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Free CFA® Level 3: CFA® Level 3 Exam Questions and Answers
Last updated: April 2, 2025
Examtopics CFA® Level 3: CFA® Level 3 Prepaway Real Exam Questions and dumps free download
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651-CFA® Level 3: CFA® Level 3
#Question
A client expresses interest in investing in small-cap stocks. What is a primary risk they should be aware of?
A.
Guaranteed liquidity
B.
Limited growth potential
C.
Higher market volatility
D.
Lower dividends
Correct Answer:
C
Small-cap stocks tend to exhibit higher market volatility, making them riskier compared to large-cap stocks.
#Question
An investment committee is reviewing the performance of their fixed income portfolio. What factor should they analyze closely?
A.
Inflation rates
B.
Current market trends
C.
Interest rate movements
D.
Company news
Correct Answer:
C
Interest rate movements directly impact the value of fixed income securities and are crucial to assess for effective portfolio management.
#Question
An investor is evaluating structured products. What is an essential consideration regarding returns?
A.
Guaranteed returns
B.
Stable interest rates
C.
High liquidity
D.
Complexity of product
Correct Answer:
D
Structured products can be complex, and understanding their structure and associated risks is crucial for evaluating potential returns.
#Question
A company plans to issue convertible bonds. What potential advantage does this present to investors?
A.
Lower default risk
B.
Potential capital appreciation
C.
Immediate income
D.
Fixed interest rate
Correct Answer:
B
Convertible bonds offer the potential for capital appreciation by allowing bondholders to convert their bonds into equity at a predetermined rate.
#Question
A financial advisor suggests a conservative growth strategy for a client. What investment types might be included?
A.
High-risk tech stocks
B.
Balanced mutual funds
C.
Commodities
D.
High-yield junk bonds
Correct Answer:
B
Balanced mutual funds typically blend equities and fixed income, making them suitable for a conservative growth strategy.
#Question
An analyst evaluates a firm that has a high dividend yield but a low payout ratio. What does this suggest?
A.
Unsustainable dividends
B.
Strong earnings potential
C.
Increased risk of price volatility
D.
Poor cash flow management
Correct Answer:
B
A low payout ratio alongside a high dividend yield may suggest the company has ample earnings to support current dividends, indicating strong earnings potential.
#Question
A portfolio manager is considering an investment in emerging markets. What risk should they prioritize?
A.
Fluctuating demand
B.
Currency risk
C.
Low transaction costs
D.
High interest rates
Correct Answer:
B
Currency risk is particularly significant in emerging markets, where exchange rate fluctuations can adversely affect returns.
651-CFA® Level 3: CFA® Level 3
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