Investment Foundations (CFA Level I-aligned) Practice Exams

A 180-question, 270-minute finance practice paper across the ten Level I topic areas, weighted to the 2027 topic weights: ethics, quantitative methods, economics, financial statement analysis, corporate issuers, equity, fixed income, derivatives, alternative investments and portfolio management. Educational practice material only — nothing here is investment advice.

3 practice papers · 540 questions · 270 minutes each · pass mark 70% · ₹196 for all papers

What the CFA Level I practice exams cover

Written from the published CFA Program Level I topic areas and exam weights (2027).

Ethical and professional standards (10–15%): the role of a code of ethics and professional standards in capital markets; professionalism, integrity of capital markets and duties to clients and employers; conflicts of interest, disclosure and fair dealing; suitability, performance presentation and preservation of confidentiality; ethical decision-making frameworks applied to short scenarios
Quantitative methods (11–14%): time value of money, discounting and annuities; rates of return: holding period, money-weighted and time-weighted; descriptive statistics and probability; sampling, estimation and hypothesis testing basics; simple linear regression
Economics (6–9%): supply and demand, elasticity and market structures; business cycles and inflation measurement; monetary and fiscal policy; international trade, capital flows and exchange rate quotations
Financial statement analysis (11–14%): the income statement, balance sheet and statement of cash flows and their links; revenue and expense recognition, inventory and long-lived asset accounting choices; income taxes and long-term liabilities at an introductory level; financial ratio analysis: activity, liquidity, solvency and profitability; financial reporting quality
Corporate issuers (6–9%): corporate governance and stakeholder management; working capital and liquidity management; capital investments: net present value versus internal rate of return; capital structure, cost of capital and leverage
Equity investments (11–14%): market organisation, indexes and market efficiency; industry and company analysis frameworks; equity valuation: dividend discount, free cash flow and multiples at an introductory level; types of equity securities and their characteristics
Fixed income (11–14%): fixed income instruments, cash flow structures and issuance; bond pricing, yield measures and the term structure; interest rate risk: duration and convexity; credit risk and credit analysis basics; securitised products basics
Derivatives (6–9%): forwards, futures, options and swaps: features and payoffs; no-arbitrage pricing and valuation at an introductory level; uses, benefits and risks of derivatives
Alternative investments (6–9%): features, methods of investing and fee structures of alternative investments; private capital: private equity and private debt; real estate and infrastructure; natural resources and hedge funds
Portfolio management (8–12%): the portfolio management process and investment policy statements; risk and return, diversification and correlation; the capital asset pricing model, beta and the security market line; behavioural biases of individuals; an introduction to risk management

The real CFA Level I exam pattern

Questions: 180 multiple choice with 3 options, in two sessions of 90
Time: 2 sessions of 135 min (270 min), optional break between them
Scoring: pass or fail against an unpublished minimum passing score; no penalty for wrong answers
Question types: multiple choice with 3 options (A, B, C); sentence completion or direct questions using most or least likely

Practice papers

CFA Level I-style practice exam 1: Investment Foundations — 180 questions, 270 minutes
CFA Level I-style practice exam 2: Investment Foundations — 180 questions, 270 minutes
CFA Level I-style practice exam 3: Investment Foundations — 180 questions, 270 minutes

Free CFA Level I sample questions

Sample question 1 (Ethical and professional standards)

A portfolio manager at a small asset management firm receives a limited allocation of shares in a highly oversubscribed initial public offering. She has both retail and institutional clients whose investment mandates include equity securities. To comply with the standard on fair dealing, which action should the manager take when allocating the IPO shares?

Allocate shares first to institutional clients because they generate higher fee revenue for the firm.
Allocate shares pro rata across all clients whose investment mandates permit the holding, regardless of account size.
Allocate shares only to clients who opened accounts within the past month to reward new relationships.
Allocate shares to the clients who pay the highest total fees to the firm, since they deserve priority benefits.

Answer: B. Allocate shares pro rata across all clients whose investment mandates permit the holding, regardless of account size.

