[NEW] CFA Program Level I

Detailed Exam Domain Coverage

To pass the CFA Level I exam, you need to understand exactly how the 180 questions are distributed. I have structured this practice question bank to mirror the actual computer-based testing environment, adhering to the official curriculum weights.

• Ethical & Professional Standards (20%): Code of Ethics, Professional Standards, and Global Investment Performance Standards (GIPS).

• Quantitative Methods (10%): Time Value of Money, Probability Concepts, and Hypothesis Testing.

• Economics (10%): Supply and Demand, Inflation and Deflation, Fiscal and Monetary Policy, and International Trade and Capital Flows.

• Financial Statement Analysis (15%): Income Statement Analysis, Balance Sheet Ratios, Cash Flow Statement, and Financial Ratio Interpretation.

• Corporate Issuers (10%): Corporate Governance, Capital Structure, Working Capital Management, and Leverage.

• Equity Investments (10%): Equity Market Structure, Industry Analysis, Security Analysis, and Basic Valuation Techniques.

• Fixed Income (10%): Bond Valuation, Yield Measures, Credit Analysis, and Term Structure of Interest Rates.

• Derivatives (5%): Forward Contracts, Futures Contracts, Options Basics, and Swaps Overview.

• Alternative Investments (5%): Real Estate, Private Equity, Hedge Funds, and Commodities.

• Portfolio Management & Wealth Planning (5%): Asset Allocation, Risk Management, Performance Measurement, and Wealth Planning Fundamentals.

Course Description

I built this comprehensive practice test suite to give you a realistic, rigorous testing experience before you sit for the actual CFA Program Level I exam. Candidates generally spend about 300 hours preparing for this milestone. Reading the curriculum is only the first step; applying that knowledge under timed conditions is what determines a passing score.

This question bank targets the most heavily tested concepts, specifically drilling into Ethics, Financial Statement Analysis, and Investment Tools. Rather than just giving you a final score, I have written detailed, step-by-step explanations for every single option. This ensures that you not only understand why the correct answer is right, but exactly why the other choices are traps.

Below is a preview of the type of questions and detailed breakdowns you will find inside.

Practice Questions Preview

Question 1: Ethical & Professional Standards Which of the following actions constitutes a violation of the CFA Institute Standard relating to Material Nonpublic Information?

• A: Trading on financial guidance discussed during a widely broadcasted public analyst call.

• B: Using the mosaic theory to piece together public and non-material nonpublic information to reach an investment conclusion.

• C: Acting on preliminary earnings data accidentally emailed to an analyst by a company’s CFO before the public press release.

• D: Refusing to execute a client’s trade in a specific stock after reading a highly speculative, anonymous blog post.

• E: Recommending a sector rotation based on an expert network interview that only covered general, well-known macroeconomic trends.

• F: Waiting a full 24 hours after an official company press release to execute trades for discretionary client accounts.

• Correct Answer: C

• Overall Explanation: The Standard regarding Material Nonpublic Information strictly prohibits members from trading or causing others to trade on information that is both material (would impact the stock price) and nonpublic (not disseminated to the broader market).

• Option Explanations:

  • A is incorrect because a publicly broadcasted call means the information is fully public.

  • B is incorrect because the mosaic theory is a legally and ethically permissible method of analysis under CFA Institute standards.

  • C is correct. The earnings data is highly material and, because it was accidentally emailed prior to the press release, it is definitively nonpublic. Trading on this violates the Standard.

  • D is incorrect. Speculative blog posts are not material nonpublic information.

  • E is incorrect. General industry trends do not constitute material nonpublic information.

  • F is incorrect. Waiting after a press release ensures the information has been fully absorbed by the public market, which is compliant.

Question 2: Financial Statement Analysis How is the payment of dividends to shareholders typically classified on the Statement of Cash Flows under US GAAP and IFRS?

• A: US GAAP: Operating activity; IFRS: Operating or Financing activity

• B: US GAAP: Financing activity; IFRS: Operating or Financing activity

• C: US GAAP: Financing activity; IFRS: Financing activity only

• D: US GAAP: Investing activity; IFRS: Financing activity

• E: US GAAP: Operating activity; IFRS: Investing activity

• F: US GAAP: Investing activity; IFRS: Operating activity

• Correct Answer: B

• Overall Explanation: Different accounting standards have different flexibility regarding cash flow classifications. US GAAP is rigid on certain line items, whereas IFRS often allows classification based on the nature of the entity.

• Option Explanations:

  • A is incorrect. US GAAP does not classify dividends paid as an operating activity.

  • B is correct. Under US GAAP, dividends paid must be classified as a financing activity. Under IFRS, a company has the flexibility to classify dividends paid as either an operating activity or a financing activity.

  • C is incorrect. IFRS provides flexibility; it does not strictly require financing classification for dividends paid.

  • D is incorrect. US GAAP classifies dividends paid as financing, not investing.

  • E is incorrect. It misstates both the US GAAP and IFRS rules.

  • F is incorrect. Dividends paid are never classified as an investing activity under either standard.

Question 3: Fixed Income Which of the following statements best describes the mathematical relationship between a bond’s price, its coupon rate, and its market yield?

• A: If the market yield is higher than the coupon rate, the bond trades at a premium.

• B: A bond’s price moves directly in tandem with changes in the market yield.

• C: If the coupon rate equals the market yield, the bond will trade at its par value.

• D: Longer-maturity bonds are generally less sensitive to market yield changes than shorter-maturity bonds.

• E: A bond trading at a discount will always have a coupon rate higher than the prevailing market yield.

• F: Floating rate bonds experience the highest price volatility when market interest rates fluctuate.

• Correct Answer: C

• Overall Explanation: Bond prices and market yields have an inverse relationship. The bond’s price adjusts so that its fixed coupon payments offer a return competitive with the current market yield.

• Option Explanations:

  • A is incorrect. If the market yield is higher than the coupon rate, the bond must trade at a discount to compensate the buyer for the lower coupon.

  • B is incorrect. Bond prices and yields have an inverse relationship, not a direct one.

  • C is correct. When a bond’s coupon rate perfectly matches the current market yield, investors require no price adjustment (discount or premium), so it trades exactly at par.

  • D is incorrect. Longer-maturity bonds are typically more sensitive to yield changes (higher duration) than shorter-maturity bonds.

  • E is incorrect. A bond trading at a discount has a coupon rate lower than the market yield.

  • F is incorrect. Floating rate bonds regularly reset their coupons to match current rates, resulting in very low price volatility compared to fixed-rate bonds.

• Welcome to the Mock Exam Practice Tests Academy to help you prepare for your CFA Program Level I Exam.

• You can retake the exams as many times as you want

• This is a huge original question bank

• You get support from me, your instructor, if you have questions

• Each question has a detailed explanation

• Mobile-compatible with the Udemy app

I hope that by now you’re convinced! And there are a lot more questions inside the course.

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