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 Ri...
CFA Level 1 – Quantitative Methods Study Guide
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
The benefits of buying summaries with Stuvia:
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
You can quickly pay through credit card for the summaries. There is no membership needed.
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 cracker. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £11.50. You're not tied to anything after your purchase.
