2018 CFA level 1 study note book1

2018 CFA level 1 study note book1 2018 CFA level 1 study note book12018 CFA level 1 study note book12018 CFA level 1 study note book12018 CFA level 1 study note book12018 CFA level 1 study note book12018 CFA level 1 study note book12018 CFA level 1 study note book12018 CFA level 1 study note book1 2018 CFA level 1 study note book1 2018 CFA level 1 study note book1

Table of Contents Getting Started Flyer Table of Contents Page List Book – Ethical & Professional Standards and Quantitative Methods Welcome to the 2018 SchweserNotes Reading Assignments and Learning Outcome Statements Ethics and Trust in the Investment Profession LOS 1.a: Explain ethics LOS 1.b: Describe the role of a code of ethics in defining a profession LOS 1.c: Identify challenges to ethical behavior LOS 1.d: Describe the need for high ethical standards in the investment industry LOS 1.e: Distinguish between ethical and legal standards LOS 1.f: Describe and apply a framework for ethical decision making Key Concepts LOS 1.a LOS 1.b LOS 1.c LOS 1.d LOS 1.e LOS 1.f Concept Checkers Answers – Concept Checkers Code of Ethics and Standards of Professional Conduct LOS 2.a: Describe the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of the Code and Standards LOS 2.b: State the six components of the Code of Ethics and the seven Standards of Professional Conduct LOS 2.c: Explain the ethical responsibilities required by the Code and Standards, including the sub-sections of each Standard Guidance for Standards I-VII LOS 3.a: Demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity LOS 3.b: Distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards LOS 3.c: Recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct Concept Checkers Answers – Concept Checkers 10 Introduction to the Global Investment Performance Standards (GIPS) LOS 4.a: Explain why the GIPS standards were created, what parties the GIPS standards apply to, and who is served by the standards LOS 4.b: Explain the construction and purpose of composites in performance reporting LOS 4.c: Explain the requirements for verification Key Concepts LOS 4.a LOS 4.b LOS 4.c 11 The GIPS Standards LOS 5.a: Describe the key features of the GIPS standards and the fundamentals of compliance LOS 5.b: Describe the scope of the GIPS standards with respect to an investment firm’s definition and historical performance record LOS 5.c: Explain how the GIPS standards are implemented in countries with existing standards for performance reporting and describe the appropriate response when the GIPS standards and local regulations conflict LOS 5.d: Describe the nine major sections of the GIPS standards Key Concepts LOS 5.a LOS 5.b LOS 5.c LOS 5.d Concept Checkers Answers – Concept Checkers 12 Self-Test Assessment: Ethical and Professional Standards 13 The Time Value of Money Time Value of Money Concepts and Applications LOS 6.a: Interpret interest rates as required rates of return, discount rates, or opportunity costs LOS 6.b: Explain an interest rate as the sum of a real risk-free rate and premiums that compensate investors for bearing distinct types of risk LOS 6.c: Calculate and interpret the effective annual rate, given the stated annual interest rate and the frequency of compounding LOS 6.d: Solve time value of money problems for different frequencies of compounding LOS 6.e: Calculate and interpret the future value (FV) and present value (PV) of a single sum of money, an ordinary annuity, an annuity due, a perpetuity (PV only), and a series of unequal cash flows LOS 6.f: Demonstrate the use of a time line in modeling and solving time value of money problems Key Concepts LOS 6.a LOS 6.b LOS 6.c LOS 6.d LOS 6.e LOS 6.f Concept Checkers Answers – Concept Checkers 10 Challenge Problems Answers – Challenge Problems 14 Discounted Cash Flow Applications LOS 7.a: Calculate and interpret the net present value (NPV) and the internal rate of return (IRR) of an investment LOS 7.b: Contrast the NPV rule to the IRR rule, and identify problems associated with the IRR rule LOS 7.c: Calculate and interpret a holding period return (total return) LOS 7.d: Calculate and compare the money-weighted and time-weighted rates of return of a portfolio and evaluate