CFA Level 1 Practice Test (Basic): Try our free CFA level 1 sample questions answers: For some warm-up practice, here is our upgraded, free CFA Level 1 mock exam that reflects the latest CFA exam curriculum. To help you prepare for the exam, we offer different types of practice, including practice questions and a mock exam, for better CFA Test Prep.
There is always one correct answer for each question. You may score 1 point for every correct answer. If your answer is incorrect or you omit a question, you receive 0 points.
CFA Level 1 Practice Test (Basic)
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CFA Level 1 Mock Exam Practice Test
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Question 1 of 50
1. Question
1 pointsThe theory that deals with conflicts of interest between a company’s owners and its creditors is most appropriately called:
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Question 2 of 50
2. Question
1 pointsFor which two of a company’s stakeholders does information asymmetry most likely make monitoring more difficult?
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Question 3 of 50
3. Question
1 pointsThe least likely item to be a requirement for good stakeholder management is:
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Question 4 of 50
4. Question
1 pointsAn agreement between a company and a labor union that represents most of its employees would be most appropriately considered part of a company’s
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Question 5 of 50
5. Question
1 pointsThe type of voting that is most likely to allow minority stockholders a greater representation on the board of directors is:
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Question 6 of 50
6. Question
1 pointsThe type of resolution most likely to require a supermajority of shareholder votes for passage is a resolution to
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Question 7 of 50
7. Question
1 pointsThe board of directors committee most likely to be responsible for monitoring the performance of a project that requires a large capital expenditure is
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Question 8 of 50
8. Question
1 pointsWhich of the following statements is most accurate? Ethics can be described as:
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Question 9 of 50
9. Question
1 pointsWhich of the following statements is most accurate? Standards of conduct:
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Question 10 of 50
10. Question
1 pointsWhich of the following statements concerning corporate takeovers is most accurate?
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Question 11 of 50
11. Question
1 pointsBenefits of effective corporate governance and stakeholder management most likely include
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Question 12 of 50
12. Question
1 pointsExecutive compensation and bonuses are most likely consistent with the interests of shareholders if they are:
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Question 13 of 50
13. Question
1 pointsThe method of ESG integration that does not exclude any sectors but seeks to invest in the companies with the best practices regarding employee rights and environmental sustainability is:
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Question 14 of 50
14. Question
1 pointsWhich of the following statements is most accurate? Investment professionals have a special responsibility to act ethically because:
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Question 15 of 50
15. Question
1 pointsWhich of the following statements best completes the following sentence? Professionals use their specialized knowledge and skills:
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Question 16 of 50
16. Question
1 pointsWhich of the following statements is most accurate? A profession’s code of ethics:
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Question 17 of 50
17. Question
1 pointsWhich of the following will most likely determine whether an individual will behave unethically?
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Question 18 of 50
18. Question
1 pointsWhich of the following statements is most accurate?
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Question 19 of 50
19. Question
1 pointsThe post-audit is used to:
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Question 20 of 50
20. Question
1 pointsWhich of the following statements concerning the principles underlying the capital budgeting process is most accurate?
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Question 21 of 50
21. Question
1 pointsAn analyst has gathered the following data about two projects, each with a 12% required rate of return.
If the projects are independent, the company should:
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Question 22 of 50
22. Question
1 pointsAn analyst has gathered the following data about two projects, each with a 12% required rate of return.
If the projects are mutually exclusive, the company should:
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Question 23 of 50
23. Question
1 pointsWhich of the following statements about NPV and IRR is least accurate?
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Question 24 of 50
24. Question
1 pointsA company is considering the purchase of a copier that costs $5,000. Assume a required rate of return of 10% and the following cash flow schedule:
Year 1: $3,000.
Year 2: $2,000.
Year 3: $2,000.What is the project’s NPV?
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Question 25 of 50
25. Question
1 pointsA company is considering the purchase of a copier that costs $5,000. Assume a required rate of return of 10% and the following cash flow schedule:
Year 1: $3,000.
Year 2: $2,000.
Year 3: $2,000.The project’s IRR is closest to:
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Question 26 of 50
26. Question
1 pointsWhich of the following statements is most accurate?
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Question 27 of 50
27. Question
1 pointsWhich of the following statements is most accurate?
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Question 28 of 50
28. Question
1 pointsUse the following data to answer this
A company is considering the purchase of a copier that costs $5,000. Assume a required rate of return of 10% and the following cash flow schedule:
Year 1: $3,000.
Year 2: $2,000.
Year 3: $2,000.What is the project’s payback period?
