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CFA Level 1: Quant question with complete solution 2023 rated A+ $14.99   Add to cart

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CFA Level 1: Quant question with complete solution 2023 rated A+

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CFA Level 1: Quant question with complete solution 2023 rated A+nominal risk free rate equals... - correct answer real risk free rate + expected inflation required interest rate on a security - correct answer nominal risk free rate + default risk premium + liquidity premium + maturity risk premi...

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  • June 15, 2023
  • 24
  • 2022/2023
  • Exam (elaborations)
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CFA Level 1: Quant question with
complete solution 2023 rated A+

nominal risk free rate equals... - correct answer real risk free rate + expected inflation



required interest rate on a security - correct answer nominal risk free rate + default risk premium +
liquidity premium + maturity risk premium



EAR or APY - correct answer (1+periodic rate)^m - 1



always higher than annual percentage rates (not compounded)



ordinary annuity - correct answer cash flows that occur at the end of each compounding period



annuity due - correct answer payments or receipts occur at the beginning of each period



PV of Perpetuity - correct answer Payment/interest rate



Effect of increase in the frequency of compounding rates - correct answer increases FV, decreases PV



amortization schedule - correct answer interest component = interest rate * beginning balance

principal component = payment - interest component

ending balance = period's beginning balance (last period's ending balance) - principal component



holding period return - correct answer (ending value-beginning value) / beginning value OR

(Ending value / beginning value) - 1

,time-weighted rate of return - correct answer The compound rate of growth of one unit of currency
invested in a portfolio during a stated measurement period; a measure of investment performance that
is not sensitive to the timing and amount of withdrawals or additions to the portfolio. Also a geometric
mean return



money weighted return - correct answer IRR based on cash inflows and outflows



Bank discount yield - correct answer RBD = D/F * 360/t Where: D = dollar discount from face value, F =
face value, T = days until maturity, 360 = days in a year



US T-Bills are quoted on a bank discount basis



holding period yield - correct answer Holding Period Return = (ending value/beginning value) - 1



EAY^t/365 - 1



total return an investor earns between the purchase date and the sale or maturity date



effective annual yield - correct answer EAY = (1 + HPY)^365/t - 1 where t is days to maturity. Remember
that EAY > bank discount yield, for three reasons: (a) yield is based on purchase price, not face value, (b)
it is annualized with compound interest (interest on interest), not simple interest, and (c) it is based on a
365-day year rather than 360 days. Be prepared to compare these two measures of yield and use these
three reasons to explain why EAY is preferable.



money market yield (Rmm) - correct answer = HPR * (360/days until maturity)



bond equivalent yield - correct answer = Semiannual Yield * 2



semiannual yield needs to be compounded



Descriptive statistics - correct answer used to summarize the important characteristics of large data sets

, Inferential statistics - correct answer a sample, pertain to the procedures used to make forecasts,
estimates or judgement about a large set of data



nominal scale / categorical - correct answer level of measurement with least information, observations
are classified or counted with no particular order



ordinal scale - correct answer level of measurement, categorized with respect to specified characteristic



interval scale - correct answer provides relative ranking like ordinal scale plus assurance that the
difference between the scale values are equal e.g. temperature



however measurement of 0 does not necessarily indicate the total absence of what we are measuring -
e.g. 30 c is not three times as hot as 10 c



ratio scale - correct answer ratio scales provide ranking and equal difference between scale values and a
true zero point as the origin e.g. measurement of money



difference between parameter and sample statistic - correct answer parameter is used for population

sample statistic is used for sample



modal interval - correct answer For any frequency distribution, the interval with the greatest frequency



relative frequency - correct answer dividing the absolute frequency of reach return by the total number
of observations



mode - correct answer the value that occurs most frequently in a data set



unimodal: one value that happens most frequent

bimodal, trimodal: two or three values happen the most frequent

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