CFA® Level 3 Portfolio Practice Questions
The free CFA® Level 3 questions that deal with portfolio, with answers and explanations. The full bank and the timed practice test cover every topic the exam asks about.
Question #1
A portfolio manager is evaluating two securities: Security X has a higher return but also a higher volatility than Security Y. What should the manager prioritize?
Correct answer: D
Explanation
The manager should focus on risk-adjusted return as it helps evaluate the return in relation to the risk taken.
Question #2
During a quarterly review, a client expresses concern about the underperformance of their bond portfolio. What is the first step you should take?
Correct answer: D
Explanation
The first step should be to review benchmarks to determine if the underperformance is relative or absolute.
Question #6
You are managing a diversified portfolio that includes international stocks. What economic factor could most affect your portfolio's performance?
Correct answer: B
Explanation
Foreign exchange rates can have a significant impact on the value of international stocks in your portfolio.
Question #10
During the annual portfolio review, which of the following factors should be assessed to determine reallocation needs?
Correct answer: B
Explanation
Changes in the macroeconomic environment can significantly impact asset allocation decisions and should be assessed during reviews.
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