CFA Level I – Quantitative Methods Verified Practice Study Guide (2026/2027 A+ Edition)

CFA Level 1 - Quantitative Methods questions and
answers 2026\2027 A+ Grade

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



Calculating the Growth Rate
- correct answer Or use TMV calculator

1. N = Periods, PV = PV, PMT = 0, FV = FV

2. Compute I/Y