Schweser note for the CPA exam 2013 CFA level 1 book 1

BooK ETHICAL AND PROFESSIONAL STANDARDS AND QuANTITAT IVE METHODS - Reading Assignments and Learning Outcome Statements Study Session - Ethics and Professional Standards Self-Test - Ethics and Professional Standards Study Session Study Session - - Formulas Quantitative Methods: Application Appendices Index Quantitative Methods: Basic Concepts Self-Test - Quantitative Methods 13 91 98 245 362 367 371 379 SCHWESERNOTESTM 2013 CFA LEVEL I B O OK 1: ETHICAL AND PROFESSIONAL STANDARDS AND QUANTITATIVE METHODS ©2012 Kaplan, Inc All rights reserved Published in 2012 by Kaplan Schweser Printed in the United States of A merica ISBN: 978-1-4277-4269-8 /1-4277-4269-3 PPN: 3200-2844 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 gready appreciated Required CFA Institute disclaimer: "CFN� and Chartered Financial Analyst® are trademarks owned by CFA Institute CFA Institute (formerly the Association for Investment Management and Research) does not endorse, promote, review, or warrant the accuracy of the products or services offered by Kaplan Schweser." Certain materials contained within this text are the copyrighted property of CFA Institute The following is the copyright disclosure for these materials: "Copyright, 2013, CFA Institute Reproduced and republished from 2013 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 SchweserNotes should be used in conjunction with the original readings as set forth by CFA Institute in their 2013 CFA Level I 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 WELCOME TO THE 2013 ScuwEsERNoTEs™ Thank you for trusting Kaplan Schweser to help you reach your goals We are all very pleased to be able to help you prepare for the Level I CFA Exam In this introduction, I want to explain the resources included with the SchweserNotes, suggest how you can best use Schweser materials to prepare for the exam, and direct you toward other educational resources you will find helpful as you study for the exam Besides the SchweserNotes themselves, there are many educational resources available at Schweser.com Just log in using the individual username and password that you received when you purchased the SchweserNotes SchweserNotesTM These consist of five volumes that include complete coverage of all 18 Study Sessions and all Learning Outcome Statements (LOS) with examples, Concept Checkers (multiple-choice questions for every topic review), and Challenge Problems for many topic reviews to help you master the material and check your progress At the end of each major topic area, we include a Self-test Self-test questions are created to be exam­ like in format and difficulty in order for you to evaluate how well your study of each topic has prepared you for the actual exam Practice Questions To retain what you learn, it is important that you quiz yourself often We offer CD, download, and online versions of the SchweserProTM QBank, which contains thousands of Level I practice questions and explanations Quizzes are available for each LOS, topic, or Study Session Build your own exams by specifying the topics and the number of questions you choose Practice Exams Schweser offers six full 6-hour practice exams Practice Exams Volume and Volume each contain three full 240-question exams These are important tools for gaining the speed and skills you will need to pass the exam Each book contains answers with full explanations for self-grading and evaluation By entering your answers at Schweser.com, you can use our Performance Tracker to find out how you have performed compared to other Schweser Level I candidates Schweser Library We have created reference videos, some of which are available to all SchweserNotes purchasers Schweser Library volumes are typically between 20 and 60 minutes in length and cover such topics as: "CFA Level I Exam Overview," "Calculator Basics," "Code and Standards Overview," and "Time Value of Money." The full Schweser Library is included with our 16-week live or online classes and with our video instruction (online or CDs) Online Schweser Study Planner Use your Online Access to tell us when you will start and what days of the week you can study The online Schweser Study Planner will create a study plan just for you, breaking each study session into daily and weekly tasks to keep you on track and help you monitor your progress through the curriculum ©2012 Kaplan, Inc Page3 Welcome to the 2013 SchweserNotesTM Additional Resources Purchasers of the Essential Self-Study or Premium Instruction Packages also receive access to our Instructor-led Office Hours Office Hours allow you to get your questions about the curriculum answered in real time and to see others' questions (and instructor answers) as well Office Hours is a text-based live interactive online chat with our team of Level I experts Archives of previous Office Hours sessions can be sorted by topic or date and are posted shortly after each session The Level I CFA exam is a formidable challenge (67 topic reviews and 500+ Learning Outcome Statements), and you must devote considerable time and effort to be properly prepared There is