CFA Practice Questions
Last updated: April 17, 2026
These sample questions are written by FinnQuiz for educational practice. They are not official CFA Institute questions. Use them to check whether you understand the idea behind the answer, not just whether you guessed the right option.
How to use this page
- Answer before reading the explanation.
- Write why the correct answer is correct.
- Write why one tempting wrong answer would be wrong.
- Add missed concepts to your weekly review list.
Question 1 - Ethics
An analyst receives a rumor from a client that a listed company will miss earnings. The analyst has not verified the information. What should the analyst do before using it in a recommendation?
Answer
Check whether the information is public and reliable before acting on it.
Why it works
A strong ethics process separates rumors from verified information. Candidates should ask whether the information is material, nonpublic, and supported by a reasonable basis.
Question 2 - Quantitative Methods
An investment grows from 1,000 to 1,120 and pays 30 in income during the holding period. What is the holding period return?
Answer
15 percent.
Why it works
The gain is 120 and income is 30. Total return is 150 divided by the beginning value of 1,000.
Question 3 - Financial Statement Analysis
A company has current assets of 600 and current liabilities of 300. What is the current ratio, and what does it mainly measure?
Answer
2.0, and it mainly measures short-term liquidity.
Why it works
Current ratio equals current assets divided by current liabilities. It helps review short-term payment capacity, but it does not prove profitability.
Question 4 - Equity Investments
A stock has expected next-year dividends of 2, a required return of 10 percent, and stable growth of 4 percent. Under the constant-growth dividend model, what is the estimated value?
Answer
33.33.
Why it works
Value equals D1 divided by required return minus growth: 2 / (0.10 - 0.04). The model depends heavily on stable growth assumptions.
Question 5 - Fixed Income
A bond pays an annual coupon of 50 and trades at 1,000. What is the current yield?
Answer
5 percent.
Why it works
Current yield equals annual coupon divided by bond price. It is quick, but it ignores reinvestment and any gain or loss at maturity.
Question 6 - Economics
If the nominal interest rate is 8% and expected inflation is 3%, what is the approximate real rate?
Answer
About 5 percent.
Why it works
A simple approximation is real rate ~= nominal rate - expected inflation. The exact Fisher relationship is multiplicative, but the approximation is often used for quick thinking.
Question 7 - Corporate Issuers
A project has a positive net present value (NPV). What does a positive NPV generally suggest?
Answer
The project is expected to add value relative to the required return.
Why it works
NPV compares the present value of expected cash inflows to the present value of cash outflows using a discount rate. Positive NPV suggests value creation (based on assumptions).
Question 8 - Derivatives
Why might an investor use a derivative contract like a forward or option?
Answer
To hedge risk, gain exposure, or express a view with defined terms.
Why it works
Derivatives are contracts whose value depends on an underlying asset or rate. They are commonly used to transfer risk, manage uncertainty, or create efficient exposure.
Question 9 - Alternative Investments
Why are alternative investments often described as less liquid than public stocks?
Answer
They can be harder to buy or sell quickly without a price discount.
Why it works
Many alternatives trade less frequently or have restrictions, so converting to cash can take time and may require accepting a lower price.
Question 10 - Portfolio Management
If two assets have low correlation, what is a common portfolio benefit?
Answer
Better diversification, which can reduce overall portfolio volatility.
Why it works
When assets do not move together, gains in one may offset losses in another. Diversification can improve the risk profile for a given expected return.
What to do after these questions
If a question felt easy, try explaining it in one sentence without the answer visible. If it felt hard, return to the related guide and rebuild the concept from the definition, formula, example, and common trap.
FAQ
How many questions should I do per day?
Consistency matters more than volume. Even 10 to 20 questions daily (with review) can build strong recall.
What if I keep missing the same topic?
Return to the guide and rebuild the concept from the definition and one example. Then re-try a similar question the next day. This loop is how understanding becomes automatic.
Exam prep disclaimer: FinnQuiz provides study support only and does not guarantee exam results. Always use official CFA Institute resources for exam rules, curriculum requirements, and candidate policies.