The CFA Level 1 Exam is the first of 3 rigorous tests that form the foundation of the Chartered Financial Analyst (CFA) program. It serves as an entry point into the world of professional finance, testing your knowledge of investment tools, financial analysis, and ethical standards. Despite Level 1’s low pass rate, it’s possible to pass the first time with the right information and plan. This guide will help you get started.
2025 CFA Level 1 Curriculum Updates
The CFA Level 1 program continues to evolve, including expanded eligibility, hands-on learning, and a more focused curriculum.
More recent changes that will affect the curriculum in 2025 include:
- Continued emphasis on foundational knowledge across key finance areas, including Corporate Issuers, Fixed Income, and Alternative Investments.
- Modules designed to better match how adults learn, making it easier to understand and remember concepts.
- Visual aids and practical exercises to help candidates apply concepts effectively.
- Updated ethical standards across all levels to reflect changes in professionalism, investment analysis communication, and conflict of interest disclosures.
Stay up to date with CFA Exam curriculum changes.
CFA Level 1 Exam Format
The CFA Level 1 Exam consists of 180 multiple-choice questions designed to assess your foundational understanding of a broad range of financial concepts.
The exam is divided into two 2-hour-and-15-minute sessions, each containing 90 questions, with an optional break in between. Both sessions are equally weighted, and each question is worth the same amount. There is no penalty for incorrect answers, so it’s in your best interest to attempt every question.
Question Format
The CFA Level 1 exam questions are multiple-choice, each with a short statement or question (the "stem") followed by 3 answer options (A, B, or C). These questions come in 2 formats: fill-in-the-blank sentence completion or straightforward.
The exam avoids tricky words such as “except,” “true,” “false,” and “not.” It might use phrases including “most likely” or “best described” to guide your thinking. Each question focuses on 1 specific point.
You won’t see answer options such as “all of the above” or “none of the above,” and choices are usually organized logically — from shortest to longest for sentences or smallest to largest for numbers.
CFA Level 1 Sample Questions
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According to the Modigliani-Miller propositions (with taxes), if a company increases its debt level, its market value will most likely:
- decrease since the costs of financial distress are increasing.
- remain the same since the market value is unaffected by the capital structure.
- increase proportionally to the change in debt.
Explanation:
The Modigliani-Miller (MM) propositions assume perfect capital markets (ie, no arbitrage, no transaction or bankruptcy costs, and symmetric information) and assert that a company's market value equals the present value of its future cash flows. Modigliani and Miller propose that, in the absence of taxes:
- A company's capital structure does not affect its value (MM I without taxes); and
- A company's cost of equity (re) is directly proportional to its debt-to-equity ratio (D/E), but WACC remains constant (MM II without taxes).
However, these propositions change when there are corporate taxes:
- The market value of a levered company is greater than the value of an unlevered but otherwise identical company; tax-exempt interest payments improve the levered company's cash flows, increasing its value. The difference in value is the amount of the debt tax shield (tD), which is the product of a company's tax rate (t) and value of debt (D) (MM I with taxes).
- A company's re is directly proportional to D/E, adjusted by (1 − t). Greater leverage will increase the cost of equity, but at a slower pace due to taxes. The greater the tax rate (t), the slower the increase in re when D/E increases (MM II with taxes).
Therefore, with taxes, an increase in debt will proportionally increase a company's value and reduce its WACC.
(Choice A) The MM propositions assume no cost of financial distress.
(Choice B) The market value would remain the same in the absence of taxes.
Things to remember:
The Modigliani-Miller (MM) propositions assume perfect capital markets (ie, no arbitrage, no transaction or bankruptcy costs, and symmetric information). When these propositions include corporate taxes, greater leverage will increase a company's market value (MM I) and reduce its WACC (MM II).
If a professional organization has standards of conduct in addition to its code of ethics, the purpose of the standards is most likely to describe:
- shared principles.
- laws and regulations.
- acceptable behaviors.
