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).

177 Questions

4 Easy

120 Medium

53 Hard

2026 Syllabus

Sample Questions

Question 1 Easy

Cumulative preferred shares differ from non-cumulative preferred shares in that if a dividend is skipped, cumulative shares:

Solution

A is correct.

Cumulative preferred stock requires that all unpaid (passed) dividends accumulate as arrears and must be paid in full before the company can pay any common dividend. This provides stronger protection for preferred investors.

Question 2 Medium

Enterprise value (EV) is calculated as:

Solution

C 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

A company has a payout ratio of 60%, ROE of 15%, and required return of 10%. Using the Gordon Growth Model, the justified leading P/E ratio is closest to:

Solution

B is correct.

Sustainable growth rate

g = \text{ROE} \times (1 - \text{payout ratio}) = 15\% \times 0.40 = 6\%

. Justified leading P/E:

\text{P/E} = \frac{\text{payout ratio}}{k - g} = \frac{0.60}{0.10 - 0.06} = \frac{0.60}{0.04} = 15.0x.

Create a Free Account to Access All 177 Questions →

Guides & Articles

About FreeFellow

FreeFellow is a free exam prep library for actuarial (SOA & CAS), CFA, CFP, CPA, CAIA, GARP FRM, IRS Enrolled Agent, IMA CMA, and FINRA / NASAA securities licensing candidates. The entire question bank, written solutions, and lessons are free for every candidate, with no trial period and no credit card. Lessons include narrated audio, and every constructed-response item has a copy-to-AI prompt builder so candidates can paste their answer into their own ChatGPT or Claude for self-graded feedback; Fellow members get instant AI grading on essays against the official rubric (currently CFA Level III, expanding to other essay-bearing sections).

The 70% you need to pass (question bank, written solutions, lessons, formula sheet, mixed practice, readiness tracking) is free forever, with no trial period and no credit card. Become a Fellow ($59/quarter or $149/year per track) to unlock mock exams, flashcards with spaced repetition, performance analytics, AI essay grading, and a personalized study plan. FreeFellow LLC is a CFA Institute Prep Provider. Our CFA® exam materials are validated by CFA Institute for substantial curriculum coverage and updated annually.