100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
CFA Level 1 Exam 3 || With Questions & Answers (Rated A+) – With Financial Ratios $11.99   Add to cart

Exam (elaborations)

CFA Level 1 Exam 3 || With Questions & Answers (Rated A+) – With Financial Ratios

 9 views  0 purchase
  • Course
  • CFA - Chartered Financial Analyst
  • Institution
  • CFA - Chartered Financial Analyst

CFA Level 1 Exam 3 || With Questions & Answers (Rated A+) – With Financial Ratios CFA Level 1 Exam 3 || With Questions & Answers (Rated A+) – With Financial Ratios The principle of time value of money - ANSWER - The notion that a given sum of money is more valuable the sooner it is received...

[Show more]

Preview 2 out of 14  pages

  • September 17, 2024
  • 14
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • CFA - Chartered Financial Analyst
  • CFA - Chartered Financial Analyst
avatar-seller
conceptialresearchers
2024




CFA Level 1 Exam 3 || With
Questions & Answers (Rated A+)
– With Financial Ratios




CONCEPTIAL RESEARCHERS | conceptialresearch@gmail.com

, CFA Level 1 Exam 3 || With Questions
& Answers (Rated A+) – With Financial
Ratios
The principle of time value of money - ANSWER - The notion that a given sum of
money is more valuable the sooner it is received, due to its capacity to earn interest.

The Five Components of Interest Rates - ANSWER - 1. Real Risk-Free Rate 2.
Expected Inflation 3. Default-Risk Premium 4. Liquidity Premium 5. Maturity
Premium

Real Risk-Free Rate - ANSWER - This assumes no risk or uncertainty, simply
reflecting differences in timing: the preference to spend now/pay back later versus
lend now/collect later.

Expected Inflation - ANSWER - The market expects aggregate prices to rise, and the
currency's purchasing power is reduced by a rate known as the inflation rate.
Inflation makes real dollars less valuable in the future and is factored into
determining the nominal interest rate (from the economics material: nominal rate =
real rate + inflation rate).

Default-Risk Premium - ANSWER - What is the chance that the borrower won't make
payments on time, or will be unable to pay what is owed? This component will be
high or low depending on the creditworthiness of the person or entity involved.

Liquidity Premium - ANSWER - Some investments are highly liquid, meaning they
are easily exchanged for cash (U.S. Treasury debt, for example). Other securities
are less liquid, and there may be a certain loss expected if it's an issue that trades
infrequently. Holding other factors equal, a less liquid security must compensate the
holder by offering a higher interest rate.

Maturity Premium - ANSWER - All else being equal, a bond obligation will be more
sensitive to interest rate fluctuations the longer to maturity it is.

The stated annual rate - ANSWER - (or quoted rate) is the interest rate on an
investment if an institution were to pay interest only once a year.

In practice, institutions compound interest more frequently, either ... - ANSWER
- ...quarterly, monthly, daily and even continuously.

The effective annual yield... - ANSWER - ...represents the actual rate of return,
reflecting all of the compounding periods during the year.

Effective annual rate (EAR) - ANSWER - = (1 + Periodic interest rate)^m - 1
(Where: m = number of compounding periods in one year, and periodic interest rate
= (stated interest rate) / m)

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller conceptialresearchers. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $11.99. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

83100 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$11.99
  • (0)
  Add to cart