CFA 2026 Level I Portfolio Management Diversification Free Quiz 3

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CFA 2026 Level I Portfolio Management Diversification Free Quiz 3

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CFA 2026 Level I Portfolio Management Diversification Free Quiz 3

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

General5 MCQs

21. How does the risk of a diversified portfolio compare to the weighted average of individual risks?

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

22. What is the set of portfolios with the lowest risk for each return level?

A. Efficient frontierB. Minimum variance frontierC. Capital market lineD. Security market line

23. How is the optimal portfolio chosen for an investor?

A. Minimum variance portfolioB. Tangency portfolioC. Optimal portfolio based on risk preferenceD. Market portfolio

24. What model provides a framework for understanding the relationship between risk and return for diversified portfolios?

A. APTB. Fama-French modelC. Black-Litterman modelD. CAPM

25. What measure captures the systematic risk of a portfolio?

A. BetaB. Standard deviationC. CovarianceD. Correlation

General5 MCQs

26. What theory is based on the principle of diversification?

A. Efficient market hypothesisB. Modern portfolio theoryC. CAPMD. Arbitrage pricing theory

27. What are the two components of portfolio risk?

A. Systematic risk onlyB. Unsystematic risk onlyC. Systematic and unsystematic riskD. Covariance

28. What correlation condition is necessary for diversification to reduce risk?

A. Correlation = +1B. Correlation = 0C. Correlation = -1D. Correlation < +1

29. How does the marginal benefit of diversification change as more assets are added?

A. Decreasing marginal benefitB. Linear benefitC. Increasing benefitD. No benefit

30. What is the primary objective of diversification?

A. Reduces returnB. Reduces volatility without sacrificing returnC. Increases volatilityD. No effect

📋 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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