CFA Level 1 - LOS s 2015-2016 Ethics Ethics Ethics 1.1.a 1.1.b 1.1.c describe the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of the Code and Standards state the six components of the Code of Ethics and the seven Standards of Professional Conduct explain the ethical responsibilities required by the Code and Standards, including the sub-sections of each Standard 1.1.a 1.1.b 1.1.c describe the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of the Code and Standards state the six components of the Code of Ethics and the seven Standards of Professional Conduct explain the ethical responsibilities required by the Code and Standards, including the sub-sections of each Standard Ethics Ethics Ethics Ethics Ethics Ethics Ethics Ethics 1.2.a 1.2.b 1.2.c 1.3.a 1.3.b 1.3.c 1.4.a 1.4.b demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct explain why the GIPS standards were created, what parties the GIPS standards apply to, and who is served by the standards explain the construction and purpose of composites in performance reporting explain the requirements for verification describe the key features of the GIPS standards and the fundamentals of compliance describe the scope of the GIPS standards with respect to an investment firm s definition and historical performance record 1.2.a 1.2.b 1.2.c 1.3.a 1.3.b 1.3.c 1.4.a 1.4.b demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct explain why the GIPS standards were created, what parties the GIPS standards apply to, and who is served by the standards explain the construction and purpose of composites in performance reporting explain the requirements for verification describe the key features of the GIPS standards and the fundamentals of compliance describe the scope of the GIPS standards with respect to an investment firm s definition and historical performance record or Accounting Questions? Go to passingscoreforum.com 1
Ethics Ethics 1.4.c 1.4.d 2.5.a 2.5.b 2.5.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 describe the nine major sections of the GIPS standards interpret interest rates as required rates of return, discount rates, or opportunity costs explain an interest rate as the sum of a real risk-free rate, and premiums that compensate investors for bearing distinct types of risk calculate and interpret the effective annual rate, given the stated annual interest rate and the frequency of compounding 1.4.c 1.4.d 2.5.a 2.5.b 2.5.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 describe the nine major sections of the GIPS standards interpret interest rates as required rates of return, discount rates, or opportunity costs explain an interest rate as the sum of a real risk-free rate, and premiums that compensate investors for bearing distinct types of risk calculate and interpret the effective annual rate, given the stated annual interest rate and the frequency of compounding 2.5.d solve time value of money problems for different frequencies of compounding calculate and interpret the future value (FV) and present value (PV) of a single 2.5.e sum of money, an ordinary annuity, an annuity due, a perpetuity (PV only), and a series of unequal cash flows demonstrate the use of a time line in 2.5.f modeling and solving time value of money problems calculate and interpret the net present 2.6.a value (NPV) and the internal rate of return (IRR) of an investment contrast the NPV rule to the IRR rule, 2.6.b and identify problems associated with the IRR rule 2.6.c calculate and interpret a holding period return (total return) calculate and compare the moneyweighted and time-weighted rates of 2.6.d return of a portfolio and evaluate the performance of portfolios based on these measures 2.5.d 2.5.e 2.5.f 2.6.a 2.6.b 2.6.c 2.6.d solve time value of money problems for different frequencies of compounding 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 demonstrate the use of a time line in modeling and solving time value of money problems calculate and interpret the net present value (NPV) and the internal rate of return (IRR) of an investment contrast the NPV rule to the IRR rule, and identify problems associated with the IRR rule calculate and interpret a holding period return (total return) calculate and compare the moneyweighted and time-weighted rates of return of a portfolio and evaluate the performance of portfolios based on these measures or Accounting Questions? Go to passingscoreforum.com 2
2.6.e 2.6.f 2.7.a 2.7.b 2.7.c 2.7.d 2.7.e 2.7.f 2.7.g 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 convert among holding period yields, money market yields, effective annual yields, and bond equivalent yields distinguish between descriptive statistics and inferential statistics, between a population and a sample, and among the types of measurement scales define a parameter, a sample statistic, and a frequency distribution calculate and interpret relative frequencies and cumulative relative frequencies, given a frequency distribution describe the properties of a data set presented as a histogram or a frequency polygon 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 calculate and interpret quartiles, quintiles, deciles, and percentiles 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 2.6.e 2.6.f 2.7.a 2.7.b 2.7.c 2.7.d 2.7.e 2.7.f 2.7.g 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 convert among holding period yields, money market yields, effective annual yields, and bond equivalent yields distinguish between descriptive statistics and inferential statistics, between a population