60 CFA® Exam Questions Forecast

Below, you can read a list of 60 exam issues that our specialists expect to come up in the Level 1 CFA Exam (includes QM, FRA, CF, PM, FI, DI topics). We are also waiting for you proposals of exam issues. If you have any, write in a comment below. In the meantime you can also register at our portal and get access to Free Mock Exam for level 1 candidates.

Quantitative Methods

• real risk-free interest rate + inflation = nominal risk-free interest rate
• money-weighted rate of return = IRR
• 3 disadvantages of bank discount yield
• compute average price of the stock assuming constant monthly budget (harmonic mean)
• compute sample standard deviation
• positively skewed distribution (mode < median < mean)
• fat-tails (leptokurtic distribution)
• kurtosis vs. excess kurtosis for a normal distribution
• independent events
• compute the probability of no more than 2 successes in 5 trials (binomial distribution)
• compute the probability that a variable will be higher than a given value (normal distribution)
• lognormal distribution vs. normal distribution (lognormal prices of assets; normal distribution returns)
• compute confidence interval
• properties of t-distribution (symmetrical; defined by one parameter (degrees of freedom = n-1); more conservative than normal distribution; the higher n the more t-distribution resembles normal distribution)
• F-test

Financial Reporting and Analysis

• straight line amortization vs. accelerated amortization
• basic EPS vs. diluted EPS (diluted EPS is always lower or equal to basic EPS)
• FIFO vs. LIFO when prices are decreasing
• expanded accounting equation
• operating vs. capital leasing and their impact on financial statements
• duPont analysis
• percentage-of-completion vs. completed contract method (long-term contacts)
• installment method
• reporting items like dividend paid in the proper cash flow (IFRS vs. US GAAP)
• impact of the change in receivables over the period on the cash flow from operations

Corporate Finance

• NPV vs PI (NPV > 0 PI > 1)
• compute growth rate
• compute equity beta
• compute DTL given DOL and DFL
• operating break even point vs. ‘normal’ break even point
• compute the cost of trade credit
• compute acid test ratio (quick ratio)
• steps of capital budgeting
• dividends vs. shares repurchase

Portfolio Management

• compute utility (utility function)
• risk aversion vs. risk tolerance
• compute correlation coefficient (pay attention whether you are given standard deviations or variances)
• optimal investor portfolio vs. optimal risky portfolio
• compute the return on a leveraged portfolio
• properties of beta (higher beta higher systematic risk; market beta = 1)
• undervalued portfolios (above SML)
• ability to take risk vs. willingness to take risk

Fixed Income

• floaters interest rate risk vs. inverse floaters interest rate risk
• coupon rate vs. YTM for premium bonds
• CoCos
• compute forward rate given spot rates
• characteristics of duration (the higher coupon the lower duration, the higher YTM the lower duration, the higher time to maturity (usually) the higher duration)
• compute total price change (remember to use convexity adjustment (always up))
• compute the price of the bond
• portfolio duration

Derivative Investments

• FRA vs. interest rate option
• compute the price of the put option using the put-call parity (remember to subtract the present value of dividends from the stock price)
• decide which of the options has the biggest time value (given option premium and intrinsic value)
• arbitrage
• payoff of the covered call
• impact of volatility on the option value (increase for both put and call)
• compute the payoff of the plain vanilla swap for a party receiving fixed rate
• compute variation margin
• exchange for physicals
• futures vs. forwards