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Free CMSA Practice Questions

10 free, exam-style Capital Markets & Securities Analyst (CMSA) practice questions with answers and explanations. No signup required. Work through them below, then take the full free CMSA practice test to study every exam domain.

These 10 free CMSA questions are organized by exam domain, so you can see how each part of the Capital Markets & Securities Analyst blueprint is tested. Reveal the answer and explanation under each question.

Domain 1: Equities 20% of exam

Question 1

During an IPO priced at $25 per share, the lead underwriter exercises the greenshoe option and sells 15% more shares than the base offering, creating a short position. On the first day of trading, the stock closes at $22. Which action does the underwriter MOST likely take?

  1. Exercise the greenshoe option and purchase shares from the issuer at $25 per share
  2. Buy shares in the open market at $22 to close the short position and stabilize the price
  3. Require the issuer to repurchase the excess shares directly from open market investors
  4. Allow the short position to expire, as no stabilization obligation exists below the IPO price
Show answer & explanation

Correct answer: B - Buy shares in the open market at $22 to close the short position and stabilize the price

Domain 2: Derivatives 20% of exam

Question 2

An investor purchases a call option with a strike price of $55, paying a premium of $4. At expiration, the underlying stock is trading at $62. What is the investor's net profit per share?

  1. $11
  2. -$4
  3. $7
  4. $3
Show answer & explanation

Correct answer: D - $3

Question 3

A corporation has $100 million of floating-rate debt tied to SOFR, currently at 4.5%. It enters a pay-fixed, receive-floating interest rate swap at a fixed rate of 5.0%. SOFR subsequently rises to 6.5%. What is the corporation's effective borrowing cost?

  1. 4.5%
  2. 6.5%
  3. 5.0%
  4. 1.5%
Show answer & explanation

Correct answer: C - 5.0%

Domain 3: Fixed Income 15% of exam

Question 4

A bond with a modified duration of 8.0 is currently priced at $1,000. If market yields rise by 50 basis points, what is the approximate new price of the bond?

  1. $1,040
  2. $960
  3. $1,000
  4. $920
Show answer & explanation

Correct answer: B - $960

Question 5

Bond X is callable and Bond Y is non-callable. Both are issued by the same company, are otherwise identical, and are currently priced to yield a Z-spread of 120 basis points over the benchmark swap curve. Which statement BEST describes their option-adjusted spreads (OAS)?

  1. Bond X has an OAS greater than 120 bps because the embedded call option commands a premium
  2. Both bonds have an OAS equal to their Z-spread of 120 basis points
  3. Bond Y has an OAS of 120 bps; Bond X has an OAS below 120 bps
  4. Bond X has an OAS of 120 bps; Bond Y has an OAS above 120 bps
Show answer & explanation

Correct answer: C - Bond Y has an OAS of 120 bps; Bond X has an OAS below 120 bps

Domain 4: Valuation 10% of exam

Question 6

A portfolio valued at $10 million has a daily standard deviation of 2.0%. Using the parametric method, what is the 1-day 99% Value at Risk (VaR)?

  1. $200,000
  2. $466,000
  3. $256,000
  4. $330,000
Show answer & explanation

Correct answer: B - $466,000

Question 7

A portfolio manager achieved an annual return of 14%. The portfolio's beta is 1.3, the risk-free rate is 3%, and the market returned 10%. What is the portfolio's Jensen's alpha?

  1. +11.0%
  2. +4.0%
  3. -1.9%
  4. +1.9%
Show answer & explanation

Correct answer: D - +1.9%

Domain 5: Commodities 8% of exam

Question 8

A company is financed with $60 million in equity and $40 million in debt. The cost of equity is 12%, the pre-tax cost of debt is 6%, and the corporate tax rate is 25%. What is the company's WACC?

  1. 7.5%
  2. 9.6%
  3. 9.0%
  4. 10.4%
Show answer & explanation

Correct answer: C - 9.0%

Domain 7: Trade Operations 5% of exam

Question 9

The EUR/USD spot rate is 1.1000. The 1-year interest rate is 2.5% in the Eurozone and 5.0% in the United States. Using covered interest rate parity, what is the 1-year EUR/USD forward rate?

  1. 1.1268
  2. 1.0738
  3. 1.1275
  4. 1.1000
Show answer & explanation

Correct answer: A - 1.1268

Domain 8: Foreign Exchange 7% of exam

Question 10

A sell-side analyst attends a scheduled investor meeting where the company's CFO states that Q2 order volumes are 'tracking softer than Q1.' The analyst judges this consistent with trends that three major industry suppliers have already disclosed publicly. She revises her earnings model downward and issues a sell recommendation. This conduct is BEST described as:

  1. Permissible under the mosaic theory, as the analyst synthesized non-material information with publicly available data
  2. Insider trading, as the analyst received non-public information directly from corporate management
  3. Permissible only after the analyst discloses the conversation to her firm's compliance department
  4. Impermissible, as analysts may not revise earnings models based on information received from company management
Show answer & explanation

Correct answer: A - Permissible under the mosaic theory, as the analyst synthesized non-material information with publicly available data

The rest of the CMSA blueprint

The CMSA exam also covers these domains. Drill them in the full free practice test:

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