Question 1

Which of the following best describes the components of the nominal rate of interest according to the formula shown in the image?

Accepted Answer

The nominal rate of interest is the sum of the real risk-free rate, inflation premium, default risk premium, liquidity premium, and maturity premium.

Question 2

Given the following annual returns for a stock: -9.34%, 23.45%, and 8.92%, what is the geometric mean return over the three-year period? Use the formula $$R_{G} = \sqrt[3]{(1-0.0934) 	imes (1+0.2345) 	imes (1+0.0892)} - 1.$$

Accepted Answer

6.83%

Question 3

An investor purchases a share for $$100 at t=0, buys another share for 120 at t=1$$, receives $$2 in dividends at the end of each year, and sells both shares for 130 $$each at t=2. What is the money-weighted rate of return (IRR) for this investment? (Use the cash flows and IRR calculation steps shown in the images.)

Accepted Answer

13.86%

Question 4

For the same investment scenario as above, what is the time-weighted rate of return over the two-year period? (Refer to the step-by-step calculation in the images.)

Accepted Answer

15.84%

Question 5

If the present value of $1,000 to be received in one year is calculated at different compounding frequencies with a 6% annual interest rate, which compounding frequency results in the lowest present value?

Accepted Answer

Annual compounding

Question 6

Which of the following best describes the use of a probability tree in investment analysis?

Accepted Answer

It is used to model the probabilities of various outcomes and their conditional probabilities, allowing calculation of expected values.

Question 7

Given the formula $$PV = \frac{FV}{(1 + r)^t}$$, what does the variable $$r$$ represent?

Accepted Answer

The interest rate per compounding period

Question 8

In a box and whisker plot, what does the box represent?

Accepted Answer

The interquartile range (central 50% of the data)

Question 9

Given the returns: 30%, 12%, 25%, 20%, 23%, what is the mean absolute deviation (MAD) from the mean return of 22%?

Accepted Answer

5.10%

Question 10

Which of the following statements about kurtosis is correct, based on the image provided?

Accepted Answer

A leptokurtic distribution has fatter tails and a higher peak than a normal distribution.

Question 11

Which scatter plot best represents a strong positive linear relationship between two variables?

Accepted Answer

Plot b

Question 12

Given the formula $$s_{XY} = \frac{\sum_{i=1}^{n} \left[(X_i - \bar{X})(Y_i - \bar{Y})\right]}{n-1}$$, what does $$s_{XY}$$ represent?

Accepted Answer

The sample covariance between variables X and Y

Quantitative Methods and Economics: Mini-Textbook Study Notes (CFA Level I)

Guida di studio - Domande di pratica

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