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
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
