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CFA LEVEL 1 > Study Session 2: Quantitative Methods > Flashcards

Study Session 2: Quantitative Methods Flashcards

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CFA flashcards
1
Q

Interpret interest rates as required rates of return, discount rates, or opportunity costs.

READING 5. THE TIME VALUE OF MONEY

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2
Q

Explain an interest rate as the sum of a real risk-free rate, and premiums that compensate investors for bearing distinct types of risk.

READING 5. THE TIME VALUE OF MONEY

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3
Q

Calculate and interpret the effective annual rate, given the stated annual interest rate and the frequency of compounding.

READING 5. THE TIME VALUE OF MONEY

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4
Q

Solve time value of money problems for different frequencies of compounding.

READING 5. THE TIME VALUE OF MONEY

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5
Q

Calculate and interpret the future value (FV) and present value (PV) of a single sum of money, an ordinary annuity, an annuity due, a perpetuity (PV only), and a series of unequal cash flows.

READING 5. THE TIME VALUE OF MONEY

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6
Q

Demonstrate the use of a time line in modeling and solving time value of money problems.

READING 5. THE TIME VALUE OF MONEY

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7
Q

Calculate and interpret the net present value (NPV) and the internal rate of return (IRR) of an investment.

READING 6. DISCOUNTED CASH FLOW APPLICATIONS

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8
Q

Contrast the NPV rule to the IRR rule, and identify problems associated with the IRR rule.

READING 6. DISCOUNTED CASH FLOW APPLICATIONS

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9
Q

Calculate and interpret a holding period return (total return).

READING 6. DISCOUNTED CASH FLOW APPLICATIONS

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10
Q

Calculate and compare the money-weighted and time-weighted rates of return of a portfolio and evaluate the performance of portfolios based on these measures.

READING 6. DISCOUNTED CASH FLOW APPLICATIONS

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11
Q

Calculate and interpret the bank discount yield, holding period yield, effective annual yield, and money market yield for US Treasury bills and other money market instruments.

READING 6. DISCOUNTED CASH FLOW APPLICATIONS

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12
Q

Convert among holding period yields, money market yields, effective annual yields, and bond equivalent yields.

READING 6. DISCOUNTED CASH FLOW APPLICATIONS

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13
Q

Distinguish between descriptive statistics and inferential statistics, between a population and a sample, and among the types of measurement scales.

READING 7. STATISTICAL CONCEPTS AND MARKET RETURNS

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14
Q

Define a parameter, a sample statistic, and a frequency distribution.

READING 7. STATISTICAL CONCEPTS AND MARKET RETURNS

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15
Q

Calculate and interpret relative frequencies and cumulative relative frequencies, given a frequency distribution.

READING 7. STATISTICAL CONCEPTS AND MARKET RETURNS

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16
Q

Describe the properties of a data set presented as a histogram or a frequency polygon.

READING 7. STATISTICAL CONCEPTS AND MARKET RETURNS

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17
Q

Calculate and interpret measures of central tendency, including the population mean, sample mean, arithmetic mean, weighted average or mean, geometric mean, harmonic mean, median, and mode.

READING 7. STATISTICAL CONCEPTS AND MARKET RETURNS

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18
Q

Calculate and interpret quartiles, quintiles, deciles, and percentiles.

READING 7. STATISTICAL CONCEPTS AND MARKET RETURNS

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19
Q

Calculate and interpret 1) a range and a mean absolute deviation and 2) the variance and standard deviation of a population and of a sample.

READING 7. STATISTICAL CONCEPTS AND MARKET RETURNS

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20
Q

Calculate and interpret the proportion of observations falling within a specified number of standard deviations of the mean using Chebyshev’s inequality.

READING 7. STATISTICAL CONCEPTS AND MARKET RETURNS

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21
Q

Calculate and interpret the coefficient of variation and the Sharpe ratio.

READING 7. STATISTICAL CONCEPTS AND MARKET RETURNS

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22
Q

Explain skewness and the meaning of a positively or negatively skewed return distribution.

READING 7. STATISTICAL CONCEPTS AND MARKET RETURNS

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23
Q

Describe the relative locations of the mean, median, and mode for a unimodal, nonsymmetrical distribution.

READING 7. STATISTICAL CONCEPTS AND MARKET RETURNS

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24
Q

Explain measures of sample skewness and kurtosis.

READING 7. STATISTICAL CONCEPTS AND MARKET RETURNS

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25
Q

Compare the use of arithmetic and geometric means when analyzing investment returns.

READING 7. STATISTICAL CONCEPTS AND MARKET RETURNS

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26
Q

Define a random variable, an outcome, an event, mutually exclusive events, and exhaustive events.

READING 8. PROBABILITY CONCEPTS

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27
Q

State the two defining properties of probability and distinguish among empirical, subjective, and a priori probabilities.

READING 8. PROBABILITY CONCEPTS

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28
Q

State the probability of an event in terms of odds for and against the event.

READING 8. PROBABILITY CONCEPTS

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29
Q

Distinguish between unconditional and conditional probabilities.

READING 8. PROBABILITY CONCEPTS

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30
Q

Explain the multiplication, addition, and total probability rules.

READING 8. PROBABILITY CONCEPTS

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31
Q

Calculate and interpret 1) the joint probability of two events, 2) the probability that at least one of two events will occur, given the probability of each and the
joint probability of the two events, and 3) a joint probability of any number of independent events.

READING 8. PROBABILITY CONCEPTS

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32
Q

Distinguish between dependent and independent events.

READING 8. PROBABILITY CONCEPTS

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33
Q

Calculate and interpret an unconditional probability using the total probability rule.

READING 8. PROBABILITY CONCEPTS

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34
Q

Explain the use of conditional expectation in investment applications.

READING 8. PROBABILITY CONCEPTS

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35
Q

Explain the use of a tree diagram to represent an investment problem.

READING 8. PROBABILITY CONCEPTS

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36
Q

Calculate and interpret covariance and correlation.

READING 8. PROBABILITY CONCEPTS

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37
Q

Calculate and interpret the expected value, variance, and standard deviation of a random variable and of returns on a portfolio.

READING 8. PROBABILITY CONCEPTS

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38
Q

Calculate and interpret covariance given a joint probability function.

READING 8. PROBABILITY CONCEPTS

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39
Q

Calculate and interpret an updated probability using Bayes’ formula.

READING 8. PROBABILITY CONCEPTS

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40
Q

Identify the most appropriate method to solve a particular counting problem, and solve counting problems using factorial, combination, and permutation concepts.

READING 8. PROBABILITY CONCEPTS

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CFA LEVEL 1 (4 decks)

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