24 Online CFA Mock Exam Level 1 Free Questions and Answers on Economics

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HPY = ((P1 - P0 ) + D ) / P0

• Definition of IRR
• Holding period yield
• Holding Period return
• Discount Price

Same as IRR. Gives higher precedence to amount of money invested vs return.

• Money market
• Holding Period return
• Money Weighted return
• Time Weighted return

T-Bills, Commercial Paper, Negotiable CDs.

• Net Present Value
• Payment of interest
• Examples of money market
• Money market

EAY = ( ( 1 + HPY) ^ (365/t) ) -1

• Money Market Yield (CD yield)
• Holding period yield
• Time Weighted return
• Effective annual yield on T-Bills

r = (HPY) ^ ( 360/t)

• Money Market Yield (CD yield)
• Holding period yield
• Money Weighted return
• Money market

Sum ( CF/(1+r)^t) r=required rate of return

• Money market
• NPV Formula
• Capital structure
• Discount Price

Invest only if IRR is greater than opportunity cost.

• Decision to invest - IRR rule
• Definition of IRR
• Discount Price
• Capital structure

1. Identity all cash inflows and cash outflows.2. Calculate the present value by applying the discount rate.3. Sum all present values.4. That is NPV.

• Steps to calculate Net Present Value
• Decision to invest - IRR rule
• Net Present Value
• Capital structure

D= r F ( t/360)

• Net Present Value
• Discount Price
• Definition of IRR
• Money market

Discount rate that makes NPV zeroNPV=0=Sum(CFt/(1+IRR)^t)

• Net Present Value
• Definition of IRR
• Discount Price
• Capital budgeting

Assumes a 360 day holding period

• Holding period yield
• Money Market Yield (CD yield)
• Money market
• Money Weighted return

(1 + r) ^ 4 -> Where four is the number of quarters.r -> Quarterly return.

• Converting quarterly return to yearly returns
• Time Weighted return
• Holding Period return
• Money Weighted return

Financing long term projects.

• Capital structure
• Capital budgeting
• NPV Formula
• Discount Price

PV (Cash Inflows) = PV(Cash Outflows) and the equivalent IRR that computes the rate of return

• Money market
• Money Weighted return
• Time Weighted return
• Holding Period return

Initially, the lender/investor pays the face value - Discount and at the end, the lender/investor receives the face value.

• Definition of IRR
• Capital structure
• Payment of interest
• Money market

Geometric mean of the holding periods.

• Holding Period return
• Time Weighted return
• Money Weighted return
• Capital structure

r = (D/F) * (360/t)

• Discount Price
• Annualized discount Bank Discount
• Net Present Value
• Examples of money market

Management of company's short term assets like inventory and short term liabilities (money owed to suppliers).

• Capital structure
• Capital budgeting
• Working capital management
• Holding period yield

Allocation of funds for long term projects

• Capital structure
• Definition of IRR
• Money market
• Capital budgeting

1. Capital budgeting.2. Capital structure.3. Working capital management.

• Effective annual yield on T-Bills
• Holding Period return
• Decision to invest - IRR rule
• Three critical financial decisions for businesses

Short term market ( < 1 year)

• Money market
• NPV Formula
• Examples of money market
• Discount Price

Present value of all its cash inflows - Present value of all its cash outflows.

• Discount Price
• NPV Formula
• Money market
• Net Present Value

Measures the return over a period.

• Holding Period return
• Time weighted return
• Definition of IRR
• Money Weighted return

HPR = (P1 - P0 + D1 ) / P0

• Holding period yield
• Holding Period return
• Time Weighted return
• Money Weighted return