CFA 2026 Level I Portfolio Management Diversification Free Quiz 1

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CFA 2026 Level I Portfolio Management Diversification Free Quiz 1

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CFA 2026 Level I Portfolio Management Diversification Free Quiz 1

Practice CFA 2026 Level I Portfolio Management MCQs from Diversification. Get instant results with Explanation.

General5 MCQs

1. What is the primary benefit of diversification?

A. Reduces unsystematic risk without reducing expected returns.B. Increases risk without increasing expected returns.C. Reduces expected returns without reducing risk.D. Only works with perfectly negative correlation.

2. What condition is necessary for diversification to reduce risk?

A. Perfect correlationB. Less than perfect correlationC. Zero correlationD. Negative correlation

3. What happens to portfolio risk as the number of assets increases?

A. Risk increasesB. Risk approaches zeroC. Risk approaches systematic riskD. Risk becomes unsystematic

4. What is the approximate number of assets needed for effective diversification?

A. 5B. 10C. 20D. 30-40

5. What is the diversification benefit of adding assets with low correlation?

A. Lower risk than the weighted average of individual risksB. Equal risk to the weighted averageC. Higher risk than the weighted averageD. No benefit

General5 MCQs

6. What correlation provides the maximum diversification benefit?

A. +1B. -1C. 0D. 0.5

7. How does portfolio risk compare to the weighted average of individual asset risks?

A. Greater than the weighted averageB. Equal to the weighted averageC. Less than the weighted averageD. Independent of the weighted average

8. What risk is reduced by diversification?

A. Reduces both systematic and unsystematic riskB. Reduces systematic risk onlyC. Increases riskD. Reduces unsystematic risk only

9. What graph illustrates the benefits of diversification?

A. Efficient frontierB. Capital market lineC. Security market lineD. Minimum variance frontier

10. What is the portfolio with the lowest risk?

A. Tangency portfolioB. Minimum variance portfolioC. Maximum return portfolioD. Market portfolio

📋 CFA - Test Online Practice Quizzes

CFA

Conducting Body: CFA Institute

Frequency: 4 times a year (February, May, August, November) | Time: 135 Minutes

Negative Marking: No

⚡ Test Pattern (Total: 90 MCQs):

Alternative Investments: 8 MCQs
Corporate Issuers: 7 MCQs
Derivatives: 5 MCQs
Economics: 7 MCQs
Equity Investments: 12 MCQs
Ethics: 16 MCQs
Financial Statement Analysis: 11 MCQs
Fixed Income: 11 MCQs
Portfolio Management: 9 MCQs
Quant Methods: 6 MCQs

Merit Formula: -

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