and a sample, and among the types of measurement scales define a parameter, a sample statistic, and a frequency distribution calculate and interpret relative frequencies and cumulative relative frequencies, given a frequency distribution describe the properties of a data set presented as a histogram or a frequency polygon 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 calculate and interpret quartiles, quintiles, deciles, and percentiles 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 2.7.h 2.7.i calculate and interpret the proportion of observations falling within a specified number of standard deviations of the mean using Chebyshev s inequality calculate and interpret the coefficient of variation and the Sharpe ratio 2.7.h 2.7.i calculate and interpret the proportion of observations falling within a specified number of standard deviations of the mean using Chebyshev s inequality calculate and interpret the coefficient of variation and the Sharpe ratio or Accounting Questions? Go to passingscoreforum.com 3
2.7.j 2.7.k 2.7.l 2.7.m 2.8.a 2.8.b explain skewness and the meaning of a positively or negatively skewed return distribution describe the relative locations of the mean, median, and mode for a unimodal, nonsymmetrical distribution explain measures of sample skewness and kurtosis compare the use of arithmetic and geometric means when analyzing investment returns define a random variable, an outcome, an event, mutually exclusive events, and exhaustive events state the two defining properties of probability and distinguish among empirical, subjective, and a priori probabilities 2.7.j 2.7.k 2.7.l 2.7.m 2.8.a 2.8.b explain skewness and the meaning of a positively or negatively skewed return distribution describe the relative locations of the mean, median, and mode for a unimodal, nonsymmetrical distribution explain measures of sample skewness and kurtosis compare the use of arithmetic and geometric means when analyzing investment returns define a random variable, an outcome, an event, mutually exclusive events, and exhaustive events state the two defining properties of probability and distinguish among empirical, subjective, and a priori probabilities 2.8.c state the probability of an event in terms of odds for and against the event 2.8.d distinguish between unconditional and conditional probabilities 2.8.e explain the multiplication, addition, and total probability rules calculate and interpret 1) the joint probability of two events, 2) the probability that at least one of two 2.8.f 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 2.8.g distinguish between dependent and independent events calculate and interpret an unconditional 2.8.h probability using the total probability rule 2.8.i explain the use of conditional expectation in investment applications 2.8.j explain the use of a tree diagram to represent an investment problem 2.8.k calculate and interpret covariance and correlation 2.8.c 2.8.d 2.8.e 2.8.f 2.8.g 2.8.h 2.8.i 2.8.j 2.8.k state the probability of an event in terms of odds for and against the event distinguish between unconditional and conditional probabilities explain the multiplication, addition, and total probability rules 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 distinguish between dependent and independent events calculate and interpret an unconditional probability using the total probability rule explain the use of conditional expectation in investment applications explain the use of a tree diagram to represent an investment problem calculate and interpret covariance and correlation or Accounting Questions? Go to passingscoreforum.com 4
2.8.l 2.8.m 2.8.n 2.8.o 3.9.a 3.9.b 3.9.c 3.9.d 3.9.e 3.9.f 3.9.g calculate and interpret the expected value, variance, and standard deviation of a random variable and of returns on a portfolio calculate and interpret covariance given a joint probability function calculate and interpret an updated probability using Bayes formula identify the most appropriate method to solve a particular counting problem, and solve counting problems using factorial, combination, and permutation concepts define a probability distribution and distinguish between discrete and continuous random variables and their probability functions describe the set of possible outcomes of a specified discrete random variable interpret a cumulative distribution function calculate and interpret probabilities for a random variable, given its cumulative distribution function define a discrete uniform random variable, a Bernoulli random variable, and a binomial random variable calculate and interpret probabilities given the discrete uniform and the binomial distribution functions construct a binomial tree to describe stock price movement 2.8.l 2.8.m 2.8.n 2.8.o 3.9.a 3.9.b 3.9.c 3.9.d 3.9.e 3.9.f 3.9.g calculate and interpret the expected value, variance, and standard deviation of a random variable and of returns on a portfolio calculate and interpret covariance given a joint probability function calculate and interpret an updated probability using Bayes formula identify the most appropriate method to solve a particular counting problem, and solve counting problems using factorial, combination, and permutation concepts define a probability distribution and distinguish between discrete and continuous random variables and their probability functions describe the set of possible outcomes of a specified discrete random variable interpret a cumulative distribution function calculate and interpret probabilities for a random