CFA 2026 Level I Portfolio Management Diversification Free Quiz 2

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CFA 2026 Level I Portfolio Management Diversification Free Quiz 2

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CFA 2026 Level I Portfolio Management Diversification Free Quiz 2

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

General5 MCQs

11. What portfolio maximizes the Sharpe ratio?

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

12. What line shows the risk-return trade-off for efficient portfolios?

A. Efficient frontierB. Security market lineC. Capital allocation lineD. Capital market line

13. What line shows the relationship between expected return and beta?

A. Security market lineB. Capital market lineC. Capital allocation lineD. Efficient frontier

14. What diversification benefit does a portfolio of perfectly positively correlated assets offer?

A. Some diversification benefitB. No diversification benefitC. Maximum diversification benefitD. Negative diversification benefit

15. What is the key determinant of diversification benefit?

A. Number of assetsB. Variance of assetsC. Correlation between assetsD. Expected return of assets

General5 MCQs

16. What is the effect of adding a low-correlation asset to a portfolio?

A. Increases riskB. Reduces returnC. No effectD. Reduces risk without reducing return

17. How is the benefit of diversification measured?

A. Reduction in risk relative to weighted averageB. Increase in returnC. Reduction in correlationD. Increase in number of assets

18. What benefit does international diversification provide?

A. No additional benefitB. Additional risk reductionC. Higher correlationD. Lower returns

19. What is the risk composition of a well-diversified portfolio?

A. High unsystematic riskB. Low systematic riskC. Low unsystematic risk, primarily systematic riskD. No risk

20. How does correlation affect the number of assets needed for diversification?

A. More assets needed with lower correlationB. Same number regardless of correlationC. Fewer assets needed with higher correlationD. Fewer assets needed with lower correlation

📋 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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