4/2/26, 9:49 AM CFA Level 1 - Quantitative Methods EXAM (2026) UPDATE Verified Questions And Answers | Latest Already Graded A+ UPDATE |2…
CFA Level 1 - Quantitative Methods EXAM (2026)
UPDATE Verified Questions And Answers | Latest
Already Graded A+ UPDATE |2026
Save
Terms in this set (168)
Required rate of return The market rate of return is the return that investors
and savers require to get them to willingly lend
their funds
discount rates Interchangeable with Interest Rates
real risk-free rate theoretical nominal risk-free rate ≅ real risk-free
rate + expected inflation ratete on a single-period
loan that contains no expectation of inflation and
zero probability of default
Nominal Risk Free Rate or T-Bill nominal risk-free rate ≅ real risk-free rate +
Formula expected inflation rate
3 types of risk faced for securities Default risk: Risk that a borrower will not make the
promissed amounts in a timely manner
Liquidity Risk: Risk of receiving less than fair value
for an investment if it must be sold quickly for cash
Maturity Risk: Longer maturity bonds have more
maturity risk than shorter term bonds and require a
maturity risk premium.
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,4/2/26, 9:49 AM CFA Level 1 - Quantitative Methods EXAM (2026) UPDATE Verified Questions And Answers | Latest Already Graded A+ UPDATE |2…
Holding Period Return (HPR) The percentage increase in the value of an
investment over a given period:
Arithmetic Mean Return The simple average of a series of periodic returns.
It has the statistical property of being an unbiased
estimator of the true mean of the underlying
distribution of returns
geometric mean return When periodic rates of return vary from period to
period, the geometric mean return will have a
value less than the arithmetic mean return
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,4/2/26, 9:49 AM CFA Level 1 - Quantitative Methods EXAM (2026) UPDATE Verified Questions And Answers | Latest Already Graded A+ UPDATE |2…
Harmonic mean Used for certain computations, such as the average
cost of shares purchased over time.
e.g. An investor purchases $1,000 of mutual fund
shares each month, and over the last three months,
the prices paid per share were $8, $9, and $10.
What is the average cost per share?
= 3/(1/8 + 1/9 +1/10)
= $8.926 per share
Relationship between arithmetic
mean, harmonic mean and
geometric mean
Internal Rate of Return (IRR) An IRR is the interest rate at which a series of cash
inflows and outflows sum to zero when discounted
to their present value
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, 4/2/26, 9:49 AM CFA Level 1 - Quantitative Methods EXAM (2026) UPDATE Verified Questions And Answers | Latest Already Graded A+ UPDATE |2…
Money Weighted Rate of Return Defined as the IRR
Calculated by
- making the beginning value of the account an
inflow and all deposits into the account.
- make all withdrawals from the account outflows
as is the ending value
- Then equal them to find 'r'
PV(Inflows) = PV(Outflows
Time Weighted Rate of Return measures compound growth and is the rate at
which $1 compounds over a specified performance
horizon.
The time-weighted rate of return is not affected by
the timing of cash inflows and outflows.
Time weighted Rate of Return vs In the investment management industry, time-
Money Weighted Rate of Return weighted return is the preferred method of
performance measurement because portfolio
managers typically do not control the timing of
deposits to and withdrawals from the accounts
they manage.
The use of the time-weighted return removes
potential investment time distortions, and thus
provides a better measure of a manager's ability to
select investments over the period.
https://quizlet.com/1163316910/cfa-level-1-quantitative-methods-exam-2026-update-verified-questions-and-answers-latest-already-graded-a-update-… 4/47
CFA Level 1 - Quantitative Methods EXAM (2026)
UPDATE Verified Questions And Answers | Latest
Already Graded A+ UPDATE |2026
Save
Terms in this set (168)
Required rate of return The market rate of return is the return that investors
and savers require to get them to willingly lend
their funds
discount rates Interchangeable with Interest Rates
real risk-free rate theoretical nominal risk-free rate ≅ real risk-free
rate + expected inflation ratete on a single-period
loan that contains no expectation of inflation and
zero probability of default
Nominal Risk Free Rate or T-Bill nominal risk-free rate ≅ real risk-free rate +
Formula expected inflation rate
3 types of risk faced for securities Default risk: Risk that a borrower will not make the
promissed amounts in a timely manner
Liquidity Risk: Risk of receiving less than fair value
for an investment if it must be sold quickly for cash
Maturity Risk: Longer maturity bonds have more
maturity risk than shorter term bonds and require a
maturity risk premium.
https://quizlet.com/1163316910/cfa-level-1-quantitative-methods-exam-2026-update-verified-questions-and-answers-latest-already-graded-a-update-… 1/47
,4/2/26, 9:49 AM CFA Level 1 - Quantitative Methods EXAM (2026) UPDATE Verified Questions And Answers | Latest Already Graded A+ UPDATE |2…
Holding Period Return (HPR) The percentage increase in the value of an
investment over a given period:
Arithmetic Mean Return The simple average of a series of periodic returns.
It has the statistical property of being an unbiased
estimator of the true mean of the underlying
distribution of returns
geometric mean return When periodic rates of return vary from period to
period, the geometric mean return will have a
value less than the arithmetic mean return
https://quizlet.com/1163316910/cfa-level-1-quantitative-methods-exam-2026-update-verified-questions-and-answers-latest-already-graded-a-update-… 2/47
,4/2/26, 9:49 AM CFA Level 1 - Quantitative Methods EXAM (2026) UPDATE Verified Questions And Answers | Latest Already Graded A+ UPDATE |2…
Harmonic mean Used for certain computations, such as the average
cost of shares purchased over time.
e.g. An investor purchases $1,000 of mutual fund
shares each month, and over the last three months,
the prices paid per share were $8, $9, and $10.
What is the average cost per share?
= 3/(1/8 + 1/9 +1/10)
= $8.926 per share
Relationship between arithmetic
mean, harmonic mean and
geometric mean
Internal Rate of Return (IRR) An IRR is the interest rate at which a series of cash
inflows and outflows sum to zero when discounted
to their present value
https://quizlet.com/1163316910/cfa-level-1-quantitative-methods-exam-2026-update-verified-questions-and-answers-latest-already-graded-a-update-… 3/47
, 4/2/26, 9:49 AM CFA Level 1 - Quantitative Methods EXAM (2026) UPDATE Verified Questions And Answers | Latest Already Graded A+ UPDATE |2…
Money Weighted Rate of Return Defined as the IRR
Calculated by
- making the beginning value of the account an
inflow and all deposits into the account.
- make all withdrawals from the account outflows
as is the ending value
- Then equal them to find 'r'
PV(Inflows) = PV(Outflows
Time Weighted Rate of Return measures compound growth and is the rate at
which $1 compounds over a specified performance
horizon.
The time-weighted rate of return is not affected by
the timing of cash inflows and outflows.
Time weighted Rate of Return vs In the investment management industry, time-
Money Weighted Rate of Return weighted return is the preferred method of
performance measurement because portfolio
managers typically do not control the timing of
deposits to and withdrawals from the accounts
they manage.
The use of the time-weighted return removes
potential investment time distortions, and thus
provides a better measure of a manager's ability to
select investments over the period.
https://quizlet.com/1163316910/cfa-level-1-quantitative-methods-exam-2026-update-verified-questions-and-answers-latest-already-graded-a-update-… 4/47
