CFA LEVEL 1 QUESTIONS AND ANSWERS

What are the 4 types of measurement scales? - Answer-1. Nominal Scales 2. Ordinal Scales (Assigned to a category) 3. Interval Scales (Relative ranking) 4. Ratio Scales (Equal differences between scale values) NOIR When do we use geometric and arithmetic means to analyze investment returns? - Answer-Arithmetic Mean: To estimate next year's return Geometric Mean: Measure of past performance What are the 3 different types of probabilities? - Answer-1. Empirical Probability (Past data) 2. Priori Probability (Formal reasoning) 3. Subjective Probability (Use of personal judgement) What is the difference between time-series data and cross-sectional data? - Answer-Time-Series: Data taken over a period of time Cross-Sectional: Data taken at a single point in time What are the 3 desirable properties of an estimator? - Answer-1. Unbiased (Expected value of estimator is equal to the parameter) 2. Efficient (Variance of its sampling distribution is small) 3. Consist