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Free CFA practice questions: choose your level

Try 10 free CFA sample questions with explanations, choose Level 1, 2 or 3, and explore pathway practice. No account is needed for the public sample.

Start with the level you are preparing for. Level I checks standalone concepts, Level II puts decisions inside a vignette, and Level III adds written reasoning. The mixed sampler below lets you try those differences before choosing a dedicated set.

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If you are new to the program, start with Level I rather than judging yourself against advanced cases. If you are moving into Level II, practise finding the fact that changes the model or accounting treatment. If you are preparing for Level III, combine common-core work with the pathway you selected.

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Your 10-question sample

Ten selected examples from the level samples. Level labels identify their source; this is an orientation sampler, not an exam simulation. The dedicated pages contain the fuller sets.

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  1. Question 1 of 10Level I previewEthical and Professional StandardsMultiple choice

    An issuer invites an analyst to a luxury resort for a plant tour and offers to pay all travel and lodging costs. The analyst can inspect the plant using ordinary commercial travel. Which action is most appropriate?

    Answer and explanations

    The analyst should protect independence and objectivity when a reasonable alternative exists. Paying ordinary travel costs avoids a benefit that could influence, or appear to influence, the resulting research opinion.

    Review the tested method
    • A: Access offered to others does not remove the potential conflict.
    • B - correct: Ordinary firm-paid travel protects independence.
    • C: Accepting luxury lodging still creates the benefit.
  2. Question 2 of 10Level I previewQuantitative MethodsMultiple choice

    An investor buys a share for $40, receives a $1 dividend, and sells the share for $42. The holding-period return is closest to:

    Answer and explanations

    The total gain is the $2 price increase plus the $1 dividend, or $3. Dividing $3 by the $40 initial price gives a holding-period return of 7.5%.

    Review the tested method
    • A: 5% includes only the price gain and omits the dividend.
    • B - correct: The $3 total gain divided by $40 is 7.5%.
    • C: 10% overstates the $3 gain on a $40 investment.
  3. Question 3 of 10Level I previewEconomicsMultiple choice

    A binding price ceiling is set below the competitive equilibrium price. The most likely immediate market outcome is:

    Answer and explanations

    The lower controlled price raises quantity demanded and reduces quantity supplied relative to equilibrium. The gap between the two quantities is a shortage.

    Review the tested method
    • A - correct: At the lower binding price, demand exceeds supply.
    • B: A surplus would reverse the quantities in the stem.
    • C: A binding ceiling prevents trade at the original equilibrium price.
  4. Question 4 of 10Level I previewCorporate FinanceMultiple choice

    A company identifies an independent project with a positive net present value. Accepting the project is most likely to:

    Answer and explanations

    A positive NPV means the present value of expected cash inflows exceeds the required investment at the appropriate discount rate. Accepting the project should add that positive amount to firm value.

    Review the tested method
    • A - correct: Positive NPV adds value at the stated required return.
    • B: Zero NPV, not positive NPV, would imply no incremental value.
    • C: Negative NPV would reduce value.
  5. Question 5 of 10Level II previewFinancial Statement AnalysisMultiple choice

    Case facts

    Asteria Group reports under IFRS. At the beginning of the year, it paid $120 million for 30% of Northfield Ltd. Asteria can exercise significant influence over Northfield. During the year, Northfield earned $30 million and paid $10 million in dividends.

    Asteria also acquired 80% of Lumen Co. for $480 million. At acquisition, the fair value of Lumen's identifiable net assets was $500 million and the fair value of the non-controlling interest was $110 million.

    Asteria's defined-benefit plan reported current service cost of $5 million, net interest expense of $2 million, and a $3 million remeasurement gain. A trading debt security bought for $100 million had a year-end fair value of $106 million.

    The year-end carrying amount of Asteria's investment in Northfield is closest to:

    Answer and explanations

    Asteria owns 30%, has significant influence, and Northfield reports $30 million of income and $10 million of dividends. Significant influence supports the equity method. Asteria recognizes 30% of Northfield's $30 million income, or $9 million, and reduces the investment for 30% of the $10 million dividend, or $3 million. The ending carrying amount is $120 million plus $9 million minus $3 million, which equals $126 million.

