Free CFA Level I Equity Investments Practice Questions
Equity investments on the CFA Level I exam cover market organization, security analysis, equity valuation models, and industry and company analysis. Weighted 11-14% of the exam (CFA Institute).
A 'broad-market' equity index is best described as one that:
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Correct Answer: A
Solution
A is correct.
A broad-market index aims to represent the overall equity market by including companies across many sectors, industries, and market capitalization bands.
Question 2
Medium
Enterprise value (EV) is calculated as:
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Correct Answer: A
Solution
A is correct.
Enterprise value = Market value of equity (market cap) + Market value of debt + Preferred stock + Minority interest - Cash and cash equivalents. The simplified formula is Market cap + Total debt - Cash. EV represents the total cost of acquiring a firm.
Question 3
Hard
The intensity of competitive rivalry within an industry is highest when:
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Correct Answer: C
Solution
C is correct.
Intense rivalry occurs when slow growth forces competitors to steal market share to grow revenue, commodity-like products make price competition unavoidable, and high fixed costs incentivize full-capacity production even at thin margins.
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