the performance of portfolios based on these measures LOS 7.e: Calculate and interpret the bank discount yield, holding period yield, effective annual yield, and money market yield for US Treasury bills and other money market instruments LOS 7.f: Convert among holding period yields, money market yields, effective annual yields, and bond equivalent yields Key Concepts LOS 7.a LOS 7.b LOS 7.c LOS 7.d LOS 7.e LOS 7.f Concept Checkers Answers – Concept Checkers Challenge Problems Answers – Challenge Problems 15 Statistical Concepts and Market Returns LOS 8.a: Distinguish between descriptive statistics and inferential statistics, between a population and a sample, and among the types of measurement scales LOS 8.b: Define a parameter, a sample statistic, and a frequency distribution LOS 8.c: Calculate and interpret relative frequencies and cumulative relative frequencies, given a frequency distribution LOS 8.d: Describe the properties of a data set presented as a histogram or a frequency polygon 2017-2018年最新CFA一级二级考点汇总中文版 （全）根据CFA最新考纲编写，比看notes还有效率 备考CFA的8大最有效资料和工具 教材/notes/核心词汇手册/考纲及解析手册/计算器讲 解、历年全真模拟题/真题/道德手册/QuickSheet/等等 全套资源获取方式随新考 季更新，永久有效！ PD F里 所 有 资 料 扫 码 获 得 史上最全的学霸学渣党CFA考经笔记分享 扫码关注以上微信公众号：CFAer，回复 【资料】即可免费获取全套资源！此活动 永久有效！资料会常年实时更新！绝对全 面！ 2017-2018年最新CFA视频音频课程及指南 除CFA资料外赠送金融、财会技能视频包+热门书籍 +1000G考证资料包 【CFA万人微信群】 需要加入我们CFA全球考友微信群的请添加CFA菌菌的微信号：374208596，备注需要加哪些 群~或直接扫下方CFA菌菌二维码即可~ 所有人均先加入CFA全球考友总群再根据您的需求加入其他分群~ （2017年12月，2018年6打卡签到监督群，一级、二级、三级分群、上海、武汉、北京、成 都、南京、杭州、广州深圳、香港、海外等分群）！ 备考资料、学霸考经、考试资讯免费共享！交流、答疑、互助应有尽有！快来加入我们吧！ 群数量太多，文件中只是部分展示~有困难的话可以随时咨询我哦！ LOS 8.e: Calculate and interpret measures of central tendency, including the population mean, sample mean, arithmetic mean, weighted average or mean, geometric mean, harmonic mean, median, and mode LOS 8.f: Calculate and interpret quartiles, quintiles, deciles, and percentiles LOS 8.g: Calculate and interpret 1) a range and a mean absolute deviation and 2) the variance and standard deviation of a population and of a sample LOS 8.h: Calculate and interpret the proportion of observations falling within a specified number of standard deviations of the mean using Chebyshev’s inequality LOS 8.i: Calculate and interpret the coefficient of variation and the Sharpe ratio 10 LOS 8.j: Explain skewness and the meaning of a positively or negatively skewed return distribution 11 LOS 8.k: Describe the relative locations of the mean, median, and mode for a unimodal, nonsymmetrical distribution 12 LOS 8.l: Explain measures of sample skewness and kurtosis 13 LOS 8.m: Compare the use of arithmetic and geometric means when analyzing investment returns 14 Key Concepts LOS 8.a LOS 8.b LOS 8.c LOS 8.d LOS 8.e LOS 8.f LOS 8.g LOS 8.h LOS 8.i 10 LOS 8.j 11 LOS 8.k 12 LOS 8.l 13 LOS 8.m 15 Concept Checkers Answers – Concept Checkers 16 Challenge Problems Answers – Challenge Problems 16 Probability Concepts LOS 9.a: Define a random variable, an outcome, an event, mutually exclusive events, and exhaustive events LOS 9.b: State the two defining properties of probability and distinguish among empirical, subjective, and a priori probabilities LOS 9.c: State the probability of an event in terms of odds for and against the event LOS 9.d: Distinguish between unconditional and conditional probabilities LOS 9.e: Explain the multiplication, addition, and total probability rules LOS 9.f: Calculate and interpret 1) the joint probability of two events, 2) the probability that at least one of two events will occur, given the probability of each and the joint probability of the two events, and 3) a joint probability of any number of independent events LOS 9.g: Distinguish between dependent and independent events LOS 9.h: Calculate and interpret an unconditional probability using the total probability rule LOS 9.i: Explain the use of conditional expectation in investment applications 10 LOS 9.j: Explain the use of a tree diagram to represent an investment problem 11 LOS 9.k: Calculate and interpret covariance and correlation 12 LOS 9.l: Calculate and interpret the expected value, variance, and standard deviation of a random variable and of returns on a portfolio 13 LOS 9.m: Calculate and interpret covariance given a joint probability function 14 LOS 9.n: Calculate and interpret an updated probability using Bayes’ formula 15 LOS 9.o: Identify the most appropriate method to solve a particular counting problem and solve counting problems using factorial, combination, and permutation concepts 16 Key Concepts LOS 9.a LOS 9.b LOS 9.c LOS 9.d LOS 9.e LOS 9.f LOS 9.g LOS 9.h LOS 9.i 10 LOS 9.j 11 LOS 9.k 12 LOS 9.l 13 LOS 9.m 14 LOS 9.n 15 LOS 9.o 17 Concept Checkers Answers – Concept Checkers 18 Challenge Problems Answers – Challenge Problems 17 Common Probability Distributions LOS 10.a: Define a probability distribution and distinguish between discrete and continuous random variables and their probability functions LOS 10.b: Describe the set of possible outcomes of a specified discrete random variable LOS 10.c: Interpret a cumulative distribution function LOS 10.d: Calculate and interpret probabilities for a random variable, given its cumulative distribution function LOS 10.e: Define a discrete uniform random variable, a Bernoulli random variable, and a binomial random variable LOS 10.f: Calculate and interpret probabilities given the discrete uniform and the binomial distribution functions LOS 10.g: Construct a binomial tree to describe stock price movement LOS 10.h: Define the continuous uniform distribution and calculate and interpret probabilities, given a continuous uniform distribution LOS 10.i: Explain the key properties of the normal distribution 10 LOS 10.j: Distinguish between a univariate and a multivariate distribution and explain the role of correlation in the multivariate normal distribution 11 LOS 10.k: Determine the probability that a normally distributed random variable lies inside a given interval 12 LOS 10.l: Define the standard normal distribution, explain how to standardize a random variable, and calculate and interpret probabilities using the standard normal distribution 13 LOS 10.m: Define shortfall risk, calculate the safety-first ratio, and select an optimal portfolio using Roy’s safety-first criterion 14 LOS 10.n: Explain the relationship between normal and lognormal distributions and why the lognormal distribution is used to model asset prices 15 LOS 10.o: Distinguish between discretely and continuously compounded rates of return and calculate and interpret a continuously compounded rate of return, given a specific holding period return 16 LOS 10.p: Explain Monte Carlo simulation and describe its applications and limitations 17 LOS 10.q: Compare Monte Carlo simulation and historical simulation 18 Key Concepts LOS 10.a LOS 10.b LOS 10.c LOS 10.d LOS 10.e LOS 10.f LOS 10.g LOS 10.h LOS 10.i 10 LOS 10.j 11 LOS 10.k 12 LOS 10.l 13 LOS 10.m 14 LOS 10.n 15 LOS 10.o 16 LOS 10.p 17 LOS 10.q 19 Concept Checkers Answers – Concept Checkers 20 Challenge Problems Answers – Challenge Problems 18 Sampling and Estimation LOS 11.a: Define simple random sampling and a sampling distribution LOS 11.b: Explain sampling error LOS 11.c: Distinguish between simple random and stratified random sampling LOS 11.d: Distinguish between time-series and cross-sectional data LOS 11.e: Explain the central limit theorem and its importance LOS 11.f: Calculate and interpret the standard error of the sample mean LOS 11.g: Identify and describe desirable properties of an estimator LOS 11.h: Distinguish between a point estimate and a confidence interval estimate of a population parameter LOS 11.i: Describe properties of Student’s t-distribution and calculate and interpret its degrees of freedom 10 LOS 11.j: Calculate and interpret a confidence interval for a population mean, given a normal distribution with 1) a known population variance, 2) an unknown population variance, or 3) an unknown variance and a large sample size 11 LOS 11.k: Describe the issues regarding selection of the appropriate sample size, data-mining bias, sample selection bias, survivorship bias, look-ahead bias, and time-period bias 12 Key Concepts LOS 11.a LOS 11.b LOS 11.c LOS 11.d LOS 11.e LOS 11.f LOS 11.g LOS 11.h LOS 11.i 10 LOS 11.j 11 LOS 11.k 13 Concept Checkers The cumulative probability, F(4), and P(2 < x ≤ 5) are: F(4); P(2 < x ≤ 5) A 0.267 ; 0.80 B 0.267 ; 0.93 C 0.667 ; 0.80 F(4) is the probability that x ≤ 4, which is (1 + + + 4) / 15 = 0.667, or – / 15 = 0.667 The probability