EBOOK
Before Sit for the CFA Exam eBook
Get advice from CFA Charterholders for a successful exam day.CFA How To Prep
March 17, 2026
Not finding what you’re looking for?
CFA® exam sample questions might be just what you need if you are trying to get a sense of what the exam is like. In this article, we explain the question formats for each level and provide examples (and answers) from past exams. For the sake of continuity, and to give you an idea of how the questions change at each level, all of them relate to the CFA fixed income exam topic.
There are various question formats for CFA exams. All questions on CFA exams are weighted equally and there is no penalty for an incorrect answer.
The Level I CFA exam uses multiple-choice questions with three unique answer options. The formats are:
Sentence completion with three unique choices.
Questions with three unique choices.
Questions often use qualifiers like 'most likely', 'best described', or 'least accurate'. You will not see answer options like 'all of the above' or 'A and B only'. Questions typically avoid words like 'except', 'false', 'true', or 'not'.
The Level II exam consists of multiple-choice questions grouped together in what are called ‘item sets’. Candidates will read what’s called a ‘vigenette’ and answer multiple related questions. A vignette describes a business scenario in several paragraphs using a mix of text, tables, financial statements, etc. There are 22 item sets on the Level II exam. Twenty of these items are scored, and two are unscored.
The CFA Level III exam includes two question formats: item sets and constructed response (essay) sets.
Item sets consist of a vignette (a short case or scenario) followed by multiple-choice questions.
Constructed response (essay) sets are open-ended questions where you must write your own answer.
The exam will have 11 item sets and 11 essay sets, for a total of 22 question sets. However, only 20 of these are scored (10 item sets and 10 essay sets); one set of each type is unscored. All questions require you to refer to a vignette before answering.
Question 1: If the market yield does not change, the price of a Treasury bill:
A. Will increase as the bill approaches maturity.
B. Will decrease as the bill approaches maturity.
C. Stay the same as the bill approaches maturity.
Question 2: Which of the following is closest to the percentage price change of a bond for a 20 basis point increase in the yield if the bond’s duration is 8.54 and the convexity is 58.66?
A. –1.696%.
B. –1.708%.
C. –1.720%.
Question 3: The following details are gathered from Treasury securities:
Which of the following is the best estimate of the one-year implied forward rate three years from now?
A. 2.91%
B. 3.12%
C. 3.20%
Question 4: Evaluate the following statements.
Statement 1: “A putable bond exhibits negative convexity at low yields and positive convexity at high yields.”
Statement 2: “Effective duration measures the sensitivity of a bond’s price to changes in its yield to maturity.”
A. Both statements are correct.
B. Exactly one statement is correct.
C. None of the statements are correct.
As part of preparing for Level II, you must develop the ability to quickly scan through a vignette and pick out the pieces of data needed to answer a particular question. Let’s see a sample vignette and its questions.
Holly Jameson has recently started a new role as a bond analyst at Holt Investment Management, LLC, based in Farland. Her team leader has provided her with up-to-date but incomplete data on the term structure of interest rates, summarized in Exhibit 1.
Holly has been asked to assess whether a specific treasury bond that Holt is considering recommending to its clients is fairly priced. The bond pays a 6% annual coupon, matures in three years’ time, and is trading at $108.30.
In a discussion in the staff dining room shortly after she joined the firm, Holly’s colleague, Doug Ross, made a confident assertion, “I really don’t know how some people find bond trading difficult. For each specific maturity, spot rates are always lower than forward rates, and forward rates are always lower than YTM. So, you can always achieve a higher return by riding the yield curve. I’ve been doing that since my first day on the job.”
Holt offers both domestic and international bonds to its clients to enable them to benefit from risk reduction through diversification. Holly has carried out some preliminary research on the Farland bond market and has found that the yield curve has an unexpected shape and does not seem to be driven by interest rate expectations.
She asks her team leader for advice, who tells her, “Things are strange in Farland. Rates are influenced simply by the supply and demand of bonds of specific maturities. Different types of investors want particular maturity bonds, and they never seem to deviate from their preferences. High demand for 5-year bonds has pushed prices up and yields down.”
Alex Allan, a bond analyst colleague of Holly, started another discussion with the group by stating, “I’m more interested in what happens to bond prices when the yield curve changes. I need to estimate how much prices will change when short-term yields increase but long-term yields stay constant.”