no shortcut! You must learn the material, know the terminology and techniques, understand the concepts, and be able to answer 240 questions quickly and (at least 70%) correctly Fifteen to 20 hours per week for 20 weeks is a good estimate of the study time required on average, but some candidates will need more or less time, depending on their individual backgrounds and experience To help you master this material and be well prepared for the CFA Exam, we offer several other educational resources, including: Live Weekly Classroom Programs We offer weekly classroom programs around the world Please check Schweser.com for locations, dates, and availability 16-Week Online Class Our 16-Week Online Classes are available at New York time (6:30-9:30 pm) or London time (6:00-9:00 pm) beginning in January and August The approximate schedule for the 16-Week Online Classes (3-hour sessions) is as follows: Class# Class# Exam Intro/Quantitative Methods SS2 Financial Reporting & Analysis SSlO Quantitative Methods SS3 Corporate Finance SS 1 Economics SS4, 1 Equity Investments SS13, 14 Economics SS5, 12 Fixed Income SS 5 Financial Reporting & Analysis SS7 13 Fixed Income SS 16 Financial Reporting & Analysis SS8 14 Derivatives SS 7 Financial Reporting & Analysis SS8,9 15 Portfolio Management & Alternative Investments SS12, 18 Financial Reporting & Analysis SS9 16 Ethical and Professional Standards SSl Archived classes are available for viewing at any time throughout the season Candidates enrolled in the 16-Week Online Classes also have full access to supplemental on-demand video instruction in the Schweser Library and an e-mail address to use to send questions to the instructor at any time Page ©2012 Kaplan, Inc Welcome to the 2013 SchweserNotesTM Late Season Review Whether you use self�study or in-class, online, or video instruction to learn the CFA curriculum, a late-season review and exam practice can make all the difference Our most complete late�season review course is our residence program in Windsor, Ontario (WindsorWeek) where we cover the entire curriculum over seven days (May 4-10) at all three levels We also offer 3-Day Exam Workshops in many cities (and online) that combine curriculum review with an equal component of hands-on practice with hundreds of questions and problem-solving techniques Our Dallas/Fort Worth review program extends to five days (May 13-17) Please visit us at Schweser.com for complete listings and course descriptions for all our late-season review offerings Mock Exam and Multimedia Tutorial On May 18, 2013, and November 23, 2013, the Schweser Mock Exam will be offered live in over 60 cities around the world and as an online exam as well The optional Multimedia Tutorial provides extended explanations and topic tutorials to get you exam-ready in topic areas where you miss questions on the Mock Exam Please visit Schweser.com for a listing of cities and locations Topic Weighting In preparing for the exam, you must pay attention to the weights assigned to each topic within the curriculum The Level I topic weights are as follows: Topic Ethical and Professional Standards Exam Weight 15% Quantitative Methods 12% Economics 10% Financial Reporting and Analysis 20% Corporate Finance 8% Portfolio Management 5% Equity Investments 10% Fixed Income Investments 12% Derivatives 5% Alternative Investments 3% Total 100% How to Succeed There are no shortcuts; depend on the fact that CFA Institute will test you in a way that will reveal how well you know the Level I curriculum You should begin early and stick to your study plan You should first read the SchweserNotes and complete the Concept Checkers and Challenge Problems for each topic review You should prepare for and attend a live class, an online class, or a study group each week You should take quizzes often using SchweserPro Qbank and go back to review previous topics and Study Sessions as well At the end of each topic area, you should take the Self-test to check your progress You should finish the overall curriculum at least four weeks (preferably five weeks) before the Level I exam so that you have sufficient time for Practice Exams and for further review of those topics that you have not yet mastered ©2012 Kaplan, Inc PageS Welcome to the 2013 SchweserNotesTM I would like to thank Craig Prochaska, CFA, Content Specialist and Jared Heintz, Lead Editor, for their contributions to producing the 2013 Level I SchweserNotes for the CFA Exam Best regards, Dr Douglas Van Eaton, CFA SVP of CFA Education and Level I Manager Kaplan Schweser Page6 ©2012 Kaplan, Inc READING AssiGNMENTS AND LEARNING OuTcoME STATEMENTS The following material is a review ofthe Ethics and Professional Standards and Quantitative Methods principles designed to address the learning outcome statements setforth by CFA Institute STUDY SESSION Reading Assignments Ethical and Professional Standards and Quantitative Methods, CPA Program Curriculum, Volume (CFA Institute, 2013) Code of Ethics and Standards of Professional Conduct page 13 Guidance for Standards 1-VII page 13 Introduction to the Global Investment Performance Standards (GIPS®) page 82 Global