- CFA Exams
- CFA Level I Exam
- Study Session 18. Portfolio Management (1)
- Reading 52. Portfolio Risk and Return: Part I
- Subject 1. Major Return Measures

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**CFA Practice Question**

Which of the following calculations can be successfully performed without knowing the required rate of return?

II. Internal Rate of Return

III. Modified Internal Rate of Return

IV. Time-weighted Rate of Return

V. Dollar-weighted Rate of Return

VI. Valuing a common stock using the dividend discount model

VII. Valuing a common stock using the free-cash-flow-to-equity model

I. Net Present Value

II. Internal Rate of Return

III. Modified Internal Rate of Return

IV. Time-weighted Rate of Return

V. Dollar-weighted Rate of Return

VI. Valuing a common stock using the dividend discount model

VII. Valuing a common stock using the free-cash-flow-to-equity model

A. II, IV, V

B. II, V, VI

C. II, IV, V, VI, VII

**Explanation:**Of the financial figures listed, only the Internal Rate of Return, which is also known as the "Dollar-Weighted Rate of Return," and the Time-Weighted Rate of Return can be calculated without knowing the required rate of return.

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**User Contributed Comments**
2

User |
Comment |
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wollogo |
I would arguee that VII is also correct. They key advantage of using multiplier based models or ratios is that you don't need to estimate the rate of return. |

octavianus |
FCFE is not an equity based multiplier, it is CFO - Capital Expenditures discounted at cost of equity (k). Thus, discount rate/required rate of return is needed. |