CFA Level 1 Quantitative Methods -
Complete Exam Study Guide with Verified
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Default Risk ------- ✔ CORRECT ANSWER ✓✓Risk that a borrower will not make promised
payments
Liquidity Risk ------- ✔ CORRECT ANSWER ✓✓Risk of recieving less than fair value for an
investment if it must be sold for cash quickly
Required Interest Rate on A Security ------- ✔ CORRECT ANSWER ✓✓= Nominal Interest Rate
+ Default Risk Premium
+ Liquidity Premium
+ Maturity Risk Premium
Real Risk Free Rate / Nominal Risk Free Rate ------- ✔ CORRECT ANSWER ✓✓- Single period
interest rate for a completely risk-free security with no inflation added
- Nominal = Real Risk Free Rate + Expected Inflation Rate
Required Rate of Return ------- ✔ CORRECT ANSWER ✓✓Required Rate of Return for an investor
to willingly invest
Discount Rate ------- ✔ CORRECT ANSWER ✓✓Used interchangeably with interest rates,
especially in use of discounting cash flows
, Opportunity Cost ------- ✔ CORRECT ANSWER ✓✓The gain that is missed by not investing in a
particular investment
Effective Annual Rate ------- ✔ CORRECT ANSWER ✓✓The actualy rate of interst that is actually
being earned after compounding more than annually
Continuous Compounding ------- ✔ CORRECT ANSWER ✓✓1. Multiply rate by time
2. Multiple answer by e (Second LN)
3. Multiply by PV
Present Value of Perpetuity ------- ✔ CORRECT ANSWER ✓✓Financial instrument that pays a
fixed amount of money at set intervals over an infinite period of time
Present Value of a Projected Perpetuity ------- ✔ CORRECT ANSWER ✓✓1. Calculate PV of
Perpetuity
2. Find present value of (N -1)
PV of Uneven Cash Flows ------- ✔ CORRECT ANSWER ✓✓1. Clear Memory
2. Enter 0 in CF0
3. Enter Cash Flows in Sequence
4. NPV = Discount Rate
5. ComputeT NPV
FV of Uneven Cash Flows ------- ✔ CORRECT ANSWER ✓✓1. Calculate the FV of each individual
Cash Flow
2: Then add the results together
Complete Exam Study Guide with Verified
Answers | Guaranteed A+
Default Risk ------- ✔ CORRECT ANSWER ✓✓Risk that a borrower will not make promised
payments
Liquidity Risk ------- ✔ CORRECT ANSWER ✓✓Risk of recieving less than fair value for an
investment if it must be sold for cash quickly
Required Interest Rate on A Security ------- ✔ CORRECT ANSWER ✓✓= Nominal Interest Rate
+ Default Risk Premium
+ Liquidity Premium
+ Maturity Risk Premium
Real Risk Free Rate / Nominal Risk Free Rate ------- ✔ CORRECT ANSWER ✓✓- Single period
interest rate for a completely risk-free security with no inflation added
- Nominal = Real Risk Free Rate + Expected Inflation Rate
Required Rate of Return ------- ✔ CORRECT ANSWER ✓✓Required Rate of Return for an investor
to willingly invest
Discount Rate ------- ✔ CORRECT ANSWER ✓✓Used interchangeably with interest rates,
especially in use of discounting cash flows
, Opportunity Cost ------- ✔ CORRECT ANSWER ✓✓The gain that is missed by not investing in a
particular investment
Effective Annual Rate ------- ✔ CORRECT ANSWER ✓✓The actualy rate of interst that is actually
being earned after compounding more than annually
Continuous Compounding ------- ✔ CORRECT ANSWER ✓✓1. Multiply rate by time
2. Multiple answer by e (Second LN)
3. Multiply by PV
Present Value of Perpetuity ------- ✔ CORRECT ANSWER ✓✓Financial instrument that pays a
fixed amount of money at set intervals over an infinite period of time
Present Value of a Projected Perpetuity ------- ✔ CORRECT ANSWER ✓✓1. Calculate PV of
Perpetuity
2. Find present value of (N -1)
PV of Uneven Cash Flows ------- ✔ CORRECT ANSWER ✓✓1. Clear Memory
2. Enter 0 in CF0
3. Enter Cash Flows in Sequence
4. NPV = Discount Rate
5. ComputeT NPV
FV of Uneven Cash Flows ------- ✔ CORRECT ANSWER ✓✓1. Calculate the FV of each individual
Cash Flow
2: Then add the results together
