CFA Level 1 Quantitative Methods questions and correct answers GRADED A+

CFA LEVEL 1
QUANTITATIVE
METHODS QUESTIONS
AND CORRECT ANSWERS
GRADED A+ 2025-2026
Default Risk - ANS-Risk that a borrower will not make promised payments


Liquidity Risk - ANS-Risk of recieving less than fair value for an investment if it must
be sold for cash quickly


Required Interest Rate on A Security - ANS-= Nominal Interest Rate
+ Default Risk Premium
+ Liquidity Premium
+ Maturity Risk Premium


Real Risk Free Rate / Nominal Risk Free Rate - ANS-- 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 - ANS-Required Rate of Return for an investor to willingly
invest

, Discount Rate - ANS-Used interchangeably with interest rates, especially in use of
discounting cash flows


Opportunity Cost - ANS-The gain that is missed by not investing in a particular
investment


Effective Annual Rate - ANS-The actualy rate of interst that is actually being earned
after compounding more than annually


Continuous Compounding - ANS-1. Multiply rate by time
2. Multiple answer by e (Second LN)
3. Multiply by PV


Present Value of Perpetuity - ANS-Financial instrument that pays a fixed amount of
money at set intervals over an infinite period of time


Present Value of a Projected Perpetuity - ANS-1. Calculate PV of Perpetuity
2. Find present value of (N -1)


PV of Uneven Cash Flows - ANS-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 - ANS-1. Calculate the FV of each individual Cash Flow
2: Then add the results together


Calculating the Growth Rate - ANS-Or use TMV calculator
1. N = Periods, PV = PV, PMT = 0, FV = FV
2. Compute I/Y