CFA Level 1 - 101 Must Knows 368 Questions with Verified Answers,100% CORRECT
105 views 1 purchase
Module
CFA Level 1
Institution
CFA Level 1
CFA Level 1 - 101 Must Knows 368 Questions with Verified Answers
Addition Rule of Probability - CORRECT ANSWER ADDITION: P(A or B) = P(A) + P(B) - P(AB)
Roy's Safety First Criterion - CORRECT ANSWER Safety First Ratio = (E(R) - Rₜ) / σ
Larger ratio is better
If (Rₜ) is risk free ra...
CFA Level 1 - 101 Must Knows 368 Questions with Verified Answers
Addition Rule of Probability - CORRECT ANSWER ADDITION: P(A or B) = P(A) + P(B)
- P(AB)
Roy's Safety First Criterion - CORRECT ANSWER Safety First Ratio = (E(R) - R ₜ) / σ
Larger ratio is better
If (Rₜ) is risk free rate, then it becomes Sharpe Ratio
Sharpe Ratio - CORRECT ANSWER Sharpe Ratio = (E(R) - RFR) / σ
Larger ratio is better
If (Rt) is higher than RFR, then it becomes Safety First Ratio
Central Limit Theorem - CORRECT ANSWER If we take samples of a population, with a large enough sample size, the distribution of all sample means is normal with:
- A mean equal to the population mean
- A variance equal to the population variance divided by sample size (σ² / n)
Standard Error of Sample Mean - CORRECT ANSWER σ / n^½
Binomial Probability - CORRECT ANSWER One of two possible outcomes (i.e. success/failure)
Possible outcomes can be demonstrated in binomial tree
Use "nCr" on calculator to solve:
nCr = P(success)^x * P(failure)^(n-x) P - Value - CORRECT ANSWER Based on a calculated test statistic, rather than a significance level (which is chosen)
p-value = smallest significance level at which an analyst can reject the null hypothesis
one-tailed test - "less than or equal to"
two-tailed test - "equal to"
Cumulative Distribution Function - CORRECT ANSWER Gives the probability that a random variable will have an outcome less than or equal to a specific value (represented by F(x))
F(x) = probability of an outcome less than or equal to x
Standard normal table (z) shows cumulative probabilities
Effective Annual Yield - CORRECT ANSWER EAY = (1 + (i/n))^n - 1
Stated Rate = (EAY^(1/n) - 1) * n
Continuous Compounding - CORRECT ANSWER ln(EAY) = continuously compounded stated rate
e^(continuously compounded stated rate) = EAY
Type I Error - CORRECT ANSWER Incorrectly rejecting a true null hypothesis
(convicting an innocent person is Type I)
Type II Error - CORRECT ANSWER Failure to reject a false null hypothesis
(failure to convict a guilty person is Type II)
Significance Level / Power of a Test - CORRECT ANSWER Significance Level = Probability of Type I Power of a Test = (1 - Probability of Type I)
Covariance (Probability Model) - CORRECT ANSWER Covariance of random variables A and B from probability model
On the calculator:
1) Enter returns for set A and joint probabilities for AB; find mean A
2) Enter returns for set B and joint probabilities for AB; find mean B
3) Multiply each joint probability AB by each set's returns minus means
(ex: P(AB1)(A1 - Mean A)(B1 - Mean B) + P(AB2)(A2 - Mean A)(B2 - Mean B) + ... + P(ABn)(An - Mean A)(Bn - Mean B))
4) The summed total is your covariance
Covariance (Sample) - CORRECT ANSWER Covariance of random variables A and B from sample with historical data with n observations
Correlation Coefficient - CORRECT ANSWER COVab / σaσb
Bank Discount Yield (Discount basis) - CORRECT ANSWER (Discount / Face Value) *
(360 / Days)
Money Market Yield - CORRECT ANSWER (HPY) * (360 / Days)
Bond Equivalent Yield - CORRECT ANSWER (HPY) * (365 / Days)
Most appropriate for comparing yields!
Technical Analysis Indicators - CORRECT ANSWER Continuation:
TRIANGLE (or pennant) = Suggests a pause in the stock price movement that will be followed by a continuation of the previous trend
Reversal:
HEAD AND SHOULDERS = Suggests a future decline in the stock price regardless of
prior trend
DOUBLE BOTTOM = Increasing stock price in the future (reversal of a downtrend) Trendlines:
SUPPORT / RESISTANCE = Range that stock price trades in based on supply/demand. Stock is "supported" from going below a certain low price, and "resists" going above a certain high price
Price Elasticity - CORRECT ANSWER %ΔQuantity / %ΔPrice = (ΔQ / ΔP) * (P ₀ / Q₀)
Demand is elastic if less than -1
Demand is inelastic if 0 to -1
Income Elasticity - CORRECT ANSWER %ΔQuantity / %ΔIncome
Positive for normal good
Negative for inferior good
Cross-Price Elasticity - CORRECT ANSWER %ΔQuantity / %ΔPriceʳᵉˡᵃᵗᵉᵈ ᵍᵒᵒᵈ
Positive for substitutes
Negative for complements
Sources of Economic Growth - CORRECT ANSWER Increases in:
- Labor
- Physical Capital
- Technology
- Natural Resources
- Human Capital
(LPT:HN)
"Life Pro Tip: No Hangovers"
Production Function Approach (GDP) - CORRECT ANSWER Potential GDP = A * f(L,K)
L = Labor
K = Capital
A = "total factor productivity" aka increased growth not explained by growth of labor and capital
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller paulhans. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £8.99. You're not tied to anything after your purchase.