Explanation:
| Instruments for compliance with professional ethics | ||
|---|---|---|
| Instrument | Owner | Describes |
| Code of ethics | Professional organization | Shared principles |
| Standards of conduct | Professional organization | Minimally acceptable behavior |
| Laws and regulations | Government | Legal limits of behavior |
A code of ethics is a professional organization's statement of shared principles. Standards of conduct provide a guide to practicing the principles outlined in the code of ethics. Standards of conduct also clarify the minimally acceptable behaviors required to conform to the code of ethics. Although not addressed directly in standards of conduct, adherence to civil laws and regulations may be the minimally acceptable behavior in some cases.
Standards of conduct may be principle-based or rule-based. Principle-based standards are universally applicable to members of the profession and are based on the principles outlined in the code of ethics. Rule-based standards, while also relating to the principles in the code of ethics, are usually more narrowly applicable and specific to certain members or scenarios that may arise.
A code of ethics may or may not be accompanied by standards of conduct whereas standards of conduct exist only to enhance their associated code of ethics. CFA Institute has adopted both a code of ethics and standards of conduct (the "Code and Standards"); CFA charterholders and candidates are expected to know and comply with both.
(Choice A) Standards of conduct are used to describe minimally acceptable behaviors or practices, given the shared principles of the code of ethics. The code of ethics describes the shared principles.
(Choice B) Standards of conduct do not describe civil laws and regulations.
Things to remember:
Standards of conduct are used to clarify the minimally acceptable behaviors required to conform to the shared principles stated in a code of ethics; they do not address applicable civil laws and regulations.
At the end of 20X4, a hedge fund had $25 million in assets under management (AUM). The fund has the following fee structure, high-water mark, and 20X5 results:
| Selected Data | |
| Management fee (average assets) | 1% |
| Incentive fee (net of management fee) | 10% |
| Soft hurdle rate | 6% |
| High-water mark (millions) | $27 |
| Year-end fund assets 20X5 (millions) | $30 |
Assuming no inflows or outflows, the incentive fee (in $) earned by this hedge fund for 20X5 is closest to:
- 109,000
- 272,500
- 300,000
Explanation:
Hedge funds charge a management fee and an incentive fee. The management fee is calculated as a percentage of the total value of the fund's assets under management (AUM). It is assessed each year regardless of profitability.
The incentive fee is levied against the fund's annual gains, subject to certain conditions. It is calculated either gross or net of the management fee. The net calculation subtracts the management fee from AUM to arrive at an adjusted AUM that is used to calculate the fund's profits.
The high-water mark represents the value of AUM, net of fees, at any time during the fund's existence. To earn an incentive fee, the fund must exceed the high-water mark, the base from which the fee is calculated.
The hurdle rate is the minimum profit that the fund must earn (usually annually) before it receives an incentive fee. The hurdle rate can either be "soft," meaning that the incentive fee is calculated based on the entire profit, or "hard," meaning that the incentive fee is based on only the excess profit above the hurdle rate.
In this scenario, the fund generated net returns in 20X5 of 18.9% ( = (29.725 – 25) / 25 ), above the soft hurdle rate of 6%, and eclipsed the high-water mark of $27 million. Therefore, the fund earned an incentive fee of 10% of profits, net of the management fee on average assets of $27,500,000:
0.10 × (29,725,000 − 27,000,000) = $272,500.
(Choice A) $109,000 is the result of incorrectly assuming a hard hurdle rate is in effect.
(Choice C) $300,000 is the incentive fee if management fees are not deducted.
Things to remember:
Hedge funds charge both a fixed management fee and a variable incentive fee. The incentive fee is contingent on whether the fund earns a profit and may be subject to a high-water mark and hurdle rate.
In the short run, a company maximizing profit in a market with perfect competition produces at a quantity that most likely results in:
- economic profits equal to zero.
- marginal revenue equal to marginal cost.
- market price greater than marginal revenue.
Explanation:
A firm operating under perfect competition maximizes economic profit by producing and selling at the quantity where marginal revenue (MR) equals marginal cost (MC). Cost in this context includes opportunity costs (eg, the owners' required return from the business). Perfectly competitive firms can earn economic profits in the short run, but even if economic profits are zero or negative, a firm may be earning an accounting profit.