Investment Performance Standards (GIPS®) page 84 STUDY SESSION Reading Assignments Ethical and Professional Standards and Quantitative Methods, CPA Program Curriculum, Volume (CFA Institute, 2013) S The Time Value of Money Discounted Cash Flow Applications Statistical Concepts and Market Returns Probability Concepts page 98 page 138 page 163 page 201 STUDY SESSION Reading Assignments Ethical and Professional Standards and Quantitative Methods, CPA Program Curriculum, Volume (CFA Institute, 2013) Common Probability Distributions 10 Sampling and Estimation 11 Hypothesis Testing 12 Technical Analysis ©2012 Kaplan, Inc page 245 page 280 page 303 page 343 Page Book Ethical and Professional Standards and Quantitative Methods Reading Assignments and Learning Outcome Statements - LEARNING OUTCOME STATEMENTS (LOS) STUDY SESSION The topical coverage co"esponds with thefollowing CFA Institute assigned reading: Code of Ethics and Standards of Professional Conduct The candidate should be able to: a describe the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of the Code and Standards (page 13) b state the six components of the Code of Ethics and the seven Standards of Professional Conduct (page 14) c explain the ethical responsibilities required by the Code and Standards, including the sub-sections of each Standard (page 15) Guidance for Standards I-VII The candidate should be able to: a demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity (page 18) b distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards (page 18) c recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct (page 18) Introduction to the Global Investment Performance Standards (GIPS®) The candidate should be able to: a explain why the GIPS standards were created, what parties the GIPS standards apply to, and who is served by the standards (page 82) b explain the construction and purpose of composites in performance reporting (page 83) c explain the requirements for verification (page 83) Global Investment Performance Standards (GIPS®) The candidate should be able to: a describe the key features of the GIPS standards and the fundamentals of compliance (page 84) b describe the scope of the GIPS standards with respect to an investment firm's definition and historical performance record (page 86) 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 (page 86) d describe the nine major sections of the GIPS standards (page 86) Page ©2012 Kaplan, Inc Book - Ethical and Professional Standards and Quantitative Methods Reading Assignments and Learning Outcome Statements STUDY SESSION The Time Value of Money The candidate should be able to: a interpret interest rates as required rates of return, discount rates, or opportunity costs (page 100) 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 (page 101) c calculate and interpret the effective annual rate, given the stated annual interest rate and the frequency of compounding (page 101) d solve time value of money problems for different frequencies of compounding (page 103) 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 (page 104) f demonstrate the use of a time line in modeling and solving time value of money problems (page 118) Discounted Cash Flow Applications The candidate should be able to: a calculate and interpret the net present value (NPV) and the internal rate of return (IRR) of an investment (page 138) b contrast the NPV rule to the IRR rule, and identify problems associated with the IRR rule (page 141) c calculate and interpret a holding period return (total return) (page 143) 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 (page 143) e calculate and interpret the bank discount yield, holding period yield, effective annual yield, and money market yield for U.S Treasury bills and other money market instruments (page 147) f convert among holding period yields, money market yields, effective annual yields, and bond equivalent yic:lds (page 1SO) Statistical Concepts and Market Returns The candidate should be able to: a distinguish between descriptive statistics and inferential statistics, between a population and a sample, and among the types of measurement scales (page 163) b define a parameter, a sample statistic, and a frequency distribution (page 164) c calculate and interpret relative frequencies and cumulative relative frequencies, given a frequency distribution (page 166) d describe the properties of a data set presented as a histogram or a frequency polygon (page 168) 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 (page 169) f calculate and interpret quartiles, quintiles, deciles, and percentiles (page 174) 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 (page 175) ©2012 Kaplan, Inc Page Book - Ethical and Professional Standards and Quantitative Methods Formulas N portfolio expected return: E{RP ) L wiE{Ri ) w1E(R 1) + w2E(�) + + wnE(Rn) i=l = = N N portfolio variance: Var(RP ) LL wiw;Cov{Ri ,R; ) i=l j=l = value of investment in asset i where w· = market market value of the portfolio - Bayes' formula: of new information for a given event pnor probahili'ty of event updated probabil.1ty = probability unconditional