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CFA Level I Accounting & Finance Questions
Practise accounting & finance (finance) for the CFA Program Level I: 10 multiple-choice questions, each with the correct answer and a worked explanation. Click an option to check it, or “New questions” for another set.
Accounting & Finance practice
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Q1.Diversification mainly reduces:
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Answer: A — Unsystematic (specific) risk
Holding many assets reduces company-specific risk, not market risk.
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Q2.Find the compound interest on $31,000 at 5% per annum for 2 years, compounded annually.
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Answer: D — $3,177.5
A = P(1 + R/100)^T = 31,000 × 1.05^2 = 34,177.5; CI = A − P = $3,177.5.
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Q3.Standard deviation in finance measures:
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Answer: A — Volatility (dispersion) of returns
It measures how widely returns vary around the mean.
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Q4.Find the compound interest on $21,000 at 20% per annum for 3 years, compounded annually.
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Answer: A — $15,288
A = P(1 + R/100)^T = 21,000 × 1.20^3 = 36,288; CI = A − P = $15,288.
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Q5.Which ratio measures short-term liquidity?
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Answer: B — Current ratio
Current ratio = current assets ÷ current liabilities.
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Q6.Find the compound interest on $16,000 at 5% per annum for 2 years, compounded annually.
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Answer: B — $1,640
A = P(1 + R/100)^T = 16,000 × 1.05^2 = 17,640; CI = A − P = $1,640.
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Q7.The CAPM expected return equals:
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Answer: C — Rf + β(Rm − Rf)
Capital Asset Pricing Model: risk-free rate + beta × market risk premium.
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Q8.Find the present value of $1,200 received at the end of each year for 6 years at 10%.
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Answer: C — $5,226
PV of an ordinary annuity = PMT × [1 − (1 + r)⁻ⁿ]/r = 1,200 × 4.3553 = $5,226.
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Q9.Under the accounting equation, Assets =
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Answer: A — Liabilities + Equity
Assets = Liabilities + Owners’ equity.
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Q10.Find the present value of $1,200 received at the end of each year for 5 years at 4%.
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Answer: A — $5,342
PV of an ordinary annuity = PMT × [1 − (1 + r)⁻ⁿ]/r = 1,200 × 4.4518 = $5,342.
How to approach accounting & finance questions
Master the accounting equation, the three financial statements and time value of money: FV = PV(1 + r)ⁿ, PV of an annuity = PMT × [1 − (1 + r)⁻ⁿ]/r. Ratios link the statements.
About CFA Level I
CFA Program Level I — conducted by CFA Institute. Investment tools, quantitative methods, economics, ethics and financial reporting fundamentals.
Original practice questions written for this site in the style and difficulty of each exam’s syllabus. They are not past papers and the site is not affiliated with any exam body. Exam patterns, marking schemes and syllabi change — always check the latest official notification.
CFA Level I practice topics
| Topic | Section | Question source |
|---|---|---|
| Accounting & Finance | Finance | Calculated + question bank |
| Simple & Compound Interest | Quantitative aptitude | Calculated (new numbers every set) |
| Probability & Combinatorics | Mathematics | Calculated (new numbers every set) |
| Averages & Statistics | Quantitative aptitude | Calculated (new numbers every set) |
| Economy & Banking Awareness | General awareness | Question bank |