Free CFA Level I Portfolio Management Practice Questions
Portfolio management on the CFA Level I exam covers modern portfolio theory, the capital asset pricing model (CAPM), risk and return measurement, and the investment policy statement. Weighted 5-8% (CFA Institute).
109 questions16 easy72 medium21 hard2026 syllabus
Sample Questions
Question 1
Easy
Which of the following best describes the Sharpe ratio?
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Correct Answer: A
Solution
A is correct. The Sharpe ratio is defined as (Rp−Rf)/σp, measuring a portfolio's excess return over the risk-free rate per unit of total risk, as captured by the standard deviation of returns.
Question 2
Medium
The Treynor ratio is best described as the:
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Correct Answer: C
Solution
C is correct. The Treynor ratio is defined as (Rp−Rf)/βp, measuring the excess return earned per unit of systematic (market) risk. Because the denominator is beta rather than total risk, the Treynor ratio is most appropriate for evaluating well-diversified portfolios where unsystematic risk has been eliminated.
Question 3
Hard
Value at Risk (VaR) is best described as:
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Correct Answer: B
Solution
B is correct.
VaR represents the minimum loss that would be exceeded with a specified probability (e.g., 5%) over a given time horizon. For example, a 1-day 5% VaR of 1 million means there is a 5% chance the portfolio will lose at least 1 million in one day.
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