probability of new information combination (binomial) formula: ncr = (n -n!r) r x ' ' formula: Pr = n! permutauon (n-r)! binomial probability: p(x) = n-xn!) !x! px (l-pt-x n - { for a binomial random variable: E(X) = np; variance = np(l - 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 mean = -x - 1-1 z = observation-population standard deviation cr (Jp [l continuously compounded rate of return' r� = In � = In (t + HPR) - xl ) for a uniform distribution: P (x1 -< X -< x2 ) = (x(b-a) sampling error ofthe mean = sample mean-population mean = i - IJ standard error ofthe sample mean, known population variance: = � CJx- ©2012 Kaplan, Inc Page 369 Book - Ethical and Professional Standards and Quantitative Methods Formulas standard error of the sample mean, unknown population variance: sx: = confidence interval: point estimate ± (reliability factor x standard error) confidence interval for the population mean: x ± zo.12 � x -�-to x -�-to tests fior popuIauon mean = 110: z-statistlc = r , t-statiStlc = r s / cr / test for equality ofvariances: F = � , where sf > s� s s2 test ofmean differences = 0: t-statistic = _.! sd test for equality of means: {sample variances assumed unequal) (sample variances assumed equal) Page 370 ©2012 Kaplan, Inc s J;; A PPENDIX 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 $ 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 - �)lcr = ($7 25 - $5.00)1$ 1.50 = + 50 If EPS = x = $3.00, then z = (x - �)lcr = ($3.00 - $5.00)1$ 50 Solving Using The Cumulative Z-Table = -1.33 For z-value of1.50: 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 50 For z-value of-1.33: Use the row headed 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 = 0.09 The area between these critical values is 0.9332 - 0.09 = 0.8414, o r 84.14% Hypothesis Testing - One-Tailed Test Example A sample of a stock's returns on 36 nonconsecutive days results in a mean return of2.0 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: fl � 0.0%, Ha: fl > 0.0% The test statistic = z-statistic = (20.0 I 6) = 0.60 x-� cr I = (2.0 - 0.0) I The significance level = - 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 of0.05, 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 65 Because the test statistic is less than the critical value, we fail to reject H0 â2012 Kaplan, Inc Page 371 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: fJ 0.0%, Ha: fJ :;t: 0.0% The test statistic (z-value) (2.0 - 0.0) I (20.0 I 6) 0.60 The significance level = - 99 = 0.0 1, 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 ( - 0.005) in the table The closest value is 0.995 , which corresponds to a critical z-value of2.58 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 Page 372 ©2012 Kaplan, Inc CuMULATIVE Z-TABLE STANDARD NORMAL DISTRIBUTION P(Z :::; z) N(z) FOR z � "" z 0.0 0.2 0.3 0.4 0.00 0.5000 0.5398 0.5793 0.6179 0.6554 0.01 0.5040 0.5438 0.5832 0.6217 0.6591 0.02 0.5080 0.5478 0.5871 0.6255 0.6628 0.03 0.5120 0.5517 0.5910 0.6293 0.6664 0.04 0.5 160 0.5557 0.5948 0.6331 0.6700 0.05 0.5199 0.5596 0.5987 0.6368 0.6736 0.06 0.5239 0.5636 0.6026 0.6406 0.6772 0.07 0.5279 0.5675 0.6064 0.6443 0.6808 0.08 0.5319 0.5714 0.6103 0.6480 0.6844 0.09 0.5359 0.5753 0.6141 0.6517 0.6879 0.5 0.6 0.7 0.8 0.9 0.69 0.7257 0.7580 0.7881 0.8159 0.6950 0.7291 0.76 1 0.7910 0.8186 0.6985 0.7324 0.7642 0.7939 0.8212 0.7019 0.7357 0.7673 0.7967 0.8238 0.7054 0.7389 0.7704 0.7995 0.8264 0.7088 0.7422 0.7734 0.8023 0.8289 0.7123 0.7454 0.7764 0.8051 0.8315 0.7157 0.7486 0.7794 0.8078 0.8340 0.7190 0.7517 0.7823 0.8106 0.8365 0.7224 0.7549 0.7852 0.8133 0.8389 1.0 1.1 1.2 1.3 1.4 0.8413 0.8643 0.8849 0.9032 0.9192 0.8438 0.8665 0.8869 0.9049 0.9207 0.8461 0.8686 0.8888 0.9066 0.9222 0.8485 0.8708 0.8907 0.9082 0.9236 0.8508 0.8729 0.8925 0.9099 0.9251 0.8531 0.8749 0.8944 0.91 0.9265 0.8554 0.8770 0.8962 0.9131 0.9279 0.8577 0.8790 0.8980 0.9147 0.9292 0.8599 0.8810 0.8997 0.9162 0.9306 0.8621 0.8830 0.9015 0.9177 0.9319 1.5 1.6 1.7 1.8 1.9 0.9332 0.9452 0.9554 0.9641 0.9713 0.9345 0.9463 0.9564 0.9649 0.9719 0.9357 0.9474 0.9573 0.9656 0.9726 0.9370 0.9484 0.9582 0.9664 0.9732 0.9382 0.9495 0.9591 0.9671 0.9738 0.9394 0.9505 0.9599 0.9678 0.9744 0.9406 0.9515 0.9608 0.9686 0.9750 0.9418 0.9525 0.9616 0.9693 0.9756 0.9429 0.9535 0.9625 0.9699 0.9761 0.9441 0.9545 0.9633 0.9706 0.9767 2.0 2.2 2.3 2.4 0.9772 0.9821 0.9861 0.9893 0.99 18 0.9778 0.9826 0.9864 0.9896 0.9920 0.9783 0.9830 0.9868 0.9898 0.9922 0.9788 0.9834 0.9871 0.9901 0.9925 0.9793 0.9838 0.9875 0.9904 0.9927 0.9798 0.9842 0.9878 0.9906 0.9929 0.9803 0.9846 0.9881 0.9909 0.9931 0.9808 0.9850 0.9884 0.9911 0.9932 0.9812 0.9854 0.9887 0.9913 0.9934 0.9817 0.9857 0.9890 0.9916 0.9936 2.5 2.6 2.7 2.8 2.9 3.0 0.9938 0.9953 0.9965 0.9974 0.9981 0.9987 0.9940 0.9955 0.9966 0.9975 0.9982 0.9987 0.9941 0.9956 0.9967 0.9976 0.9982 0.9987 0.9943 0.9957 0.9968 0.9977 0.9983 0.9988 0.9945 0.9959 0.9969 0.9977 0.9984 0.9988 0.9946 0.9960 0.9970 0.9978 0.9984 0.9989 0.9948 0.9961 0.9971 0.9979 0.9985 0.9989 0.9949 0.9962 0.9972 0.9979 0.9985 0.9989 0.9951 0.9963 0.9973 0.9980 0.9986 0.9990 0.9952 0.9964 0.9974 0.9981 0.9986 0.9990 ©2012 