    • A: $120m ignores the net share of earnings less dividends.
    • B - correct: $120m + $9m - $3m = $126m.
    • C: $129m includes earnings but ignores dividends.
  6. Question 6 of 10Level II previewFinancial Statement AnalysisMultiple choice

    Case facts

    Asteria Group reports under IFRS. At the beginning of the year, it paid $120 million for 30% of Northfield Ltd. Asteria can exercise significant influence over Northfield. During the year, Northfield earned $30 million and paid $10 million in dividends.

    Asteria also acquired 80% of Lumen Co. for $480 million. At acquisition, the fair value of Lumen's identifiable net assets was $500 million and the fair value of the non-controlling interest was $110 million.

    Asteria's defined-benefit plan reported current service cost of $5 million, net interest expense of $2 million, and a $3 million remeasurement gain. A trading debt security bought for $100 million had a year-end fair value of $106 million.

    Goodwill recognized in the Lumen acquisition is closest to:

    Answer and explanations

    Consideration is $480 million, fair-value non-controlling interest is $110 million, and identifiable net assets are $500 million. Using the full-goodwill data supplied, goodwill equals consideration transferred plus the fair value of the non-controlling interest minus identifiable net assets. The calculation is $480 million plus $110 million minus $500 million, which produces $90 million of goodwill.

    • A: $80m does not use the supplied fair value of the non-controlling interest.
    • B - correct: $480m + $110m - $500m = $90m.
    • C: $110m is the non-controlling interest, not goodwill.
  7. Question 7 of 10Level II previewFinancial Statement AnalysisMultiple choice

    Case facts

    Asteria Group reports under IFRS. At the beginning of the year, it paid $120 million for 30% of Northfield Ltd. Asteria can exercise significant influence over Northfield. During the year, Northfield earned $30 million and paid $10 million in dividends.

    Asteria also acquired 80% of Lumen Co. for $480 million. At acquisition, the fair value of Lumen's identifiable net assets was $500 million and the fair value of the non-controlling interest was $110 million.

    Asteria's defined-benefit plan reported current service cost of $5 million, net interest expense of $2 million, and a $3 million remeasurement gain. A trading debt security bought for $100 million had a year-end fair value of $106 million.

    The defined-benefit pension expense reported in profit or loss is closest to:

    Answer and explanations

    Current service cost is $5 million, net interest expense is $2 million, and the $3 million remeasurement is a gain. Under the supplied IFRS presentation, current service cost and net interest are recognized in profit or loss, while the remeasurement gain is recognized in other comprehensive income. Profit-or-loss pension expense is therefore $5 million plus $2 million, or $7 million.

    • A: $2m includes net interest alone.
    • B: $5m includes service cost alone.
    • C - correct: $5m service cost + $2m interest = $7m; remeasurement goes to OCI.
  8. Question 8 of 10Level III previewAsset allocationMultiple choice

    Case facts

    A foundation holds 60% equities returning 7% and 40% bonds returning 3% in its forecast. Ignore fees and cash flows.

    Calculate the forecast portfolio return.

    Answer and explanations

    Weight each asset return by its allocation: 0.60 x 7% + 0.40 x 3% = 5.4%.

    • A: 4.6% reverses the weights.
    • B - correct: Weight each asset return by its allocation: 0.60 x 7% + 0.40 x 3% = 5.4%.
    • C: 6% is not the weighted average.
  9. Question 9 of 10Level III previewLiquidity constraintsWritten response

    Case facts

    A foundation has $10m in assets, including $3m in a fund locked for five years. It owes a $2m grant in six months and proposes another $6m illiquid investment funded in full today. Assume no other inflows before the grant.

    Identify the binding constraint and explain why the proposed investment is unsuitable without a funding plan.

    Model answer and self-review rubric

    Liquidity is the immediate constraint. Existing and proposed illiquid allocations would leave only $1m liquid against a $2m near-term grant, before other expenses. Reserve or arrange reliable funding before investing.

    Teaching checklist only. No official points or automated grade.

  10. Question 10 of 10Level III previewPerformance measurementMultiple choice

    Case facts

    A manager earns 7.5% against a 6.0% benchmark with 3.0% annualized tracking error. All inputs use the same annual horizon.

    Calculate the information ratio.

    Answer and explanations

    Active return is 1.5 percentage points. Divide by tracking error: (7.5% - 6.0%) / 3.0% = 0.5.

    • A - correct: Active return is 1.5 percentage points. Divide by tracking error: (7.5% - 6.0%) / 3.0% = 0.5.
    • B: 2.0 divides benchmark return by tracking error.
    • C: 2.5 divides total manager return by tracking error.
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