What to know
Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.
Quantitative Methods
Portfolio Mathematics practice questions
Portfolio Mathematics is part of CFA Level I Quantitative Methods. Quantitative Methods questions emphasize time value of money, probability, sampling, hypothesis testing, regression, and return statistics. Use this page to review the controlling ideas, then work through 9 questions with answer explanations and common traps.
Review the worked explanations before moving into adaptive practice. The app version can mix this topic with due reviews and weak related concepts.
Practice this topicHow to practice
Work each item under time pressure, then compare your reasoning with the step-by-step explanation and key takeaway.
Review signal
Missed questions should become scheduled reviews when the error comes from a concept gap, formula setup, or answer-choice trap.
Quantitative Methods
Portfolio Mathematics
A portfolio is 30% invested in Asset A with expected return 4% and 70% in Asset B with expected return 10%. The portfolio expected return is closest to:
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Portfolio Mathematics
A negative covariance between two assets most likely indicates that their returns:
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Portfolio Mathematics
Roy's safety-first ratio is best described as:
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Portfolio Mathematics
A two-asset portfolio has weights of 40% and 60%, standard deviations of 10% and 15%, and correlation of 0.20. The portfolio standard deviation is closest to:
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Portfolio Mathematics
The covariance between two asset returns is 0.0030. Their standard deviations are 12% and 20%. The correlation is closest to:
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Portfolio Mathematics
For two risky assets with unchanged individual risks and weights, diversification benefit is greatest when the correlation is:
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Portfolio Mathematics
A joint probability model has three states with probabilities 30%, 40%, and 30%. Asset A returns are 10%, 4%, and -2%; Asset B returns are 12%, 3%, and -6%. The covariance of returns is closest to:
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Portfolio Mathematics
Three portfolios have the following expected returns and standard deviations. The minimum acceptable return is 2%: Portfolio A, 8% and 10%; Portfolio B, 9% and 14%; Portfolio C, 7% and 8%. Roy safety-first selects:
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Portfolio Mathematics
Two assets each have a standard deviation of 10%. A 50/50 portfolio of the assets has a standard deviation of 0%. The correlation between the assets is:
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