Level I CFA Exam example questions and tips

Here are a few example Level I CFA exam questions along with answers and some tips for taking the exam:

Example Question 1: Ethical and Professional Standards

Which of the following CFA Institute Standards of Professional Conduct relates to the “Priority of Transactions” for clients?

A) Fair Dealing B) Suitability C) Preservation of Confidentiality D) Diligence and Reasonable Basis

Answer 1: A) Fair Dealing

Explanation: The “Priority of Transactions” for clients is addressed under the “Fair Dealing” standard. This standard requires CFA charterholders to place the interests of their clients above their own and to deal fairly and objectively with all clients.

Example Question 2: Quantitative Methods

An investor is considering two investment options. Option A has an expected return of 8% and a standard deviation of 12%. Option B has an expected return of 10% and a standard deviation of 15%. If the investor is risk-averse and wants to maximize the Sharpe ratio, which option should they choose?

A) Option A B) Option B C) Either Option A or Option B D) Neither Option A nor Option B

Answer 2: B) Option B

Explanation: The Sharpe ratio measures the risk-adjusted return of an investment. In this case, the investor should choose the option with the higher Sharpe ratio. Option B has a higher expected return and a higher standard deviation, resulting in a higher Sharpe ratio.

Tips for Taking the Exam:

  1. Understand the Weighting: Pay attention to the weightings of topics in the exam. The CFA Institute provides information on the approximate weight of each topic area in the exam. Focus your study efforts accordingly.
  2. Practice with Mock Exams: Take advantage of mock exams and practice questions. The CFA Institute offers official mock exams that closely resemble the actual exam format. Practice questions help you get familiar with the question types and pace.
  3. Read the Questions Carefully: Carefully read each question to understand what is being asked. Be mindful of terms like “not,” “except,” or “most likely” as they can change the meaning of the question.
  4. Time Management: Keep track of time during the exam. The Level I exam is time-constrained, so allocate your time wisely. Don’t spend too long on one question; move on and come back to it if needed.
  5. Flag Questions: If you’re unsure about an answer, flag the question and come back to it later. You might find that later questions provide hints for earlier ones.
  6. Answer All Questions: There is no penalty for guessing, so make sure to answer all questions, even if you’re uncertain. An unanswered question has no chance of being correct.
  7. Review Ethics: The Ethics section is a crucial part of the exam. Review the CFA Institute’s Code of Ethics and Standards of Professional Conduct thoroughly, as it can be a differentiator in the scoring.
  8. Stay Calm: The Level I CFA exam is a challenging test, but staying calm and composed during the exam is crucial. Manage your time and approach each question systematically.

Remember that passing the CFA Level I exam requires diligent preparation and a strong understanding of the curriculum. It’s essential to start your studies well in advance and use the recommended CFA Institute materials and practice exams to increase your chances of success.

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