variable, given its cumulative distribution function define a discrete uniform random variable, a Bernoulli random variable, and a binomial random variable calculate and interpret probabilities given the discrete uniform and the binomial distribution functions construct a binomial tree to describe stock price movement 3.9.h calculate and interpret tracking error 3.9.h calculate and interpret tracking error define the continuous uniform define the continuous uniform 3.9.i distribution and calculate and interpret distribution and calculate and interpret 3.9.i probabilities, given a continuous probabilities, given a continuous uniform distribution uniform distribution 3.9.j explain the key properties of the explain the key properties of the normal 3.9.j normal distribution distribution 3.9.k distinguish between a univariate and a multivariate distribution, and explain the role of correlation in the multivariate normal distribution 3.9.k distinguish between a univariate and a multivariate distribution, and explain the role of correlation in the multivariate normal distribution or Accounting Questions? Go to passingscoreforum.com 5
3.9.l 3.9.m 3.9.n 3.9.o 3.9.p 3.9.q 3.9.r 3.10.a determine the probability that a normally distributed random variable lies inside a given interval define the standard normal distribution, explain how to standardize a random variable, and calculate and interpret probabilities using the standard normal distribution define shortfall risk, calculate the safetyfirst ratio, and select an optimal portfolio using Roy s safety-first criterion explain the relationship between normal and lognormal distributions and why the lognormal distribution is used to model asset prices 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 explain Monte Carlo simulation and describe its applications and limitations compare Monte Carlo simulation and historical simulation define simple random sampling and a sampling distribution 3.9.l 3.9.m 3.9.n 3.9.o 3.9.p 3.9.q 3.9.r 3.10.a determine the probability that a normally distributed random variable lies inside a given interval define the standard normal distribution, explain how to standardize a random variable, and calculate and interpret probabilities using the standard normal distribution define shortfall risk, calculate the safetyfirst ratio, and select an optimal portfolio using Roy s safety-first criterion explain the relationship between normal and lognormal distributions and why the lognormal distribution is used to model asset prices 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 explain Monte Carlo simulation and describe its applications and limitations compare Monte Carlo simulation and historical simulation define simple random sampling and a sampling distribution 3.10.b explain sampling error 3.10.b explain sampling error 3.10.c distinguish between simple random and distinguish between simple random and 3.10.c stratified random sampling stratified random sampling 3.10.d distinguish between time-series and distinguish between time-series and 3.10.d cross-sectional data cross-sectional data 3.10.e explain the central limit theorem and explain the central limit theorem and its 3.10.e its importance importance 3.10.f calculate and interpret the standard calculate and interpret the standard 3.10.f error of the sample mean error of the sample mean 3.10.g identify and describe desirable identify and describe desirable 3.10.g properties of an estimator properties of an estimator 3.10.h distinguish between a point estimate and a confidence interval estimate of a population parameter 3.10.h distinguish between a point estimate and a confidence interval estimate of a population parameter or Accounting Questions? Go to passingscoreforum.com 6
3.10.i 3.10.j 3.10.k 3.11.a 3.11.b 3.11.c 3.11.d 3.11.e 3.11.f 3.11.g describe properties of Student s t- distribution and calculate and interpret its degrees of freedom 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 describe the issues regarding selection of the appropriate sample size, datamining bias, sample selection bias, survivorship bias, look-ahead bias, and time-period bias define a hypothesis, describe the steps of hypothesis testing, and describe and interpret the choice of the null and alternative hypotheses distinguish between one-tailed and twotailed tests of hypotheses explain a test statistic, Type I and Type II errors, a significance level, and how significance levels are used in hypothesis testing explain a decision rule, the power of a test, and the relation between confidence intervals and hypothesis tests distinguish between a statistical result and an economically meaningful result explain and interpret the p-value as it relates to hypothesis testing identify the appropriate test statistic and interpret the results for a hypothesis test concerning the population mean of both large and small samples when the population is normally or approximately distributed and the variance is 1) known or 2) unknown 3.10.i 3.10.j 3.10.k 3.11.a 3.11.b 3.11.c 3.11.d 3.11.e 3.11.f 3.11.g describe properties of Student s t- distribution and calculate and interpret its degrees of freedom 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 describe the issues regarding selection of the appropriate sample size, datamining bias, sample selection bias, survivorship bias, look-ahead bias, and time-period bias define a hypothesis, describe the steps of hypothesis testing, and describe and interpret the choice of the null and alternative hypotheses distinguish between one-tailed and twotailed tests of hypotheses explain a test statistic, Type I and Type II errors, a significance level, and how significance levels are used in hypothesis testing explain a decision rule, the power of a test, and the relation between confidence intervals and hypothesis tests distinguish between a statistical result and an economically meaningful result explain and interpret the p-value as it relates to hypothesis testing identify the appropriate test statistic and interpret the results for a hypothesis test concerning the population mean of both large and small samples when the population is normally or approximately normally distributed and the variance is 1) known or 2) unknown or Accounting Questions? Go to passingscoreforum.com 7