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Question 29 of 50
29. Question
1 pointsUse the following data to answer this
A company is considering the purchase of a copier that costs $5,000. Assume a required rate of return of 10% and the following cash flow schedule:
Year 1: $3,000.
Year 2: $2,000.
Year 3: $2,000.The project’s discounted payback period is closest to
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Question 30 of 50
30. Question
1 pointsUse the following data to answer this
A company is considering the purchase of a copier that costs $5,000. Assume a required rate of return of 10% and the following cash flow schedule:
Year 1: $3,000.
Year 2: $2,000.
Year 3: $2,000.What is the project’s profitability index (PI)?
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Question 31 of 50
31. Question
1 pointsWhich of the following statements about the payback period method is least accurate? The payback period
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Question 32 of 50
32. Question
1 pointsWhich of the following statements is least accurate? The discounted payback period:
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Question 33 of 50
33. Question
1 pointsThe NPV profiles of two projects will intersect:
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Question 34 of 50
34. Question
1 pointsWhich of the following statements most accurately describes the IRR and NPV methods?
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Question 35 of 50
35. Question
1 pointsFullen Machinery is investing $400 million in new industrial equipment. The present value of the future after-tax cash flows resulting from the equipment is $700 million. Fullen currently has 200 million shares of common stock outstanding, with a current market price of $36 per share. Assuming that this project is new information and is independent of other expectations about the company, what is the theoretical effect of the new equipment on Fullen’s stock price? The stock price will
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Question 36 of 50
36. Question
1 pointsWhich of the following situational influences is likely to have the most effect on the financial adviser’s efforts to get new clients to invest in the funds? His relationship with his:
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Question 37 of 50
37. Question
1 pointsWhich of the following statements is most accurate? An ethical decision making framework:
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Question 38 of 50
38. Question
1 pointsWhich of the following is most accurate? Ethical decision-making frameworks:
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Question 39 of 50
39. Question
1 pointsWhich of the following is most accurate? Ethical decision-making frameworks:
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Question 40 of 50
40. Question
1 pointsUsing an ethical decision-making framework, which of the following duties would most likely take precedence in the scenario described? The financial adviser’s duty to his:
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Question 41 of 50
41. Question
1 pointsUsing an ethical decision-making framework, the financial adviser would most likely
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Question 42 of 50
42. Question
1 pointsAn analyst gathered the following data about a company:
Assuming a 40% tax rate, what after-tax rate of return must the company earn on its investments?
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Question 43 of 50
43. Question
1 pointsA company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax required return on debt is 9% and 14% for equity. If the company is in the 40% tax bracket, the company’s marginal cost of capital is closest to:
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Question 44 of 50
44. Question
1 pointsWhat happens to a company’s weighted average cost of capital (WACC) if the firm’s corporate tax rate increases and if the Federal Reserve causes an increase in the risk-free rate, respectively? (Consider the events independently and assume a beta of less than one.)
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Question 45 of 50
45. Question
1 pointsFlynn Company has a capital structure of 40% debt, 50% common equity, and 10% preferred equity, based on market values. Firms in Flynn’s industry have on average 30% debt, 55% common equity, and 15% preferred equity. Flynn’s management intends to issue equity shares to bring the proportion of common equity up to 55% and keep the proportion of preferred equity at 10%. To estimate Flynn’s WACC, an analyst should use a weight of debt:
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Question 46 of 50
46. Question
1 pointsAn investment opportunity schedule is most accurately described as illustrating all the projects:
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Question 47 of 50
47. Question
1 pointsTo evaluate a project with less risk than the average risk of a company’s existing projects, an analyst should discount its cash flows at an interest rate
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Question 48 of 50
48. Question
1 pointsA company has $5 million in debt outstanding with a coupon rate of 12%. Currently, the yield to maturity (YTM) on these bonds is 14%. If the firm’s tax rate is 40%, what is the company’s after-tax cost of debt?
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Question 49 of 50
49. Question
1 pointsA company’s $100, 8% preferred is currently selling for $85. What is the company’s cost of preferred equity?
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Question 50 of 50
50. Question
1 pointsThe expected dividend is $2.50 for a share of stock priced at $25. What is the cost of equity if the long-term growth in dividends is projected to be 8%?
See also:
- CFA Level 1 Mock Exam and Practice Questions 2023
- CFA Level 1 Practice Test (Basic) (50 MCQs warmup test)
- CFA Level 1 Practice Test (Part 1) (90 Question Answers)
- CFA Level 1 Practice Test (Part 2) (90 Question Answers)