that < x ≤ 5, which is P(x = 3, 4, or 5), = (3 + + 5) / 15 = 0.80 This is also F(5) – F(2) = (1 + + + + 5) / 15 – (1 + 2) / 15 = 0.80 FORMULAS nominal risk-free rate = real risk-free rate + expected inflation rate required interest rate on a security = nominal risk-free rate + default risk premium + liquidity premium + maturity risk premium effective annual rate = (1 + periodic rate)m – continuous compounding: er – = EAR FV = PV(1 + I/Y)N general formula for the IRR: bank discount yield effective annual yield = (1 + HPY)365 / t – money market yield population mean: sample mean: geometric mean return (RG): harmonic mean: weighted mean: position of the observation at a given percentile, y: range = maximum value – minimum value excess kurtosis = sample kurtosis – coefficient of variation: joint probability: P(AB) = P(A | B) × P(B) addition rule: P(A or B) = P(A) + P(B) – P(AB) multiplication rule: P(A and B) = P(A) × P(B) total probability rule: P(R) = P(R | S1) × P(S1) + P(R | S2) × P(S2) + + P(R | SN) × P(SN) expected value: E(X) = ΣP(xi)xi = P(x1)x1 + P(x2)x2+ … + P(xn)xn Cov(Ri,Rj) = E{[Ri – E(Ri)][Rj – E(Rj)]} portfolio expected return: wnE(Rn) portfolio variance: = w1E(R1) + w2E(R2) + … + where Bayes’ formula: combination (binomial) formula: permutation formula: binomial probability: for a binomial random variable: E(X) = np; variance = np(1 – p) for a normal variable: 90% confidence interval for X is X – 1.65s to X + 1.65s 95% confidence interval for X is X – 1.96s to X + 1.96s 99% confidence interval for X is X – 2.58s to X + 2.58s SFRatio = continuously compounded rate of return: for a uniform distribution: sampling error of the mean = sample mean – population mean = x – μ standard error of the sample mean, known population variance: standard error of the sample mean, unknown population variance: confidence interval: point estimate ± (reliability factor × standard error) confidence interval for the population mean: tests for population mean = μ0: test for equality of variances: paired comparisons test: t-statistic = test for differences in means: , , where t-statistic = (sample variances assumed unequal) t-statistic = (sample variances assumed equal) APPENDIX A: AREAS UNDER THE NORMAL CURVE Most of the examples in this book have used one version of the z-table to find the area under the normal curve This table provides the cumulative probabilities (or the area under the entire curve to left of the z-value) PROBABILITY EXAMPLE Assume that the annual earnings per share (EPS) for a large sample of firms is normally distributed with a mean of $5.00 and a standard deviation of $1.50 What is the approximate probability of an observed EPS value falling between $3.00 and $7.25? If EPS = x = $7.25, then z = (x – μ)/σ = ($7.25 – $5.00)/$1.50 = +1.50 If EPS = x = $3.00, then z = (x – μ)/σ = ($3.00 – $5.00)/$1.50 = –1.33 SOLVING USING THE CUMULATIVE Z-TABLE For z-value of 1.50: Use the row headed 1.5 and the column headed to find the value 0.9332 This represents the area under the curve to the left of the critical value 1.50 For z-value of –1.33: Use the row headed 1.3 and the column headed to find the value 0.9082 This represents the area under the curve to the left of the critical value +1.33 The area to the left of –1.33 is – 0.9082 = 0.0918 The area between these critical values is 0.9332 – 0.0918 = 0.8414, or 84.14% HYPOTHESIS TESTING – ONE-TAILED TEST EXAMPLE A sample of a stock’s returns on 36 nonconsecutive days results in a mean return of 2.0 percent Assume the population standard deviation is 20.0 percent Can we say with 95 percent confidence that the mean return is greater than zero percent? H0: μ ≤ 0.0%, Ha: μ > 0.0% The test statistic = z-statistic = = (2.0 – 0.0) / (20.0 / 6) = 0.60 The significance level = 1.0 – 0.95 = 0.05, or 5% Because we are interested in a return greater than 0.0 percent, this is a one-tailed test USING THE CUMULATIVE Z-TABLE Because this is a one-tailed test with an alpha of 0.05, we need to find the value 0.95 in the cumulative z-table The closest value is 0.9505, with a corresponding critical z-value of 1.65 Because the test statistic is less than the critical value, we fail to reject H0 HYPOTHESIS TESTING – TWO-TAILED TEST EXAMPLE Using the