3.11.h 3.11.i 3.11.j 3.11.k 3.12.a 3.12.b 3.12.c identify the appropriate test statistic and interpret the results for a hypothesis test concerning the equality of the population means of two at least approximately normally distributed populations, based on independent random samples with 1) equal or 2) unequal assumed variances identify the appropriate test statistic and interpret the results for a hypothesis test concerning the mean difference of two normally distributed populations identify the appropriate test statistic and interpret the results for a hypothesis test concerning 1) the variance of a normally distributed population, and 2) the equality of the variances of two normally distributed populations based on two independent random samples distinguish between parametric and nonparametric tests and describe situations in which the use of nonparametric tests may be appropriate explain principles of technical analysis, its applications, and its underlying assumptions describe the construction of different types of technical analysis charts and interpret them explain uses of trend, support, resistance lines, and change in polarity 3.11.h 3.11.i 3.11.j 3.11.k 3.12.a 3.12.b 3.12.c identify the appropriate test statistic and interpret the results for a hypothesis test concerning the equality of the population means of two at least approximately normally distributed populations, based on independent random samples with 1) equal or 2) unequal assumed variances identify the appropriate test statistic and interpret the results for a hypothesis test concerning the mean difference of two normally distributed populations identify the appropriate test statistic and interpret the results for a hypothesis test concerning 1) the variance of a normally distributed population, and 2) the equality of the variances of two normally distributed populations based on two independent random samples distinguish between parametric and nonparametric tests and describe situations in which the use of nonparametric tests may be appropriate explain principles of technical analysis, its applications, and its underlying assumptions describe the construction of different types of technical analysis charts and interpret them explain uses of trend, support, resistance lines, and change in polarity 3.12.d describe common chart patterns 3.12.d describe common chart patterns describe common technical analysis describe common technical analysis 3.12.e indicators (price-based, momentum indicators (price-based, momentum 3.12.e oscillators, sentiment, and flow of oscillators, sentiment, and flow of funds) funds) 3.12.f explain how technical analysts use cycles 3.12.f explain how technical analysts use cycles or Accounting Questions? Go to passingscoreforum.com 8
3.12.g 3.12.h describe the key tenets of Elliott Wave Theory and the importance of Fibonacci numbers describe intermarket analysis as it relates to technical analysis and asset allocation 3.12.g 3.12.h describe the key tenets of Elliott Wave Theory and the importance of Fibonacci numbers describe intermarket analysis as it relates to technical analysis and asset allocation 4.13.a distinguish among types of markets 4.13.a distinguish among types of markets 4.13.b explain the principles of demand and explain the principles of demand and 4.13.b supply supply 4.13.c describe causes of shifts in and movements along demand and supply curves 4.13.c describe causes of shifts in and movements along demand and supply curves 4.13.d describe the process of aggregating describe the process of aggregating 4.13.d demand and supply curves demand and supply curves 4.13.e 4.13.f 4.13.g 4.13.h describe the concept of equilibrium (partial and general), and mechanisms by which markets achieve equilibrium distinguish between stable and unstable equilibria, including price bubbles, and identify instances of such equilibria calculate and interpret individual and aggregate demand, and inverse demand and supply functions, and interpret individual and aggregate demand and supply curves calculate and interpret the amount of excess demand or excess supply associated with a non-equilibrium price 4.13.e 4.13.f 4.13.g 4.13.h describe the concept of equilibrium (partial and general), and mechanisms by which markets achieve equilibrium distinguish between stable and unstable equilibria, including price bubbles, and identify instances of such equilibria calculate and interpret individual and aggregate demand, and inverse demand and supply functions, and interpret individual and aggregate demand and supply curves calculate and interpret the amount of excess demand or excess supply associated with a non-equilibrium price 4.13.i describe types of auctions and calculate the winning price(s) of an auction calculate and interpret consumer 4.13.j surplus, producer surplus, and total surplus describe how government regulation 4.13.k and intervention affect demand and supply forecast the effect of the introduction 4.13.l and the removal of a market interference (e.g., a price floor or ceiling) on price and quantity 4.13.i 4.13.j 4.13.k 4.13.l describe types of auctions and calculate the winning price(s) of an auction calculate and interpret consumer surplus, producer surplus, and total surplus describe how government regulation and intervention affect demand and supply forecast the effect of the introduction and the removal of a market interference (e.g., a price floor or ceiling) on price and quantity or Accounting Questions? Go to passingscoreforum.com 9
