Free CFA® Level I practice questions

Pieter van der Berg, CFA, trades commodity futures for a proprietary trading firm. Shortly before a cocoa futures contract expires, he quietly buys up most of the cocoa that is eligible for delivery against the contract while also holding a large long futures position. Traders with short futures positions are forced to buy back their contracts from him at inflated prices. Did van der Berg violate the CFA Institute Standards of Professional Conduct?

Using 31 monthly returns for Stock X and 41 monthly returns for Stock Y, an analyst finds sample variances of 0.00330 for X and 0.00182 for Y. He tests H0: σX² = σY² versus Ha: σX² ≠ σY² at the 5% significance level, assuming independent, normally distributed returns. For 30 and 40 degrees of freedom, the upper 2.5% critical F-value is 1.94 and the upper 5% critical F-value is 1.74.

The analyst should most appropriately:

A corporate bond has a yield-to-maturity of 4.10% calculated on a 30/360 day-count basis. A government bond of the same maturity yields 3.55% on an actual/actual basis. Using the government equivalent yield of the corporate bond, the yield spread between the two bonds is closest to:

An analyst researching a mid-sized chemicals producer gathers a credit rating agency's report on the issuer and data downloaded from a paid financial data platform. These information sources are best classified as:

The investment committee of the Ngata Community Foundation has agreed on the maximum overall risk the endowment may bear and now wants to translate that decision into guidance for its portfolio managers.

The committee's next step is best described as:

Tanglewood Forest Trust owns 12,000 hectares of mature timberland. A cement producer offers to pay the trust annual fees for ten years in exchange for a promise not to harvest the trees, so that the producer can claim carbon offsets.

If the trust accepts, it most likely:

Harrowgate Capital Partners, the GP of a private equity fund, is entitled to 20% of aggregate fund profits, subject to a clawback provision. The fund invested USD 15 million in each of three companies. Company X was sold in Year 2 for USD 33 million, and Company Y was sold in Year 3 for USD 21 million; the GP accrued carried interest on each gain at the time of sale. In Year 4, Company Z was sold for only USD 5 million. The amount of previously accrued carried interest the GP must return under the clawback is closest to:

In jurisdictions such as the United States, a private limited company (for example, a limited liability company) differs from a public limited company (corporation) most likely because the private limited company:

Chiara Bellandi is the chief operating officer of Veltrona SpA and owns 0.2% of its shares. She charges the company for a private club membership and uses the corporate jet for family holidays. This conflict with shareholders is best described as:

An analyst covering a US-listed software company wants to track, as they occur, purchases and sales of the company's shares by its directors and officers. The SEC filing that is most useful for this purpose is:

Delacroix Home Goods reports under US GAAP and uses LIFO. Its cost of goods sold for the year was USD 18,600 million. The LIFO reserve was USD 1,150 million at the beginning of the year and USD 1,420 million at the end of the year.

If Delacroix had used FIFO, its cost of goods sold would have been closest to:

The CAD/USD exchange rate, quoted as CAD per one USD, is unchanged over a year in which US inflation is 4% and Canadian inflation is 1%. From a Canadian perspective, the most likely outcome is that the:

Parliament in Selgaria pressures the central bank to buy newly issued government bonds directly, so that the government can finance large deficits without raising taxes. The most likely consequence is:

Portfolio Alpha and Portfolio Beta will produce identical cash flows in every possible future state of the world. Alpha is priced at EUR 1,040 and Beta at EUR 1,025.

An arbitrageur would most likely:

The spot exchange rate is USD 1.1650 per EUR. The US dollar risk-free rate is 4.2% and the euro risk-free rate is 2.5%, both per year with continuous compounding.

The no-arbitrage nine-month forward exchange rate is closest to:

Professional Conduct staff believe that Hyun-woo Lee, CFA, violated the Code and Standards and propose a sanction. Lee rejects both the charges and the proposed sanction. What happens next?

The monthly returns on a hedge fund index have a known population standard deviation of 4.0%. From a random sample of 64 months, an analyst computes a mean monthly return of 1.2%. The standard normal critical values are 1.645 for 90% confidence and 1.96 for 95% confidence.

The 95% confidence interval for the population mean monthly return is closest to:

A 10-year zero-coupon bond is priced at a yield-to-maturity of 4.00% (annual compounding). The bond's annualized convexity is closest to:

A proposed portfolio for Soren Lykke has an expected annual return of 7.0% and a standard deviation of 10.0%. Returns are assumed to be normally distributed, and the one-tailed 5% critical value of the standard normal distribution is 1.645.

The annual return that the portfolio will fall below with 5% probability is closest to: