CFA Level 1 - Quantitative Methods Exam Questions with Complete Solutions
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Course
CFA
Institution
CFA (CFA)
CFA Level 1 - Quantitative Methods Exam Questions with Complete Solutions
Working Capital Management - Answer-The management of the company's short-term assets (such as inventory) and short term liabilities (such as money owed to suppliers).
NPV Decision Rule - Answer-If the investments NPV...
Calculate Amortization Schedule - Answer-1. Calculate Loan Payment
2. Calculate Interest Component (Beginning balance x I/Y)
3. Calculate Principal component (Payment - Interest Component)
4.The following beginning balance is the first period balance - principal component only.
(Interest goes to bank)
Cash Flow Additivity Principle - Answer-Present value of any stream of cash flow equals
the sum of the present values of the cash flows.
Ex: Cash flows of $100 for 4 Years & a $300 payment that occurs in year 3. Calculate
the PV of both and add them together.
(Use the Unequal Cash flow method.)
NPV - Answer-Present Value of expected cash inflows minus the present value of the
expected outflows, discounted at the appropriate rate.
Use the Calculator (Cash Flow):
Set CF0 = 0 (for profit)
Set CF0 = Initial negative outflow (for total NPV)
IRR - Answer-Discount rate that makes NPV equal to zero
Capital Budgeting - Answer-The allocation of funds to relatively long range projects or
investments
Capital Structure - Answer-The choice of long-term financial for the investments the
company wants to make
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