CFA Level I Exam Companion

Foreword by Pamela Peterson Drake, PhD, CFA ix Study Session 1 Ethics 1 Reading 1 Code of Ethics and Standards of Professional Conduct 3 Reading 2 Guidance for Standards I--VII 6 Reading 3 Introduction to the Global Investment Performance Standards 8 Reading 4 Introduction to the Global Investment Performance Standards 11 Study Session 2 Quantitative Methods: Basic Concepts 13 Reading 5 The Time Value of Money 15 Reading 6 Discounted Cash Flow Applications 19 Reading 7 Statistical Concepts and Market Returns 22 Reading 8 Probability Concepts 26 Study Session 3 Quantitative Methods: Application 31 Reading 9 Common Probability Distributions 33 Reading 10 Sampling and Estimation 37 Reading 11 Hypothesis Testing 40 Reading 12 Technical Analysis 45 Study Session 4 Economics 49 Reading 13 Demand and Supply Analysis: Introduction 51 Reading 14 Demand and Supply Analysis: Consumer Demand 56 Reading 15 Demand and Supply Analysis: The Firm 58 Reading 16 The Firm and Market Structures 62 Study Session 5 Economics 67 Reading 17 Aggregate Output, Prices, and Economic Growth 69 Reading 18 Understanding Business Cycles 73 Reading 19 Monetary and Fiscal Policy 77 Study Session 6 Economics 81 Reading 20 International Trade and Capital Flows 83 Reading 21 Currency Exchange Rates 86 Study Session 7 Financial Reporting and Analysis 89 Reading 22 Financial Statement Analysis: An Introduction 93 Reading 23 Financial Reporting Mechanics 96 Reading 24 Financial Reporting Standards 101 Study Session 8 Financial Reporting and Analysis 105 Reading 25 Understanding Income Statements 107 Reading 26 Understanding Balance Sheets 112 Reading 27 Understanding Cash Flow Statements 116 Reading 28 Financial Analysis Techniques 122 Study Session 9 Financial Reporting and Analysis 127 Reading 29 Inventories 129 Reading 30 Long-lived Assets 133 Reading 31 Income Taxes 138 Reading 32 Non-current (Long-term) Liabilities 142 Study Session 10 Financial Reporting and Analysis 149 Reading 33 Financial Reporting Quality: Red Flags and Accounting Warning Signs 151 Reading 34 Accounting Shenanigans on the Cash Flow Statement 153 Reading 35 Financial Statement Analysis: Applications 154 Study Session 11 Corporate Finance 157 Reading 36 Capital Budgeting 159 Reading 37 Topics in Cost of Capital Estimation 163 Reading 38 Measures of Leverage 168 Reading 39 Dividends and Share Repurchases: Basics 170 Reading 40 Working Capital Management 173 Reading 41 Financial Statement Analysis 178 Reading 42 The Corporate Governance of Listed Companies: A Manual for Investors 180 Study Session 12 Portfolio Management 183 Reading 43 Portfolio Management: An Overview 185 Reading 44 Portfolio Risk and Return: Part I 187 Reading 45 Portfolio Risk and Return: Part II 192 Reading 46 Basics of Portfolio Planning and Construction 196 Study Session 13 Equity 199 Reading 47 Equity Markets and Analysis 201 Reading 48 Equity Markets and Analysis 206 Reading 49 Equity Markets and Analysis 209 Study Session 14 Equity 213 Reading 50 Overview of Equity Securities 215 Reading 51 Introduction to Industry and Company Analysis 218 Reading 52 Equity Valuation: Concepts and Basic Tools 221 Study Session 15 Fixed Income 225 Reading 53 Features of Debt Securities 227 Reading 54 Risks Associated with Investing in Bonds 231 Reading 55 Overview of Bond Sectors and Instruments 236 Reading 56 Understanding Yield Spreads 241 Study Session 16 Fixed Income 245 Reading 57 Introduction to the Valuation of Debt Securities 247 Reading 58 Yield Measures, Spot Rates, and Forward Rates 252 Reading 59 Introduction to the Measurement of Interest Rate Risk 257 Study Session 17 Derivatives 263 Reading 60 Derivative Markets and Instruments 265 Reading 61 Forward Markets and Contracts 268 Reading 62 Futures Markets and Contracts 272 Reading 63 Option Markets and Contracts 276 Reading 64 Swap Markets and Contracts 282 Reading 65 Risk Management Applications of Option Strategies 285 Study Session 18 Alternative Investments 287 Reading 66 Alternative Investments 289 Reading 67 Investing in Commodities 295 Answers to Sample Questions 297 Index 317