MR, the incremental revenue from selling one additional unit, depends on the firm's demand curve. In the case of perfect competition, the demand curve for any individual firm is a horizontal line at the market equilibrium price, since demand is perfectly elastic. Therefore, market price equals MR at all quantities (Choice C).
MC, the incremental cost to produce one additional unit, depends on the firm's cost structure. Producing at a quantity greater than where MR = MC means that the incremental cost for each unit exceeds the incremental revenue generated by that unit and the firm generates a loss on each additional unit sold. Producing at a lower quantity means that the firm forgoes economic profit (in the short run) since the additional revenue from a unit sold would exceed the cost of the unit.
(Choice A) Perfectly competitive firms can earn economic profits in the short run. However, in the long-run, the positive economic profits will attract new firms, which will increase supply/lower price until economic profit is zero.
Note: Although this question specifically addresses perfect competition, the condition that firms optimally produce when MR = MC applies to all market structures. It is likely that the exam will have questions on this topic.
Things to remember:
Under perfect competition, a firm maximizes short-run economic profit by producing and selling at the quantity where marginal revenue (MR) equals marginal cost (MC). Since there is perfectly elastic demand, price also equals MR for all quantities. Short-run, but not long-run, economic profits are possible. However, a firm may earn an accounting profit even if economic profits are zero or negative.
An analyst observes the following market data for one American put option:
| Selected Data | |
| (in CAD) | |
| Stock price | 48 |
| Strike price | 50 |
| Option premium | 4 |
This option's moneyness is best described as:
- in the money.
- at the money.
- out of the money.
Explanation:
Moneyness refers to the relationship between an option's strike price and the underlying stock price and is indicative of the option's intrinsic value. An option trading at the money or out of the money has no intrinsic value. An option trading in the money has intrinsic value:
- For an in-the-money call option, the underlying stock price is greater than the strike price. This gives the call owner the right to buy the stock at a price lower than the market price, which in turn gives the option intrinsic value.
- For an in-the-money put option, the strike price is greater than the underlying stock price. This gives the put owner the right to sell the stock at a price higher than the market price, which in turn gives the option intrinsic value.
In this scenario, the put option's underlying stock price is less than its strike price. Therefore, the option is trading in the money. Note that the option's premium is irrelevant to determining the option's intrinsic value; it would, however, be relevant to determining the option's profit at exercise.
(Choice B) If the stock price equals the strike price, the option is trading at the money (ATM). At expiration, an ATM option is economically equivalent to owning the underlying asset.
(Choice C) For a call option, if the stock price is less than the strike price, the option is trading out of the money (OTM) and has no intrinsic value. The same is true for a put option if the stock price is greater than the strike price.
Things to remember:
Moneyness refers to the relationship between an option's strike price and the underlying stock price. If the stock price equals the strike price, the option is trading at the money. For a call (put) option, if the stock price is greater (less) than the strike price, the option is trading in the money. For a call (put) option, if the stock price is less (greater) than the strike price, the option is trading out of the money.
A multivariate distribution:
- specifies the probabilities associated with groups of random variables.
- gives multiple probabilities for the same outcome.
- applies only to binomial distributions.
Explanation:
No Additional context, only the formula for the correct answer. The candidate will need to look up the reading for further clarity on the substance and significance behind the formula.Typical competitor QBanks (especially when free) are part of a much larger learning system that requires an additional purchase for clarity. A multivariate distribution specifies the probabilities for a group of related random variables.
The following data points are observed returns.
14.4%, 17.0%, 19.0%, 22.5%, 4.2%, 6.8%, 7.0%, 10.9%, 11.6%, What return lies at the 70th percentile (70% of returns lie below this return)?
- 19.0%
- 17.0%
- 14.4%.
Explanation:
No Additional context, only the formula for the correct answer. The candidate will need to look up the reading for further clarity on the substance and significance behind the formula.Typical competitor QBanks (especially when free) are part of a much larger learning system that requires an additional purchase for clarity. With 9 observations, the location of the 70th percentile is (9 + 1)(70 / 100) = 7. The seventh observation in ascending order is 17.0%.
The average annual return over 20 years for a sector of mutual funds, calculated for the population of funds in that sector that have 20 years of performance history, is most likely to:
- understate returns for the fund sector.
