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CFA Flashcards

7 cards from real CFA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. Under the CFA Institute Code of Ethics, what must a member do when an investment recommendation could benefit the member personally?

    Answer: Disclose the conflict of interest to clients and prospects

    Standard VI(A) requires full and fair disclosure of all matters that could reasonably impair independence or create conflicts of interest.

  2. The required rate of return used to discount a firm's free cash flow to the firm (FCFF) is the:

    Answer: Weighted average cost of capital (WACC)

    FCFF belongs to all capital providers, so it is discounted at the WACC.

  3. A bond's Macaulay duration of 6 years and modified duration are related by which adjustment?

    Answer: Dividing Macaulay duration by (1 + yield per period)

    Modified duration equals Macaulay duration divided by (1 + yield per period).

  4. Which financial ratio best measures a company's ability to meet short-term obligations using its most liquid assets?

    Answer: Quick (acid-test) ratio

    The quick ratio excludes inventory, focusing on cash, marketable securities, and receivables.

  5. In the Capital Asset Pricing Model (CAPM), beta measures a security's:

    Answer: Systematic (market) risk

    Beta captures the non-diversifiable systematic risk relative to the market portfolio.

  6. Under IFRS, which inventory cost flow assumption is NOT permitted?

    Answer: LIFO (last-in, first-out)

    IFRS prohibits LIFO, though it is allowed under U.S. GAAP.

  7. A positively sloped (normal) yield curve generally implies that:

    Answer: Longer-term yields are higher than shorter-term yields

    A normal upward-sloping curve has higher yields for longer maturities, reflecting term premiums.