CFA Level 1 Practice Questions — All Questions
AllEthical & Professional StandardsQuantitative MethodsFinancial Reporting & AnalysisCorporate IssuersInvestment Tools (Equity & Fixed Income)
4 questions
Quantitative Methods
The concept that a dollar today is worth more than a dollar in the future is:
- a.Diversification
- b.The time value of money✓
- c.Arbitrage
- d.Duration
Time value of money reflects that money can earn a return over time.
Quantitative Methods
A project should be accepted under the NPV rule when its net present value is:
- a.Positive✓
- b.Negative
- c.Exactly zero always rejected
- d.Equal to the payback period
Positive-NPV projects add value and should be accepted.
Quantitative Methods
Standard deviation is a measure of:
- a.Central tendency
- b.Correlation
- c.Dispersion (variability) of returns✓
- d.The mean only
Standard deviation measures how spread out values are around the mean.
Quantitative Methods
If two assets have a correlation of +1.0, combining them provides:
- a.Maximum diversification benefit
- b.Guaranteed higher returns
- c.Zero risk
- d.No diversification benefit✓
Perfectly positively correlated assets provide no diversification benefit.