Question 1: The BBB-rated corporate bond being assessed by Holly is most likely:
A. Undervalued by $2.34.
B. Overvalued by $3.75.
C. Overvalued by $3.70.
Question 2: The comments made by Doug Ross are most likely:
A. Inaccurate in respect to the statement about spot rates, forward rates, and yields-to-maturity.
B. Inaccurate in respect to the statement about riding the yield curve.
C. Inaccurate in both respects.
Question 3: Holly’s team leader’s comments about interest rates in Farland most likely supports which theory of the term structure of interest rates?
A. Liquidity preference theory.
B. Segmented markets theory.
C. Local expectations theory.
Question 4: The most appropriate measure for Alex Allan to assess bond price sensitivity is:
A. Key rate duration.
B. Effective duration.
C. Macaulay duration.
Below is an example of a CFA level III constructed response question related to the topic of fixed income.
Algonquin Enterprises is a US company that recently raised a substantial quantity of cash from the sale of a redundant factory site and would like to use this cash to retire a set of debt liabilities. Summary statistics for the liabilities, which range in maturity from five to eight years, are given in Exhibit 1-1:
Algonquin’s treasury department is considering three possible methods that could be used: a bond tender offer, whereby the liabilities are repurchased on the open market, which they hope will lead to an upgrade from the company’s current A- rating to AA. However, the tender offer would need to be at a price reflecting the improvement in rating; cash flow matching using government bonds, which would allow for defeasement of the assets and liabilities; or duration matching using high-quality corporate bonds.
A. Identify and explain one advantage and one disadvantage of the duration matching approach compared to the cash flow matching approach.
Three different portfolios of investment-grade corporate bonds, ranging in maturity from 3 years to 10 years, have been proposed for the duration matching approach. Each portfolio has a market value of $650 million, which will be adequate for the funding of the liabilities. Exhibit 1-2 shows relevant information for these portfolios:
B. Identify and justify with two reasons which of the three portfolios (P, Q, or R) should be chosen if the duration matching strategy is adopted.
Algonquin is currently pursuing a contingent immunization strategy with another set of liabilities. These liabilities have a current market value of $78.96 million and a BPV of $36,374. The associated T-Note portfolio has a market value of $83.15 million and a BPV of $41,458. Additionally, 140 contracts of the five-year T-Note futures have been sold. The futures have a par value of $100,000 and an estimated BPV of $51.0745.
C. Assuming that any remaining duration gap is intentional, state with justification the likely view held by Algonquin’s treasury department on the future five-year T-Note interest rate.
Below are commonly asked questions about questions on CFA exams.
There are four types of questions asked on the CFA exam.
Sentence completion questions with three unique choices
Questions with three unique choices
Item sets which is a group questions related to one ‘vignette’
Constructed response (essay) sets which may require more than one answer, written and multiple choice.
There is no general guideline for how many practice questions you should do when studying for a CFA exam but considering most third party prep providers offer thousands of CFA practice questions, it’s safe to say that you should use as many practice questions as you need to feel confident going into exam day.
The hardest section of the CFA exam depends on your background and which exam you are taking. At Level I, Quantitative Methods or Ethical and Professional Standards might be the most difficult section for you depending on your previous work experience and education. At Level II, Portfolio Management may be the hardest section because this topic's weight increases significantly from Level I. At Level III, your interests and previous work experience can be a big factor in determining which topic will be the hardest. Some of the topics that have been mentioned as being the most challenging at Level III are Derivatives and Portfolio Management and Wealth Planning.
Vignette-style item set questions are a series of questions that all relate to a particular vignette which can describe a business scenario in several paragraphs using a mix of text, tables, financial statements, and so on.
Constructed response question sets are a series of questions that may need to be answered as a written response versus selecting an answer.
You can find more practice questions for topics such as economics, financial reporting & analysis, corporate issuers, portfolio management, equity investments, and ethics by signing up for free CFA practice questions.
Now that you have insight into the kinds of questions that are on the three levels of the CFA exam, you might be wondering how you can learn to answer them. Browsing our CFA study materials is a great place to start.
Assess Your Baseline Knowledge of the CFA Program Curriculum with a Free CFA Diagnostic Exam.
Before Sit for the CFA Exam eBook
Get advice from CFA Charterholders for a successful exam day.
CFA Program Fundamentals eBook
Unlock in-depth overviews of CFA Program curriculum topics.