Option B is correct because when an oversubscribed security is available, members and candidates should allocate shares pro rata among all eligible clients whose mandates permit the investment, ensuring no client is unfairly favored. Option A is incorrect because favoring institutional clients over retail clients violates the fair dealing principle; account size or client type should not determine allocation priority. Option C is incorrect because allocating only to new clients discriminates against existing clients who have an equal claim under suitable mandates. Option D is incorrect because giving priority to clients with the largest fee relationships constitutes favoritism and conflicts with the duty to deal fairly with all clients.

Sample question 2 (Quantitative methods and economics)

An investor buys one share for 100, receives a 4 dividend, and sells the share for 112 one year after purchase. What is the holding period return on this investment?

4.00%
12.00%
16.00%
20.00%

Answer: C. 16.00%

The holding period return is (Ending value - Beginning value + Income) / Beginning value, so (112 - 100 + 4) / 100 = 16%. Option A only captures the dividend yield, Option B only captures the price gain, and Option D incorrectly adds the dividend and price gain without dividing by the beginning value.

Sample question 3 (Financial statement analysis and corporate issuers)

A retail company operates in an inflationary environment and switches its inventory costing method from FIFO to LIFO for the current fiscal year. Assuming inventory quantities remain stable, what is the most likely immediate impact of this change on the company's reported financial statements compared with using FIFO?

Cost of goods sold will be lower, resulting in higher gross profit.
Cost of goods sold will be higher, resulting in lower gross profit.
Ending inventory will be higher, resulting in higher total assets.
Cash flow from operations will decrease due to higher income taxes paid.

Answer: B. Cost of goods sold will be higher, resulting in lower gross profit.

Under LIFO during inflation, the most recent higher costs are assigned to cost of goods sold, reducing gross profit. Option A is wrong because LIFO assigns higher costs to COGS. Option C is wrong because LIFO ending inventory is based on older lower costs, making it lower than FIFO. Option D is wrong because lower pre-tax income under LIFO typically results in lower taxes paid and higher operating cash flow.

Sample question 4 (Equity and fixed income)

A company just paid a dividend of 2.00 per share. Dividends are expected to grow at 5 percent per year indefinitely. An investor requires a 10 percent rate of return on the stock. Using the Gordon growth model, what is the intrinsic value per share?

40.00
42.00
44.00
46.00

Answer: B. 42.00

Option B is correct. The Gordon growth model values a stock as V0 = D1 / (r - g), where D1 is the next dividend, not the dividend just paid. D1 = 2.00 × (1 + 0.05) = 2.10, so V0 = 2.10 / (0.10 - 0.05) = 42.00. Option A incorrectly uses the just-paid dividend of 2.00 as D1, giving 2.00 / 0.05 = 40.00. Option C adds the growth rate to the result instead of compounding the dividend, yielding 44.00. Option D compounds the dividend twice or misapplies the formula, producing 46.00.

Sample question 5 (Portfolio management)

An investor constructs an equally weighted portfolio consisting of two assets. Asset X has an expected return of 8 percent and a standard deviation of 12 percent. Asset Y has an expected return of 10 percent and a standard deviation of 18 percent. The correlation between the two assets is negative 0.4. Compared to a portfolio of the same two assets with a correlation of positive 0.8, the lower correlation most likely results in:

A higher expected portfolio return.
A lower expected portfolio return.
A lower portfolio standard deviation.
A lower required rate of return for both assets.

Answer: C. A lower portfolio standard deviation.

Option C is correct because correlation affects the standard deviation of a portfolio, and a lower correlation reduces the portfolio's overall risk. Options A and B are incorrect because the expected return of a portfolio is simply the weighted average of the individual asset returns, regardless of their correlation. Option D is incorrect because an asset's required rate of return depends on its systematic risk relative to the market, not its correlation with another asset in a specific portfolio.

About these papers

Unofficial practice material. Every question is original, written from the vendor's publicly published exam objectives, and no real exam item is reproduced or paraphrased. This paper is not affiliated with, endorsed by, sponsored by or certified by the certification owner, and passing it does not confer any certification.