Kaplan, Inc Page 373 CuMULATIVE Z-TABLE (coNT ) , p_�� -z STANDARD NORMAL DISTRIBUTION P(Z :::; z) N(z) FOR Z < = 0.0 -0.1 -0.2 -0.3 -0.4 z 0.00 0.5000 0.4602 0.4207 0.3821 0.3446 0.01 0.4960 0.4562 0.4168 0.3783 0.3409 0.02 0.4920 0.4522 0.4129 0.3745 0.3372 0.03 0.4880 0.4483 0.4090 0.3707 0.3336 0.04 0.4840 0.4443 0.4052 0.3669 0.3300 0.05 0.4801 0.4404 0.4013 0.3632 0.3264 0.06 0.4761 0.4364 0.3974 0.3594 0.3228 0.07 0.4721 0.4325 0.3936 0.3557 0.3192 0.08 0.4681 0.4286 0.3897 0.3520 0.3156 0.09 0.4641 0.4247 0.3859 0.3483 0.3121 -0.5 -0.6 -0.7 -0.8 -0.9 0.3085 0.2743 0.2420 0.2 1 0.1841 0.3050 0.2709 0.2389 0.2090 0.1814 0.3015 0.2676 0.2358 0.2061 0.1788 0.2981 0.2643 0.2327 0.2033 0.1762 0.2946 0.26 1 0.2297 0.2005 0.1736 0.2912 0.2578 0.2266 0.1977 0.1711 0.2877 0.2546 0.2236 0.1949 0.1685 0.2843 0.2514 0.2207 0.1922 0.1660 0.2810 0.2483 0.2177 0.1894 0.1635 0.2776 0.2451 0.2148 0.1867 0.1611 -1.0 -1.1 -1.2 - - 0.1587 0.1357 0.1151 0.0968 0.0808 0.1 562 0.1335 0.1131 0.0951 0.0793 0.1539 0.1314 1 12 0.0934 0.0778 0.1515 0.1292 0.1093 0.0918 0.0764 1492 0.1271 0.1075 0.0901 0.0749 0.1469 0.1251 0.1057 0.0885 0.0735 0.1446 0.1230 0.1038 0.0869 0.0721 0.1423 0.1210 0.1020 0.0853 0.0708 0.1401 0.1 190 0.1003 0.0838 0.0694 0.1379 0.1 170 0.0985 0.0823 0.0681 -1.5 -1.6 -1.7 - - 0.0668 0.0548 0.0446 0.0359 0.0287 0.0655 0.0537 0.0436 0.0351 0.0281 0.0643 0.0526 0.0427 0.0344 0.0274 0.0630 0.0516 0.0418 0.0336 0.0268 0.0618 0.0505 0.0409 0.0329 0.0262 0.0606 0.0495 0.0401 0.0322 0.0256 0.0594 0.0485 0.0392 0.0314 0.0250 0.0582 0.0475 0.0384 0.0307 0.0244 0.0571 0.0465 0.0375 0.0301 0.0239 0.0559 0.0455 0.0367 0.0294 0.0233 -2.0 -2.1 -2.2 -2.3 -2.4 0.0228 0.0179 0.0139 0.0107 0.0082 0.0222 0.0174 0.0136 0.0104 0.0080 0.0217 0.0170 0.0132 0.0102 0.0078 0.0212 0.0166 0.0129 0.0099 0.0076 0.0207 0.0162 0.0125 0.0096 0.0073 0.0202 0.0158 0.0122 0.0094 0.0071 0.0197 0.0154 0.0 1 0.0091 0.0069 0.0192 0.0150 0.0116 0.0089 0.0068 0.0188 0.0146 0.0113 0.0087 0.0066 0.0183 0.0143 0.0110 0.0084 0.0064 -2.5 -2.6 -2.7 -2.8 -2.9 -3.0 0.0062 0.0047 0.0035 0.0026 0.0019 0.0014 0.0060 0.0045 0.0034 0.0025 0.0018 0.0013 0.0059 0.0044 0.0033 0.0024 0.0018 0.0013 0.0057 0.0043 0.0032 0.0023 0.0017 0.0012 0.0055 0.0041 0.0031 0.0023 0.0016 0.0012 0.0054 0.0040 0.0030 0.0022 0.0016 0.00 1 0.0052 0.0039 0.0029 0.0021 0.0015 0.00 1 0.0051 0.0038 0.0028 0.0021 0.0015 0.00 1 0.0049 0.0037 0.0027 0.0020 0.0014 0.0010 0.0048 0.0036 0.0026 0.0019 0.0014 0.0010 Page 374 ©2012 Kaplan, Inc A PPENDIX B: STUDENT 's t-DISTRIBUT ION df 0.20 3.078 1.886 1.638 1.533 1.476 10 Level of Sistnificance for Two-Tailed Test 0.005 0.0005 6.314 2.920 2.353 2.132 2.015 0.05 12.706 4.303 3.182 2.776 2.571 0.02 31.821 6.965 4.541 3.747 3.365 0.01 63.657 9.925 5.841 4.604 4.032 0.001 636.619 31.599 12.294 8.610 6.869 1.440 1.415 1.397 1.383 1.372 1.943 1.895 1.860 1.833 1.812 2.447 2.365 2.306 2.262 2.228 3.143 2.998 2.896 2.821 2.764 3.707 3.499 3.355 3.250 3.169 5.959 5.408 5.041 4.781 4.587 11 12 13 14 15 1.363 1.356 1.350 1.345 1.341 796 1.782 1.771 1.761 1.753 2.201 2.179 2.160 2.145 2.131 2.718 2.681 2.650 2.624 2.602 3.106 3.055 3.012 2.977 2.947 4.437 4.318 4.221 4.140 4.073 16 17 18 19 20 1.337 1.333 1.330 1.328 1.325 1.746 740 734 1.729 725 2.120 2.110 2.101 2.093 2.086 2.583 2.567 2.552 2.539 2.528 2.921 2.898 2.878 2.861 2.845 4.015 3.965 3.922 3.883 3.850 21 22 23 24 25 1.323 1.321 1.319 1.318 1.316 1.721 1.717 1.714 1.711 708 2.080 2.074 2.069 2.064 2.060 2.518 2.508 2.500 2.492 2.485 2.831 2.819 2.807 2.797 2.787 3.819 3.792 3.768 3.745 3.725 26 27 28 29 30 1.315 1.314 1.313 1.31 1.310 706 703 1.701 1.699 1.697 2.056 2.052 2.048 2.045 2.042 2.479 2.473 2.467 2.462 2.457 2.779 2.771 2.763 2.756 2.750 3.707 3.690 3.674 3.659 3.646 40 60 120 1.303 1.296 1.289 1.282 684 1.671 1.658 645 2.021 2.000 1.980 1.960 2.423 2.390 2.358 2.326 2.704 2.660 2.617 2.576 3.55 3.460 3.373 3.291 00 ©2012 Kaplan, Inc Page 375 A PPENDIX C : F-TABLE AT PERCENT (UPPER TAIL) F-TABLE, CRITICAL VALUES, PERCENT IN UPPER TAIL Degrees of freedom for the numerator along top row Degrees of freedom for the denominator along side row 161 18.5 10.1 7.71 6.61 200 19.0 9.55 6.94 5.79 216 19.2 9.28 6.59 5.41 225 19.2 9.12 6.39 5.19 230 19.3 9.01 6.26 5.05 234 19.3 8.94 16 4.95 237 19.4 8.89 6.09 4.88 239 19.4 8.85 6.04 4.82 241 19.4 8.81 6.00 4.77 10 242 19.4 8.79 5.96 4.74 12 244 19.4 8.74 5.91 4.68 15 246 19.4 8.70 5.86 4.62 20 248 19.4 8.66 5.80 4.56 24 249 19.5 8.64 5.77 4.53 30 250 19.5 8.62 5.75 4.50 40 251 19.5 8.59 5.72 4.46 10 5.99 5.59 5.32 5.12 4.96 5.14 4.74 4.46 4.26 4.10 4.76 4.35 4.07 3.86 3.71 4.53 4.12 3.84 3.63 3.48 4.39 3.97 3.69 3.48 3.33 4.28 3.87 3.58 3.37 3.22 4.21 3.79 3.50 3.29 3.14 4.15 3.73 3.44 3.23 3.07 4.10 3.68 3.39 3.18 3.02 4.06 3.64 3.35 3.14 2.98 4.00 3.57 3.28 3.07 2.91 3.94 3.51 3.22 6.01 2.85 3.87 3.44 3.15 2.94 2.77 3.84 3.41 3.12 2.90 2.74 3.81 3.38 3.08 2.86 2.70 3.77 3.34 3.04 2.83 2.66 11 12 13 14 15 4.84 4.75 4.67 4.60 4.54 3.98 3.89 3.81 3.74 3.68 3.59 3.49 3.41 3.34 3.29 3.36 3.26 3.18 3.11 3.06 3.20 3.11 3.03 2.96 2.90 3.09 3.00 2.92 2.85 2.79 3.01 2.91 2.83 2.76 2.71 2.95 2.85 2.77 2.70 2.64 2.90 