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Free CFA Equity Practice Questions & Answers

400 exam-style Equity questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.

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Question 241

H‑model vs two‑stage DDM A firm’s growth is expected to decline from 14% to 4% over 8 years, then remain at 4%. Which model best captures this pattern?

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Question 242

RI vs DDM – when they diverge RI and DDM valuations for a firm differ materially even though clean surplus holds. Which is the most likely cause?

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Question 243

FCFF terminal value – growth constraint In a stable‑growth FCFF model, which condition must hold for the terminal value formula to be valid?

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Question 244

Industry structure and ROE sustainability A firm has ROE well above its required return due to a patent‑protected product in a highly concentrated industry with high switching costs. Which is most likely about its residual income?

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Question 245

FCFE vs dividends – payout policy A firm has FCFE significantly higher than dividends for many years, with no clear investment opportunities. Which valuation approach is most likely to understate intrinsic value?

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Question 246

Operating leverage and equity risk Two firms are identical except Firm X has much higher fixed costs and lower variable costs than Firm Y. All else equal, which is most likely?

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Question 247

Residual income and accounting conservatism A firm adopts more conservative accounting (higher expensing, lower reported earnings) without changing its economics. What is the most likely short‑term effect on RI valuation?

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Question 248

A discount for lack of marketability (DLOM) is applied because:

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Question 249

Market Efficiency – Semi‑Strong Form Which strategy should NOT consistently generate abnormal returns in a semi‑strong efficient market?

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Question 250

Market microstructure primarily studies:

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Question 251

Bid‑Ask Spread – Drivers Which factor widens bid‑ask spreads?

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Question 252

Market Efficiency – Semi‑Strong Form Semi‑strong form efficiency implies that:

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Question 253

Market Microstructure – Bid‑Ask Spread Which factor most likely widens bid‑ask spreads?

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Question 254

A discount for lack of marketability (DLOM) is most likely larger when:

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Question 255

Incumbents are most likely to retaliate aggressively when:

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Question 256

Weak‑Form Efficiency – Implication If markets are weak‑form efficient, which strategy should NOT consistently work?

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Question 257

Which anomaly most directly contradicts weak‑form efficiency?

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Question 258

A market order exposes the trader to:

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Question 259

Adverse selection occurs when:

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Question 260

In a dealer market, liquidity is provided by:

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Question 261

Auction markets provide liquidity by:

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Question 262

Liquidity is best described as:

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Question 263

Post‑earnings announcement drift (PEAD) violates:

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Question 264

Noise traders increase:

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Question 265

Dark pools reduce:

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Question 266

Market depth refers to:

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Question 267

Tightness refers to:

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Question 268

Resiliency refers to:

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Question 269

Bid‑ask spreads widen when:

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Question 270

Temporary price impact is caused by:

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Free CFA Equity Practice Questions & Answers

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