CFA Level I UPDATED SCRIPT 2026 PRACTICE SOLUTIONS GRADED A.pdf

CFA Level I UPDATED SCRIPT 2026
PRACTICE SOLUTIONS GRADED A+

● Liquidity Risk. Answer: Risk of recieving less than fair value for an
investment if it must be sold for cash quickly


● Required Interest Rate on A Security. Answer: = Nominal Interest
Rate
+ Default Risk Premium
+ Liquidity Premium
+ Maturity Risk Premium


● Real Risk Free Rate / Nominal Risk Free Rate. Answer: - Single
period interest rate for a completely risk-free security with no inflation
added


- Nominal = Real Risk Free Rate + Expected Inflation Rate


● Required Rate of Return. Answer: Required Rate of Return for an
investor to willingly invest


● Discount Rate. Answer: Used interchangeably with interest rates,
especially in use of discounting cash flows

, ● Opportunity Cost. Answer: The gain that is missed by not investing in
a particular investment


● Effective Annual Rate. Answer: The actualy rate of interst that is
actually being earned after compounding more than annually


● Continuous Compounding. Answer: 1. Multiply rate by time
2. Multiple answer by e (Second LN)
3. Multiply by PV


● Present Value of Perpetuity. Answer: Financial instrument that pays a
fixed amount of money at set intervals over an infinite period of time


● Present Value of a Projected Perpetuity. Answer: 1. Calculate PV of
Perpetuity
2. Find present value of (N -1)


● PV of Uneven Cash Flows. Answer: 1. Clear Memory
2. Enter 0 in CF0
3. Enter Cash Flows in Sequence
4. NPV = Discount Rate
5. ComputeT NPV