- overstate returns for the fund sector.
- fairly state returns for the fund sector.
Explanation:
No Additional context, only the formula for the correct answer. The candidate will need to look up the reading for further clarity on the substance and significance behind the formula.Typical competitor QBanks (especially when free) are part of a much larger learning system that requires an additional purchase for clarity. A sample suffers from survivorship bias if only surviving funds are captured in the data. Funds that cease to exist (due to poor performance) are excluded. This results in an average that overstates the annual return an investor in the sector could actually have expected to earn over the period.
Which of the following statements about a normal distribution is least accurate?
- A normal distribution has excess kurtosis of three.
- The mean and variance completely define a normal distribution.
- Approximately 68% of the observations lie within +/- 1 standard deviation of the mean.
Explanation:
No Additional context, only the formula for the correct answer. The candidate will need to look up the reading for further clarity on the substance and significance behind the formula.Typical competitor QBanks (especially when free) are part of a much larger learning system that requires an additional purchase for clarity. Even though normal curves have different sizes, they all have identical shape characteristics. The kurtosis for all normal distributions is three; an excess kurtosis of three would indicate a leptokurtic distribution. Both remaining choices are true.
The average return on small stocks over the period 1926-1997 was 17.7%, and the standard deviation of the sample was 33.9%. Assuming returns are normally distributed, the 95% confidence interval for the return on small stocks next year is:
- 16.8% to 18.6%.
- –48.7% to 84.1%.
- –16.2% to 51.6%.
Explanation:
No Additional context, only the formula for the correct answer. The candidate will need to look up the reading for further clarity on the substance and significance behind the formula.Typical competitor QBanks (especially when free) are part of a much larger learning system that requires an additional purchase for clarity. A 95% confidence interval is ± 1.96 standard deviations from the mean, so 0.177 ± 1.96(0.339) = (–48.7%, 84.1%).
CFA Level 1 Exam Topics
The CFA Level 1 Exam focuses on key knowledge and skills for a career in investment management, with a routinely updated curriculum to reflect current practices. It covers 10 major topics, emphasizing investment tools, asset classes, portfolio management, and ethics. Ethics questions appear in the first session, while other topics are spread across both sessions.
Foundational concepts such as the time value of money, basic statistics, microeconomics, and introductory company accounts are offered as pre-read materials at no extra cost to help candidates fill knowledge gaps before starting the main curriculum.
Learn more about the CFA Level 1 curriculum.
| 2025 CFA Level 1 Exam Topic Distribution | ||
|---|---|---|
| Topic Name | Weight | Number of Questions |
| Ethical and Professional Standards | 15-20% | 27-36 |
| Quantitative Methods | 6-9% | 15-22 |
| Economics | 6-9% | 15-22 |
| Financial Statement Analysis | 11-14% | 24-30 |
| Corporate Issuers | 6-9% | 15-21 |
| Portfolio Management | 8-12% | 9-15 |
| Equity Investments | 11-14% | 18-21 |
| Fixed Income | 11-14% | 18-21 |
| Derivative Investments | 5-8% | 9-15 |
| Alternative Investments | 7-10% | 9-15 |
CFA Level 1 Exam Requirements
To take the CFA Level 1 exam, you must:
- Have a bachelor’s degree, be within 2 years of graduating, or have 4,000 hours of work experience or a mix of work and education over 3 years.
- Possess a valid international travel passport that matches your CFA account details.
- Demonstrate English proficiency, as the exam is conducted entirely in English.
- Adhere to the CFA Institute’s Code of Ethics and Professional Conduct.
- Comply with the Professional Conduct Program, which enforces ethical guidelines and investigates violations.
Due to Office of Foreign Assets Control (OFAC) regulations, residents of Cuba, North Korea, Syria, and Ukraine's Crimea region are not eligible to sit for the CFA Level 1 exam.
Learn more about CFA Exam requirements.
