CFA CFA Level 1 [Pop Quiz Time] SS2 Quantitative Methods Basic Concepts

[Pop Quiz Time] SS2 Quantitative Methods Basic Concepts

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      Have your calculator ready. See if you can answer these 5 questions in just 5 minutes! 

      Question 1

      Sarah Williams buys 10 shares of Astra Corp for $5 per share. At the end of year 1, she sells three shares for $7 per share. At the end of year 2, she sells the remaining shares for $8 each. Astra paid $0.20 as a dividend at the end of year one and $0.50 per share at the end of year two. What is the difference between the time-weighted rate of return and the money-weighted rate of return?

      A. 4.00%

      B. 2.26%

      C. 5.00%

      Question 2

      A stock rated as a Sell has a 75% chance of underperforming the index. Stocks rated Hold have a 30% chance of underperforming the index. A portfolio consists of 40% Sell and 60% Hold rated stocks.

      If a randomly selected stock underperforms the index, what is the probability that it has a Sell rating?

      A. 30.00%

      B. 48.00%

      C. 62.50%

      Question 3

      Brazilian football fan Roberts Marinho queues for 12 hours outside the stadium to buy 10 tickets for the World Cup finals. He pays $100 per ticket but later finds that some of his friends already have tickets and he has eight spares. Roberto places an order to sell the eight tickets in an internet auction. To his surprise, his tickets sell for $1,000 each. He has to pay 20% commission to the internet site and the buyer pays $500 to collect the tickets from Roberto. What is Roberto’s holding period return?

      A. 675%

      B. 637.50%

      C. 700.00%

      Question 4

      Sam Watson wants to do a PhD course at a university in the UK. The research program is expected to take two years and she would like to start it one year from now. During her studies she will need at least $2,500 per month for her personal expenses. Her financial planner advises her to make a deposit every month over the next year so that she will have enough money to cover outgoings during her two-year study period. The deposit will pay 10% over the next year and then pays 15% during her PhD program. What is the monthly deposit Sam should make during the year before her research begins?

      A. $4,350.42

      B. $2,500

      C. $4,154.61

      Question 5

      An analyst expects that there is a 20% chance of an interest rate hike. If one occurs, he calculates the probability of a stock to have a negative EPS as 60%. There is a 40% chance that a stock will have a negative EPS given there is no interest rate hike. What is the probability of an interest rate hike given that a selected stock has negative EPS?

      A. 27%

      B. 44%

      C. 12%

      Answers and explanations can be found here

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