CFA® Level 2 Market Practice Questions
The free CFA® Level 2 questions that deal with market, 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 considering investing in a stock with a _ of 1.2. If the market return is 10% and the risk-free rate is 2%, what is the expected return according to CAPM?
Correct answer: A
Explanation
Expected return = Risk-free rate + _ (Market return - Risk-free rate) = 2% + 1.2 * (10% - 2%) = 10.4%.
Question #2
A trader is assessing market efficiency. If stock prices reflect all publicly available information, which form of efficiency is present?
Correct answer: D
Explanation
Semi-strong form efficiency states that stock prices reflect all publicly available information, thus affecting stock pricing.
Question #5
An investor holds a bond with a 5% coupon rate that matures in 10 years. If the current market interest rate is 6%, what will happen to the bond's price?
Correct answer: D
Explanation
As market interest rates rise above the coupon rate, the existing bonds with lower rates become less attractive, causing their prices to decrease.
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