CFA Level I Practice Test

CFA Level I Quantitative Methods Practice Questions

Quantitative Methods makes up 6 of every 50 questions on a Tigertest CFA Level I practice test. Here are 10 of the 24 questions on it, each with the answer and the reason.

Updated 2026-11-10 by the Tigertest team. Based on CFA Institute's Level I topic weights for 2027. Original questions with four choices (the real exam has three). Not affiliated with CFA Institute.

1. 1. A deposit quotes a stated annual rate of 8% compounded quarterly. Its effective annual rate is closest to:

   • A.8.30%
   • B.8.24%
   • C.8.00%
   • D.8.16%

   Answer: B. EAR = (1 + 0.08/4)^4 - 1 = 1.02^4 - 1 = 8.24%. 8.16% is semiannual compounding and 8.30% is monthly compounding.

2. 2. A stated annual rate of 6% is compounded continuously. The effective annual rate is closest to:

   • A.6.14%
   • B.6.36%
   • C.6.00%
   • D.6.18%

   Answer: D. With continuous compounding EAR = e^0.06 - 1 = 6.18%. 6.14% is quarterly compounding, and 6.00% ignores compounding altogether.

3. 3. An investment pays 2,000 at the end of each year for 5 years. At a 7% discount rate, its present value is closest to:

   • A.8,200
   • B.10,000
   • C.7,130
   • D.8,774

   Answer: A. PV = 2,000 x [1 - 1.07^-5] / 0.07 = 2,000 x 4.1002 = 8,200. 8,774 treats the payments as an annuity due, and 7,130 discounts the 10,000 total as one sum in year 5.

4. 4. 10,000 is invested for 6 years at 5% compounded annually. Its future value is closest to:

   • A.13,000
   • B.13,499
   • C.13,401
   • D.12,763

   Answer: C. FV = 10,000 x 1.05^6 = 13,401. 13,000 is simple interest, 12,763 compounds for only 5 years and 13,499 uses continuous compounding.

5. 5. A fund returns +20%, -10% and +5% in three years. Its geometric mean annual return is closest to:

   • A.5.00%
   • B.13.40%
   • C.4.28%
   • D.4.47%

   Answer: C. Geometric mean = (1.20 x 0.90 x 1.05)^(1/3) - 1 = 1.134^(1/3) - 1 = 4.28%. 5.00% is the arithmetic mean, which overstates compound growth, and 13.40% is the cumulative return.

6. 6. A manager wants a return measure that is not affected by when clients add or withdraw money. She should use the:

   • A.Time-weighted return
   • B.Holding period yield
   • C.Internal rate of return
   • D.Money-weighted return

   Answer: A. The time-weighted return links subperiod returns, so the size and timing of external cash flows do not distort it. The money-weighted return is an IRR and is driven by those flows.

7. 7. A sample of five annual returns is 4%, 8%, 6%, 10% and 2%. The sample standard deviation is closest to:

   • A.10.00%
   • B.2.83%
   • C.8.00%
   • D.3.16%

   Answer: D. The mean is 6%, squared deviations sum to 40, and the sample variance is 40 / (5 - 1) = 10, so the standard deviation is 3.16%. Dividing by 5 gives the population figure, 2.83%, and 10.00% is the variance, not its square root.

8. 8. An asset has a mean return of 9% and a standard deviation of 15%. Its coefficient of variation is closest to:

   • A.6.00
   • B.1.67
   • C.0.60
   • D.1.50

   Answer: B. CV = standard deviation / mean = 15 / 9 = 1.67, the risk per unit of return. 0.60 is the inverse ratio.

9. 9. For a positively skewed return distribution, the usual ordering of the mean, median and mode is:

   • A.Mean = median = mode
   • B.Mean > median > mode
   • C.Mode > median > mean
   • D.Median > mean > mode

   Answer: B. A long right tail pulls the mean above the median, which sits above the mode. Negative skew reverses the order; a symmetric distribution has all three equal.

10. 10. A return distribution with positive excess kurtosis, compared with a normal distribution, has:

    • A.Positive skew
    • B.A lower mean
    • C.Thinner tails
    • D.Fatter tails

    Answer: D. Positive excess kurtosis (leptokurtic) means more probability in the tails, so extreme outcomes are more likely than a normal distribution predicts. Kurtosis says nothing about skew or the mean.