2.80 2.71 2.65 2.59 2.85 2.75 2.67 2.60 2.54 2.79 2.69 2.60 2.53 2.48 2.72 2.62 2.53 2.46 2.40 2.65 2.54 2.46 2.39 2.33 2.61 2.51 2.42 2.35 2.29 2.57 2.47 2.38 2.31 2.25 2.53 2.43 2.34 2.27 2.20 16 17 18 19 20 4.49 4.45 4.41 4.38 4.35 3.63 3.59 3.55 3.52 3.49 3.24 3.20 3.16 3.13 3.10 3.01 2.96 2.93 2.90 2.87 2.85 2.81 2.77 2.74 2.71 2.74 2.70 2.66 2.63 2.60 2.66 2.61 2.58 2.54 2.51 2.59 2.55 2.51 2.48 2.45 2.54 2.49 2.46 2.42 2.39 2.49 2.45 2.41 2.38 2.35 2.42 2.38 2.34 2.31 2.28 2.35 2.31 2.27 2.23 2.20 2.28 2.23 2.19 2.16 2.12 2.24 2.19 2.15 2.11 2.08 2.19 2.15 2.11 2.07 2.04 2.15 2.10 2.06 2.03 1.99 21 22 23 24 25 4.32 4.30 4.28 4.26 4.24 3.47 3.44 3.42 3.40 3.39 3.07 3.05 3.03 3.01 2.99 2.84 2.82 2.80 2.78 2.76 2.68 2.66 2.64 2.62 2.60 2.57 2.5 2.53 2.51 2.49 2.49 2.46 2.44 2.42 2.40 2.42 2.40 2.37 2.36 2.34 2.37 2.34 2.32 2.30 2.28 2.32 2.30 2.27 2.25 2.24 2.25 2.23 2.20 2.18 2.16 2.18 2.15 2.13 2.11 2.09 2.10 2.07 2.05 2.03 2.01 2.05 2.03 2.01 1.98 1.96 2.01 1.98 1.96 1.94 1.92 1.96 1.94 1.91 1.89 1.87 30 40 60 120 4.17 4.08 4.00 3.92 3.84 3.32 3.23 3.15 3.07 3.00 2.92 2.84 2.76 2.68 2.60 2.69 2.61 2.53 2.45 2.37 2.53 2.45 2.37 2.29 2.21 2.42 2.34 2.25 2.18 2.10 2.33 2.25 2.17 2.09 2.01 2.27 2.18 2.10 2.02 1.94 2.21 2.12 2.04 1.96 1.88 2.16 2.08 1.99 1.91 1.83 2.09 2.00 1.92 1.83 1.75 2.01 1.92 1.84 1.75 1.67 1.93 1.84 1.75 1.66 1.57 1.89 1.79 1.70 1.61 1.52 1.84 1.74 1.65 1.5 1.46 1.79 1.69 1.59 1.50 1.39 00 Page 376 ©2012 Kaplan, Inc A PPENDIX D : F-TABLE AT 2.5 PERCENT (UPPER TAIL) F-TABLE, CRITICAL VALUES, 2.5 PERCENT IN UPPER TAILS Degrees of freedom for the numerator along top row Degrees of freedom for the denominator along side row 648 38.51 17.44 12.22 10.01 799 39.00 16.04 10.65 8.43 864 39.17 15.44 9.98 7.76 900 39.25 15.10 9.60 7.39 922 39.30 14.88 9.36 15 937 39.33 14.73 9.20 6.98 948 39.36 14.62 9.07 6.85 957 39.37 14.54 8.98 6.76 963 39.39 14.47 8.90 6.68 10 969 39.40 14.42 8.84 6.62 12 977 39.41 14.34 8.75 6.52 15 985 39.43 14.25 8.66 6.43 20 993 39.45 14.17 8.56 6.33 24 997 39.46 14.12 8.51 6.28 30 1001 39.46 14.08 8.46 6.23 40 006 39.47 14.04 8.41 18 10 8.81 8.07 7.57 7.21 6.94 7.26 6.54 6.06 5.71 5.46 6.60 5.89 5.42 5.08 4.83 6.23 5.52 5.05 4.72 4.47 5.99 5.29 4.82 4.48 4.24 5.82 5.12 4.65 4.32 4.07 5.70 4.99 4.53 4.20 3.95 5.60 4.90 4.43 4.10 3.85 5.52 4.82 4.36 4.03 3.78 5.46 4.76 4.30 3.96 3.72 5.37 4.67 4.20 3.87 3.62 5.27 4.57 4.10 3.77 3.52 5.17 4.47 4.00 3.67 3.42 5.12 4.41 3.95 3.61 3.37 5.07 4.36 3.89 3.56 3.31 5.01 4.31 3.84 3.51 3.26 11 12 13 14 15 6.72 6.55 6.41 6.30 6.20 5.26 5.10 4.97 4.86 4.77 4.63 4.47 4.35 4.24 4.15 4.28 4.12 4.00 3.89 3.80 4.04 3.89 3.77 3.66 3.58 3.88 3.73 3.60 3.50 3.41 3.76 3.61 3.48 3.38 3.29 3.66 3.51 3.39 3.29 3.20 3.59 3.44 3.31 3.21 3.12 3.53 3.37 3.25 3.15 3.06 3.43 3.28 3.15 3.05 2.96 3.33 3.18 3.05 2.95 2.86 3.23 3.07 2.95 2.84 2.76 3.17 3.02 2.89 2.79 2.70 3.12 2.96 2.84 2.73 2.64 3.06 2.91 2.78 2.67 2.59 16 17 18 19 20 6.12 6.04 5.98 5.92 5.87 4.69 4.62 4.56 4.51 4.46 4.08 4.01 3.95 3.90 3.86 3.73 3.66 3.61 3.56 3.5 3.50 3.44 3.38 3.33 3.29 3.34 3.28 3.22 3.17 3.13 3.22 3.16 3.10 3.05 3.01 3.12 3.06 3.01 2.96 2.91 3.05 2.98 2.93 2.88 2.84 2.99 2.92 2.87 2.82 2.77 2.89 2.82 2.77 2.72 2.68 2.79 2.72 2.67 2.62 2.57 2.68 2.62 2.56 2.51 2.46 2.63 2.56 2.50 2.45 2.41 2.57 2.50 2.44 2.39 2.35 2.51 2.44 2.38 2.33 2.29 21 22 23 24 25 5.83 5.79 5.75 5.72 5.69 4.42 4.38 4.35 4.32 4.29 3.82 3.78 3.75 3.72 3.69 3.48 3.44 3.41 3.38 3.35 3.25 3.22 3.18 3.15 3.13 3.09 3.05 3.02 2.99 2.97 2.97 2.93 2.90 2.87 2.85 2.87 2.84 2.81 2.78 2.75 2.80 2.76 2.73 2.70 2.68 2.73 2.70 2.67 2.64 2.61 2.64 2.60 2.57 2.54 2.51 2.53 2.50 2.47 2.44 2.41 2.42 2.39 2.36 2.33 2.30 2.37 2.33 2.30 2.27 2.24 2.31 2.27 2.24 2.21 2.18 2.25 2.21 18 15 2.12 30 40 60 120 5.57 5.42 5.29 5.15 5.02 18 4.05 3.93 3.80 3.69 3.59 3.46 3.34 3.23 3.12 3.25 3.13 3.01 2.89 2.79 3.03 2.90 2.79 2.67 2.57 2.87 2.74 2.63 2.52 2.41 2.75 2.62 2.51 2.39 2.29 2.65 2.53 2.41 2.30 2.19 2.57 2.45 2.33 2.22 1 2.51 2.39 2.27 2.16 2.05 2.41 2.29 2.17 2.05 1.94 2.31 18 2.06 1.94 1.83 2.20 2.07 1.94 1.82 1.71 2.14 2.01 1.88 1.76 64 2.07 1.94 1.82 1.69 1.57 2.01 1.88 1.74 1.61 1.48 00 ©2012 Kaplan, Inc Page 377 A PPENDIX E: Cui-SQUARED TABLE Values ofx2 (Degrees of Freedom, Level of Significance) Probability in Right Tail Degrees of Freedom 0.99 0.975 0.95 0.9 0.1 0.05 0.025 0.01 0.005 0.000157 0.020100 0.1 148 0.297 0.554 0.000982 0.050636 0.2158 0.484 0.831 0.003932 0.102586 0.3518 0.711 145 0.0158 0.2107 0.5844 1.064 1.610 2.706 4.605 6.251 7.779 9.236 3.841 5.991 7.815 9.488 1.070 5.024 7.378 9.348 1.143 12.832 6.635 9.210 1 345 13.277 15.086 7.879 10.597 12.838 14.860 16.750 10 0.872 1.239 1.647 2.088 2.558 237 1.690 2.180 2.700 3.247 1.635 2.167 2.733 3.325 3.940 2.204 2.833 3.490 4.168 4.865 10.645 12.017 13.362 14.684 5.987 12.592 14.067 5.507 16.919 18.307 14.449 16.013 17.535 19.023 20.483 16.812 18.475 20.090 21 666 23.209 18.548 20.278 21.955 23.589 25.188 11 12 13 14 15 3.053 3.571 4.107 4.660 5.229 3.816 4.404 5.009 5.629 6.262 4.575 5.226 5.892 6.571 7.261 5.578 6.304 7.041 7.790 8.547 17.275 18.549 19.812 21.064 22.307 19.675 21.026 22.362 23.685 24.996 