CFA practice questions

1. 01

   Fixed income

   Question 1. To estimate the monetary loss from a 25 basis point yield increase, an analyst multiplied portfolio money duration directly by 25. The analyst should have instead:

   Answer to question 1

   AA. divided money duration by modified duration before multiplying.BB. expressed the yield change in decimal form rather than in basis points.CC. adjusted the estimated loss by subtracting accrued interest.

   Check answerExplanation after you answer
2. 02

   Equity investments

   Question 2. A firm with a 15% cost of equity reports net income of $24 million on average common equity of $200 million. The firm has most likely:

   Answer to question 2

   AA. created positive economic value.BB. matched its required rate of return.CC. destroyed value for equity holders.

   Check answerExplanation after you answer
3. 03

   Financial statement analysis

   Question 3. In 2024 under US GAAP, a company records a $60,000 environmental remediation provision deductible only when settled. Assuming a 25% tax rate, the financial statements will show a:

   Answer to question 3

   AA. $15,000 deferred tax asset.BB. $15,000 increase in current taxes payable.CC. permanent tax adjustment of $15,000.

   Check answerExplanation after you answer
4. 04

   Economics

   Question 4. An investor fully hedges a one-year foreign money market investment that offers a higher interest rate than the domestic rate. Under covered interest rate parity, the hedged return is:

   Answer to question 4

   AA. equal to the foreign interest rate.BB. equal to the domestic interest rate.CC. higher than the domestic interest rate.

   Check answerExplanation after you answer
5. 05

   Equity investments

   Question 5. A portfolio manager argues that introducing short-selling restrictions and doubling trading commissions will increase market informational efficiency. The manager is mistaken because these actions:

   Answer to question 5

   AA. impede arbitrage and increase transaction frictions.BB. accelerate the incorporation of negative news into prices.CC. reduce the cost of acquiring fundamental information.

   Check answerExplanation after you answer

Questions from the MiloPrep question bank. Independently authored practice, not official exam items. This short set is for learning and does not predict an exam score.