CFA Level 1 Exam Dates, Deadlines, and Fees
The chart below outlines the 2025 CFA Level 1 exam windows, along with the early and standard registration deadlines for each period. Registering early ensures lower fees and greater flexibility in choosing your preferred exam date and location.
| 2025 CFA Level 1 Exam Dates and Deadlines | ||
|---|---|---|
| Exam Dates | Early Deadline | Standard Deadline |
| Feb.17-23 | Passed | Nov. 7, 2024 |
| May 14-20 | Passed | Feb. 6, 2025 |
| Aug. 20-26 | Jan 29, 2025 | May 6, 2025 |
| Nov. 17-23 | TBA | TBA |
Learn more about CFA Exam dates, deadlines, and scheduling.
Exam Fees
The CFA Level 1 exam costs $1,340 if you register early ($350 enrollment fee + $990) or $1,640 if you register at the standard rate ($350 enrollment fee + $1,290). You do not have to pay the enrollment fee again if you have to retake the exam.
| CFA Level 1 Exam Fees | |
|---|---|
|
Enrollment Fee |
$350 (one-time) |
|
Early Registration Fee |
$990 |
|
Standard Registration Fee |
$1,290 |
Learn more about CFA Exam registration costs and fees.
CFA Level 1 Exam Scholarships
These scholarships and options can significantly reduce the overall cost of taking the CFA Level 1 Exam:
- Access Scholarship: Reduces the registration fee to $400 for candidates with financial need. Available through CFA Institute's application process.
- Women’s Scholarship: Offers discounted exam fees for female candidates to promote gender diversity in the investment management industry.
- Student Scholarship: Lowers the registration fee to $600 for full-time students at affiliated universities who have not registered for their next exam.
- Professor Scholarship: Offers educators a discounted registration fee of $600, supporting professional development and integration of CFA content in their courses.
- Regulatory Scholarship: Available to employees of financial regulatory bodies or institutions, lowering exam expenses.
- Work Sponsorship: Some employers may cover or subsidize CFA exam fees as part of professional development programs.
Learn more:
- CFA Exam Scholarships
- How to Get a CFA Scholarship
- How to Write Your CFA Exam Scholarship Essay
- How to Save Money on the CFA Exam
CFA Level 1 Exam Pass Rates and Grading
The CFA Exam is graded on a pass/fail basis, with no numerical grades or percentiles provided. The overall pass rate for Level 1 is typically around 40%. To determine the minimum passing score, the CFA Institute evaluates each question to estimate how many minimally qualified candidates would likely answer correctly. This average score sets the passing benchmark, which may vary with each exam depending on its difficulty and candidate performance.
Learn more about CFA Exam pass rates, scores, and grading.
Tips for Passing the CFA Level 1 Exam
Getting ready for the CFA Level 1 Exam is all about planning wisely and sticking to good study habits. Here are some tips to increase your chances of success:
- Start studying at least 6 months in advance and create a structured study plan.
- Allocate around 300 hours of study time to thoroughly cover the material.
- Break study sessions into manageable chunks to maintain focus and avoid burnout.
- Practice with exam-like questions to test and strengthen knowledge.
- Familiarize yourself with your calculator and its features.
- Use mock exams to familiarize yourself with the exam format and build stamina.
- Use study tools such as spaced-repetition flashcards and video lectures.
- Join study groups or forums to stay motivated and gain insights from others.
- Get a free CFA Level 1 Study Schedule and read more tips from students who pass the exam.
Exam-Day Details
Here's what you need to know for the actual day you take the CFA Exam:
- Arrival: Arrive at least 30 minutes early for check-in and ID verification.
- Identification: Bring a valid international passport that matches your CFA account details; no other form of ID is accepted.
- Permitted Items: Only approved calculators (TI BA II Plus or HP 12C), loose batteries, and eyeglasses (without cases) are allowed in the exam room.
- Prohibited Items: Food, drinks, mobile phones, smartwatches, study materials, and writing tools are not allowed in the test room.
- Personal Belongings: Lockers are available to store items not permitted in the exam room.
- Breaks: You may take unscheduled breaks, but the exam clock will not stop. You can access water, food, or medical items during breaks with proctor approval.
- Dress Code: There is no specific dress code, but wearing layers is recommended for comfort.
Learn about CFA Level 1 Exam day requirements.