21.920 23.337 24.736 26 1 27.488 24.725 26.217 27.688 29.141 30.578 26.757 28.300 29.819 31.319 32.801 16 17 18 19 20 5.812 6.408 7.015 7.633 8.260 6.908 7.564 8.231 8.907 9.591 7.962 8.672 9.39 10 117 10.851 9.312 10.085 10.865 1 651 12.443 23.542 24.769 25.989 27.204 28.412 26.296 27.587 28.869 30.144 31.410 28.845 30.191 31.526 32.852 34.170 32.000 33.409 34.805 36.191 37.566 34.267 35.718 37.156 38.582 39.997 21 22 23 24 25 8.897 9.542 10.196 10.856 1.524 10.283 10.982 1 689 12.401 13.120 1 591 12.338 13.091 13.848 14.611 13.240 14.041 14.848 15.659 16.473 29.615 30.813 32.007 33.196 34.382 32.671 33.924 35.172 36.415 37.652 35.479 36.781 38.076 39.364 40.646 38.932 40.289 41 638 42.980 44.314 41 401 42.796 44 181 45.558 46.928 26 27 28 29 30 12.198 12.878 13.565 14.256 14.953 13.844 14.573 15.308 16.047 16.791 15.379 16 16.928 17.708 18.493 17.292 18.1 14 18.939 9.768 20.599 35.563 36.741 37.916 39.087 40.256 38.885 40 1 41.337 42.557 43.773 41.923 43.195 44.461 45.722 46.979 45.642 46.963 48.278 49.588 50.892 48.290 49.645 50.994 52.335 53.672 50 60 80 100 29.707 37.485 53.540 70.065 32.357 40.482 57.153 74.222 34.764 43.188 60.391 77.929 37.689 46.459 64.278 82.358 63.167 74.397 96.578 1 8.498 67.505 79.082 101 879 124.342 71.420 83.298 106.629 129.561 76.154 88.379 112.329 135.807 79.490 91.952 16.321 140.170 Page 378 ©2012 Kaplan, Inc INDEX A continuation patterns 165 absolute frequency additional compensation arrangements 203, 205 addition rule of probability 127 alternative hypothesis 304 amortization 1 annuities 06 annuities due 106 a priori probability 202 arithmetic means 170 Arms index 354 265 246 continuous random variable 246 continuous compounding 50 continuous distribution additivity principle continuous uniform distribution contrarian strategy 352 215, 256 cost of capital 105 253 corrdation Country Version of GIPS (CVG) covariance 213 cross-sectional data 282 cumulative absolute frequency 86 167 247 167 cumulative distribution function 344 Bayes' formula D 222 Bernoulli random variable biased estimator bimodal data set 178 172 binomial distribution binomial formula cumulative rdative frequency 147 bank discount yidd (BDY) 225 249 data mining decile 249 binomial random variable 251 Bollinger bands 351 305, 310 10 degrees of freedom 286 descriptive statistics 163 249, 250 desirable properties of an estimator 151 347 347 diligence and reasonable basis 61 105 discounting 99, 105 discount rate 100, 105, 123 discrete distribution 246 53 285 disclosure of conflicts discount factor 345 cash How additivity principle 149 central limit theorem 282 change in polarity 348 Chebyshev's inequality 179 chi-square distribution 326 Code of Ethics 14 coefficient of variation 180 combination formula 225 127 discretdy compounded returns discrete random variable CD equivalent yidd communication with clients composites 355 default risk premium breakdown candlestick charts 174 decision rule bond-equivalent yidd (BEY) c 292 decennial patterns binomial tree breakout 351 convergence B bar charts 285 349 consistent estimator 87 264 discrete uniform random variable dispersion 175 distribution function divergence 352 349 349 down transition probability downtrend 57 16 compound interest 98, 99 conditional probability 203 conduct as members and candidates 256, 287 248 247 double bottom pattern double top pattern 347 251 E compounding frequency confidence interval 245 effective annual rate (EAR) effective annual yield (EAY) 69 285 202 equality of variances 328 01 148 efficient estimator confidence interval for the population mean 288 empirical probability ©2012 Kaplan, Inc Page 379 Book Index - Ethical and Professional Standards and Quantitative Methods event 201 interval scale 185 excess return 181 exhaustive events 201 expected value 209 164 inverse head-and-shoulders pattern excess kurtosis J and variance for a portfolio of assets of a binomial random variable 250 217 204 joint probability K F 18 355 knowledge of the law factorial Kondratieff waves 224 37 kurtosis fair dealing 329 Fibonacci ratios 356 flags 350 flow offunds 354 186 L labeling 224 184 leptokurtic distributions 165 frequency polygon 168 future value (FV) 98 of an annuity due 109 ofan ordinary annuity 06 frequency distribution likdihood line charts 203 344 liquidity risk premium loan amortization 04 118 10 1 19 loan payment calculation 14 of an uneven cash flow series of a single sum 184 interpretation F-distribution location of the mean, median, and mode lognormal distribution G 282 293 263 183 longitudinal data geometric mean GIPS objectives look-ahead bias 173 84 loyalty, prudence, and care Global Investment Performance Standards (GIPS) 82 46 loyalty (to employer) 203 marginal probability harmonic mean margin debt 174 head-and-shoulders pattern histogram 168 historical simulation yidd (HPY) 303 33 material nonpublic information 101 mean absolute deviation 176 mean differences 322 measurement scales 164 143, 148 measures of central tendency 303 175 measures oflocation median I 171 independence and objectivity 207 163 inflation premium 10 interest on interest 98 intermarket analysis 356 21 IRR decision rule IRR