whether increasing the equity allocation to 80% is appropriate, given the foundation’s objectives and constraints.
(Provide two points: one supporting, one against.)
2. Determine which of the three proposed adjustments (1, 2, or 3) best aligns with the foundation’s long-term growth objective and justify your choice.
(Provide one recommendation and one justification.)
3. Recommend an asset allocation for the $10 million donation consistent with the IPS. Round allocations to the nearest $1 million.
Sample Essay Responses
- Supporting: Increasing equities may help achieve the return target of inflation + 4%, as equities historically provide higher returns than fixed income.
Against: Raising equities to 80% may exceed the foundation’s moderate risk tolerance, increasing portfolio volatility and potential drawdowns.
- The private equity allocation (Option 2) best aligns with long-term growth objectives. Private equity offers illiquidity premia and return enhancement over time, which suits the foundation’s long horizon. Currency overlays (Option 3) are tactical risk management tools, not growth drivers.
- A $10 million allocation consistent with the current SAA (70/25/5) would be:
- $7 million to equities
- $2.5 million to fixed income
- $0.5 million to alternatives
This maintains strategic discipline and aligns with the IPS.
CFA® Practice Questions Summary
| Section | Questions | Points / Focus |
|---|---|---|
| Multiple Choice | 10 | Breadth across all curriculum topics |
| Item Set 1 | 4 | Quant Methods & Portfolio |
| Item Set 2 | 4 | Ethics, FRA, Corporate Finance |
| Essay Set | 3 items | Portfolio Management & Wealth Planning |
Final Thoughts
Mastering the CFA® curriculum isn’t just about logging study hours; it’s about practicing smart. Use realistic question sets, mock exams, and essay-style responses to deepen your understanding and build confidence. By focusing on key concepts like valuation, financial analysis, and ethical decision-making, and reviewing every question with care, you’ll steadily close the gap between preparation and performance.
Ultimately, success on exam day depends not only on what you’ve studied but also on how well you’ve practiced. Integrating high-quality practice questions and explanations into your study plan is one of the most effective ways to ensure you’re ready to excel.
FAQs
The CFA® exam includes multiple-choice, item set (vignette), and constructed response (essay) questions. They test applied knowledge rather than simple memorization, often requiring multi-step calculations or ethical judgments.
The CFA® curriculum spans ten core areas, including Ethics, Quantitative Methods, Economics, Financial Reporting & Analysis, Corporate Finance, Equity, Fixed Income, Derivatives, Alternative Investments, Portfolio Management, and Wealth Planning.
The CFA® Institute does not publish an official minimum passing score. Historically, candidates generally need to answer around 65–70% of questions correctly to be in the passing range, but this can vary by exam window.
Use a structured study plan that combines reading the curriculum, watching lectures if needed, solving hundreds of practice questions, and taking multiple mock exams. Focus on weak areas, review explanations carefully, and replicate test-day conditions.
Ideally, begin incorporating practice questions early in your study timeline — not just in the final weeks. Solving questions alongside reading helps reinforce concepts and improves long-term retention, making final review far more efficient.
