You should spend approximately 15 minutes on these questions. Whilst the CFA exam is less focused on calculations than many people expect, it is important to be confident in performing basic financial math computations and to know how to use your calculator effectively. If you are not confident with these calculations yet, don't worry - all of the content in the questions below is covered during the SHP Financial Training Level I CFA Prep Course. Remember that only the HP12C or Texas BAII Plus calculators are allowed in the exam. Work through the following questions and for each question, mark ONE letter (A,B or C) as the correct answer.

 

1. Suppose you will receive R$1,000 ten years from today and that the appropriate annualized discount rate is 10%. Compute the present value of this cash flow assuming semi-annual compounding
 

2. You bought a 9%, semi-annual, 8-year corporate bond with a par value of R$1,000 (par value represents the terminal value of the bond). Compute the value of this bond today if the appropriate discount rate is 8%. The 9% is the coupon rate of the bond and represents the annual cash flow associated with the bond.
 

3. You borrow R$250,000, to be repaid in equal annual instalments over 20 years. Repayments are at the end of each year. The interest rate is 4%. What are the annual repayments?
 

4. An investor opens a fund with an investment of R$500,000. At the end of the first year, the investor
withdraws £25,000, leaving a balance of £560,000. What is the holding period return?
 

5. An analyst is observing investment returns across a class of hedge funds. He observes a sample of 6 results, as follows: 3%, 3.2%, 2.9%, 4.2%, 1.2%, -4%. What is the arithmetic mean of the sample?
 

6. An investment has a stated return of 8%. What is the semi-annual effective rate?
 

7. What is the fourth root of 28,561?
 

8. An investment costs R$100 today. It generates returns of R$50 for the next four years and then R$60 for two years after that. What is the NPV of these cash flows based on a discount rate of 10%?
 

9. What is the IRR of the cash flows in question 8?
 

10. What is the intrinsic value of an irredeemable preference share that pays a 5.75% coupon on a par
value of R$10. The risk free rate of interest is 3% and investors require an additional return of 4%
over this to compensate for the additional risk involved with this investment

 


 

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