method 142 142 problems associated with interval 165 29 26 166 misrepresentation modal interval inferential statistics internal rate of return (IRR) misconduct 169 184 mesokurtic distributions independent events 30 maturity risk premium 267 hypothesis testing, steps 354 market manipulation 348 holding period return (HPR) or holding period hypothesis 35 M H mode 172 money market yield 149 money-weighted rate of return 140 Monte Carlo simulation 266 143 moving average convergence/divergence moving average lines 142 350 multiplication rule of counting ©2012 Kaplan, Inc 256 352 227 203, 204 multiplication rule of probability multivariate distribution Page 380 349 Book multivariate normal distribution mutual fund cash position 354 mutually exclusive events 201 256 98 ofan annuity due 1 107 of an ordinary annuity ofan uneven cash Bow series 12 105 of a perpetuity of a single sum 182 negative skew net present value (NPV) 141 355 NPV decision rule new equity issuance 251 nominal risk-free rate 164 nominal scales nonparametric tests normal distribution null hypothesis 304 15, 138 presidential cycles 202 probability function properties of probability 202 353 opportunity cost 00, 05 ordinal scales 164 ordinary annuities 106 outcome 201 outliers 182 overbought market 351 oversold market 351 313 parameter quantile quartiles quintile 174 174 174 R random variable range 176 50 percentile 174 323 164 rectangles 350 101 60 and the CFA Program 72 332 referral fees performance measurement 101 permutation formula 67 rdative dispersion performance presentation 12 record retention 352 reference to CFA Institute, the CFA designation, pennants periodic rates 201 rate of change oscillator real risk-free rate parametric tests perpetuity 353 Q ratio scales 282 164 285 20 13 properties of an estimator opinion polls panel data 65 245 245 Professional Conduct Program put/call ratio paired comparisons test 355 priority of transactions 101 p 265 probability distribution p-value objective probabilities 115 preservation of confidentiality 44 price relative 332 255 odds Ethical and Professional Standards and Quantitative Methods Index present value (PV) N node - 146 42 226 184 point and figure charts 345 point estimates 285 population 163 population mean 169 population standard deviation 177 population variance 177 portfolio expected value 217 portfolio variance 217 positive skew 182 power of a test 310 platykurtic distributions rdative frequency 180 166 347 352 00, 05 relative strength analysis Relative Strength Index required rate of return resistance level 347 responsibilities of supervisors reversal patterns 348 51 reward-to-variability ratio 181 Roy's safety-first criterion 261 risk, types of s sample 163 101 186 169 sample kurtosis sample mean sample selection bias sample skewness @2012 Kaplan, Inc 185 293 Page 381 Book - Ethical and Professional Standards and Quantitative Methods Index 179 sample standard deviation sample statistic sample variance 165 178 triple bottom pattern triple top pattern t-test 280 281 314 sampling and estimation type I error sampling distribution type II error 281 sampling error 355 secondary offerings selecting the appropriate test statistic 353 sentiment indicators 181 shonfall risk 261 short interest 354 291 354 309 148 (TRIN) 354 182 interpretacion 186 Spearman rank correlation tesr 177 258 standard normal distribution 258 Standards of Professional Conduct 10 stated annual interest rates 163 stochastic oscillator uptrend 283 14 weighted mean z z.-test 315 281 285 202 347 293 survivorship bias symmetrical distributions systematic sampling 280 182 T 285, 286 343 test statistic 309 threshold level 261 time line 99 time-period bias 293 time-series data 282 time value of money 98 t-distribution technical analysis 14 5, 146 203, 208 time weighted rate of return total probability rule total return tree diagram 143 212 347 347 triangles 349 trend trendline trimodal data set Page 382 346 w Student's t-distribution 40 347 volume charts 353 subjective probability 203 255 251 v stratified random sampling support level 172 Volatility Index (VIX) 332 standard error of the sample mean suitability 285 verification ofGIPS compliance 280, 282 skew, skewness statistics unbiased estimator univariate distributions simple random sampling standardizing u up transition probability significance level standard deviation 309 309 unimodal data set short-term trading index simple interest 349 unconditional probability Sharpe ratio short interest ratio 349 172 ©2012 Kaplan, Inc 171 353 83 Notes ... SchweserNotesTM I would like to thank Craig Prochaska, CFA, Content Specialist and Jared Heintz, Lead Editor, for their contributions to producing the 2 013 Level I SchweserNotes for the CFA Exam. .. before the Level I exam so that you have sufficient time for Practice Exams and for further review of those topics that you have not yet mastered ©2 012 Kaplan, Inc PageS Welcome to the 2 013 SchweserNotesTM... original readings as set forth by CFA Institute in their 2 013 CFA Level I Study Guide The information contained in these Notes covers topics contained in the readings referenced by CFA Institute and