Free CFA Quantitative Methods Practice Questions & Answers
1,200 exam-style Quantitative Methods questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
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Question 991
A leveraged real estate investment produces a leveraged return because:
Select an option first.
Correct answer: B — The investor pays only a portion of the property value
Explanation: ✔ Why correct: Borrowing amplifies returns relative to cash invested. ✘ Why others wrong: A: Opposite of true. C: Prices can fall. D: Real estate provides both income and capital gains.
Question 992
After-tax nominal return is lower than pretax nominal return because:
Select an option first.
Correct answer: A — Taxes reduce the investor’s cash inflows
Explanation: ✔ Why correct: Taxes reduce the amount the investor keeps. ✘ Why others wrong: B: Outflows are not the primary framing. C: Taxes do not affect inflation. D: Gross return is before fees, not taxes.
Question 993
Real return is lower than nominal return when:
Select an option first.
Correct answer: A — Inflation is positive
Explanation: ✔ Why correct: Positive inflation reduces purchasing power → real return < nominal. ✘ Why others wrong: B: Real = nominal when inflation = 0. C: Negative inflation (deflation) makes real > nominal. D: Taxes affect after-tax return, not real return.
Question 994
Money-weighted return will exceed time-weighted return when:
Select an option first.
Correct answer: B — Cash flows occur at favorable times
Explanation: ✔ Why correct: If the investor adds money before strong performance, money-weighted return rises. ✘ Why others wrong: A: Unfavorable timing lowers money-weighted return. C: With no cash flows, both returns are equal. D: Constant returns eliminate differences.
Question 995
The time value of money is based on the idea that:
Select an option first.
Correct answer: B — Present cash flows are preferred because they can be invested
Explanation: ✔ Why correct: Money today can earn a return, making it more valuable than the same amount in the future.
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