L1 CFA Practice Lab Adaptive Level I exam simulator
CFA Level I subject

Portfolio Management practice questions

Portfolio Management questions connect risk and return, asset allocation, CAPM, IPS constraints, behavioral biases, performance, and risk management. This section currently includes 19 public practice questions across 26 topic modules, with explanations, formulas, traps, and key takeaways.

Indicative public exam weight: 8-12%. Start with a topic guide when you need focused review, or use adaptive mode for mixed practice and due reviews.

Try free quiz Mixed free questions

CAPM

1 public question with explanations, formulas, and exam traps.

Investor Types

1 public question with explanations, formulas, and exam traps.

Market Model

1 public question with explanations, formulas, and exam traps.

Portfolio Beta

1 public question with explanations, formulas, and exam traps.

Risk Management

1 public question with explanations, formulas, and exam traps.

Utility and CAL

1 public question with explanations, formulas, and exam traps.

Moderate

Portfolio Management

Asset Allocation and ESG

An IPS specifies a long-run 60/30/10 strategic allocation and permits ESG integration when it does not violate risk, return, and liquidity objectives. The most accurate interpretation is that ESG integration:

View sample
Moderate

Portfolio Management

Behavioral Biases

An investor refuses to sell a losing position because selling would make the loss feel real, even though new information has weakened the investment case. The bias is most likely:

View sample
Moderate

Portfolio Management

CAL, CML, and SML

A line shows combinations of the risk-free asset and the market portfolio, with expected return plotted against total portfolio standard deviation. This line is best described as the:

View sample
Moderate

Portfolio Management

CAPM

The risk-free rate is 3.5%, expected market return is 9.0%, and a stock's beta is 1.25. The CAPM expected return is closest to:

View sample
Moderate

Portfolio Management

CML and Portfolio Choice

An investor can borrow at the risk-free rate and invest in the market portfolio. A portfolio located above the capital market line would most likely indicate:

View sample
Moderate

Portfolio Management

Efficient Frontier

A risky portfolio lies below the minimum-variance frontier for a given expected return. The most accurate interpretation is that the portfolio is:

View sample
Moderate

Portfolio Management

Investor Types

Compared with a defined contribution pension plan, a defined benefit pension plan most likely places greater emphasis on:

View sample
Moderate

Portfolio Management

IPS - Constraints

A client must pay a known tuition bill in nine months and also has a 25-year retirement objective. In the IPS, the tuition bill is most appropriately treated as:

View sample
Moderate

Portfolio Management

IPS - Risk Tolerance

A retired investor with modest assets says she is comfortable taking high risk, but her required spending needs would deplete the portfolio if a 15% loss occurred. The most appropriate risk assessment is that:

View sample
Moderate

Portfolio Management

Market Model

A stock's covariance with the market is 0.032 and the market variance is 0.040. The risk-free rate is 2% and expected market return is 8%. Under CAPM, the expected stock return is closest to:

View sample
Moderate

Portfolio Management

Performance Measures

Two portfolios have identical excess returns. Portfolio X has higher standard deviation but the same beta as Portfolio Y. Relative to Y, X must have:

View sample
Moderate

Portfolio Management

Portfolio Beta

A portfolio has USD40 million in a stock with beta 1.2, USD35 million in a stock with beta 0.8, and USD25 million in a risk-free asset. The portfolio beta is closest to:

View sample
Moderate

Portfolio Management

Portfolio Management Process

A wealth manager first identifies a client's return objective, risk tolerance, constraints, and benchmark policy before selecting managers and securities. This sequence is most consistent with:

View sample
Moderate

Portfolio Management

Portfolio Risk and Return

A portfolio invests 60% in Asset A and 40% in Asset B. Expected returns are 11% and 7%, standard deviations are 18% and 12%, and correlation is 0.25. The portfolio expected return and standard deviation are closest to:

View sample
Moderate

Portfolio Management

Portfolio Risk and Return

A stock has correlation of 0.60 with the market, stock standard deviation of 24%, and market standard deviation of 16%. The stock beta is closest to:

View sample
Moderate

Portfolio Management

Risk Management

A board sets enterprise-wide risk tolerance, delegates limits to business units, and receives reports comparing actual exposures with limits. The process is best described as:

View sample
Moderate

Portfolio Management

Risk Modification

A portfolio manager reduces foreign currency risk by entering forward contracts while keeping the underlying foreign bonds. The risk modification method is best described as:

View sample
Moderate

Portfolio Management

Systematic and Nonsystematic Risk

A well-diversified investor asks for a higher expected return because a stock has high firm-specific litigation risk that is uncorrelated with market returns. Under CAPM, the request is least justified because:

View sample
Moderate

Portfolio Management

Utility and CAL

An investor has risk aversion coefficient A = 4 and evaluates portfolios using U = E(R) - 0.5A sigma^2, with returns in decimals. Portfolio A: E=8%, sigma=10%. Portfolio B: E=11%, sigma=18%. Portfolio C: E=13%, sigma=25%. The optimal portfolio is:

View sample