same assumptions as before, suppose that the analyst now wants to determine if he can say with 99% confidence that the stock’s return is not equal to 0.0 percent H0: μ = 0.0%, Ha: μ ≠ 0.0% The test statistic (z-value) = (2.0 – 0.0) / (20.0 / 6) = 0.60 The significance level = 1.0 – 0.99 = 0.01, or 1% Because we are interested in whether or not the stock return is nonzero, this is a two-tailed test Using the Cumulative Z-Table Because this is a two-tailed test with an alpha of 0.01, there is a 0.005 rejection region in both tails Thus, we need to find the value 0.995 (1.0 – 0.005) in the table The closest value is 0.9951, which corresponds to a critical z-value of 2.58 Because the test statistic is less than the critical value, we fail to reject H0 and conclude that the stock’s return equals 0.0 percent CUMULATIVE Z-TABLE APPENDIX B: STUDENT’S t-DISTRIBUTION APPENDIX C: F-TABLE AT PERCENT (UPPER TAIL) APPENDIX D: F-TABLE AT 2.5 PERCENT (UPPER TAIL) APPENDIX E: CHI-SQUARED TABLE All rights reserved under International and Pan-American Copyright Conventions By payment of the required fees, you have been granted the non-exclusive, nontransferable right to access and read the text of this eBook on screen No part of this text may be reproduced, transmitted, downloaded, decompiled, reverse engineered, or stored in or introduced into any information storage and retrieval system, in any forms or by any means, whether electronic or mechanical, now known or hereinafter invented, without the express written permission of the publisher SCHWESERNOTES™ 2018 LEVEL I CFA® BOOK 1: ETHICAL AND PROFESSIONAL STANDARDS AND QUANTITATIVE METHODS (EBOOK) ©2017 Kaplan, Inc All rights reserved Published in 2017 by Kaplan, Inc Printed in the United States of America ISBN: 978-1-4754-6101-5 If this book does not have the hologram with the Kaplan Schweser logo on the back cover, it was distributed without permission of Kaplan Schweser, a Division of Kaplan, Inc., and is in direct violation of global copyright laws Your assistance in pursuing potential violators of this law is greatly appreciated Required CFA Institute disclaimer: “CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by Kaplan Schweser CFA and Chartered Financial Analyst are trademarks owned by CFA Institute.” Certain materials contained within this text are the copyrighted property of CFA Institute The following is the copyright disclosure for these materials: “Copyright, 2017, CFA Institute Reproduced and republished from 2017 Learning Outcome Statements, Level I, II, and III questions from CFA® Program Materials, CFA Institute Standards of Professional Conduct, and CFA Institute’s Global Investment Performance Standards with permission from CFA Institute All Rights Reserved.” These materials may not be copied without written permission from the author The unauthorized duplication of these notes is a violation of global copyright laws and the CFA Institute Code of Ethics Your assistance in pursuing potential violators of this law is greatly appreciated Disclaimer: The Schweser Notes should be used in conjunction with the original readings as set forth by CFA Institute in their 2017 Level I CFA Study Guide The information contained in these Notes covers topics contained in the readings referenced by CFA Institute and is believed to be accurate However, their accuracy cannot be guaranteed nor is any warranty conveyed as to your ultimate exam success The authors of the referenced readings have not endorsed or sponsored these Notes ... 13 1 13 2 13 3 13 4 13 5 13 6 13 7 13 8 13 9 14 0 14 1 14 2 14 3 14 4 14 5 14 6 14 7 14 8 14 9 15 0 15 1 15 2 15 3 15 4 15 5 15 6 15 7 15 8 15 9 16 0 16 1 16 2 16 3 16 4 16 5 16 6 16 7 16 8 16 9 17 0 17 1 17 2 11 7 11 8 11 9 12 0 12 1 12 2 12 3... 12 3 12 4 12 5 12 6 12 7 12 8 12 9 13 0 13 1 13 2 13 3 13 4 13 5 13 6 13 7 13 8 13 9 14 0 14 1 14 2 14 3 14 4 14 5 14 6 14 7 14 8 14 9 15 0 15 1 15 2 15 3 15 4 15 5 15 6 15 7 15 8 15 9 16 0 17 3 17 4 17 5 17 6 17 7 17 8 17 9 18 0 18 1 18 2 18 3... 18 3 18 4 18 5 18 6 18 7 18 8 18 9 19 0 19 1 19 2 19 3 19 4 19 5 19 6 19 7 19 8 19 9 200 2 01 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 16 1 16 2 16 3 16 4 16 6 16 7 16 5 16 8 16 9 17 0 17 1 17 2 17 3 17 4 17 5