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
Simulation Methods practice questions
Simulation Methods 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
Simulation Methods
Asset prices are often modeled as lognormal because a lognormal variable:
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Simulation Methods
Monte Carlo simulation is best described as a method that:
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Simulation Methods
Bootstrap resampling most likely involves:
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Simulation Methods
An analyst assumes continuously compounded monthly returns are normally distributed. The corresponding one-month asset price distribution is most likely:
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Simulation Methods
A simulation produces 10,000 one-year portfolio returns, of which 1,300 are below 0%. The simulated probability of a loss is closest to:
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Simulation Methods
For a short data history with clear non-normal tail behavior, a bootstrap simulation is most likely preferred to a normal parametric simulation because it:
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Simulation Methods
A Monte Carlo model estimates a 5% probability of a portfolio loss greater than 20%. The most accurate interpretation is that:
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Simulation Methods
An analyst builds a simulation using expected return, volatility, and correlation assumptions that were estimated during an unusually calm period. The most relevant concern is:
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Simulation Methods
If simple return R is -100%, the continuously compounded return ln(1 + R) is:
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