4.13.m 4.14.a 4.14.b 4.14.c 4.14.d calculate and interpret price, income, and cross-price elasticities of demand and describe factors that affect each measure describe consumer choice theory and utility theory describe the use of indifference curves, opportunity sets, and budget constraints in decision making calculate and interpret a budget constraint determine a consumer s equilibrium bundle of goods based on utility analysis compare substitution and income effects distinguish between normal goods and inferior goods, and explain Giffen goods and Veblen goods in this context calculate, interpret, and compare accounting profit, economic profit, normal profit, and economic rent calculate and interpret and compare total, average, and marginal revenue 4.13.m 4.14.a 4.14.b 4.14.c 4.14.d calculate and interpret price, income, and cross-price elasticities of demand and describe factors that affect each measure describe consumer choice theory and utility theory describe the use of indifference curves, opportunity sets, and budget constraints in decision making calculate and interpret a budget constraint determine a consumer s equilibrium bundle of goods based on utility analysis 4.14.e 4.14.e compare substitution and income effects distinguish between normal goods and 4.14.f 4.14.f inferior goods, and explain Giffen goods and Veblen goods in this context calculate, interpret, and compare 4.15.a 4.15.a accounting profit, economic profit, normal profit, and economic rent 4.15.b 4.15.b calculate and interpret and compare total, average, and marginal revenue 4.15.c describe a firm s factors of production 4.15.c describe a firm s factors of production 4.15.d calculate and interpret total, average, calculate and interpret total, average, 4.15.d marginal, fixed, and variable costs marginal, fixed, and variable costs 4.15.e determine and describe breakeven and determine and describe breakeven and 4.15.e shutdown points of production shutdown points of production 4.15.f describe approaches to determining the describe approaches to determining the 4.15.f profit-maximizing level of output profit-maximizing level of output 4.15.g describe how economies of scale and describe how economies of scale and 4.15.g diseconomies of scale affect costs diseconomies of scale affect costs 4.15.h distinguish between short-run and longrun profit maximization run profit maximization distinguish between short-run and long- 4.15.h distinguish among decreasing-cost, distinguish among decreasing-cost, 4.15.i constant-cost, and increasing-cost constant-cost, and increasing-cost 4.15.i industries and describe the long-run industries and describe the long-run supply of each supply of each 4.15.j calculate and interpret total, marginal, and average product of labor 4.15.j calculate and interpret total, marginal, and average product of labor or Accounting Questions? Go to passingscoreforum.com 10
4.15.k 4.15.l 4.16.a 4.16.b 4.16.c 4.16.d 4.16.e 4.16.f 4.16.g 4.16.h 5.17.a 5.17.b describe the phenomenon of diminishing marginal returns and calculate and interpret the profitmaximizing utilization level of an input determine the optimal combination of resources that minimizes cost describe characteristics of perfect competition, monopolistic competition, oligopoly, and pure monopoly explain relationships between price, marginal revenue, marginal cost, economic profit, and the elasticity of demand under each market structure describe a firm s supply function under each market structure describe and determine the optimal price and output for firms under each market structure explain factors affecting long-run equilibrium under each market structure describe pricing strategy under each market structure describe the use and limitations of concentration measures in identifying market structure identify the type of market structure within which a firm operates calculate and explain gross domestic product (GDP) using expenditure and income approaches compare the sum-of-value-added and value-of-final-output methods of calculating GDP 4.15.k 4.15.l 4.16.a 4.16.b 4.16.c 4.16.d 4.16.e 4.16.f 4.16.g 4.16.h 5.17.a 5.17.b describe the phenomenon of diminishing marginal returns and calculate and interpret the profit-maximizing utilization level of an input determine the optimal combination of resources that minimizes cost describe characteristics of perfect competition, monopolistic competition, oligopoly, and pure monopoly explain relationships between price, marginal revenue, marginal cost, economic profit, and the elasticity of demand under each market structure describe a firm s supply function under each market structure describe and determine the optimal price and output for firms under each market structure explain factors affecting long-run equilibrium under each market structure describe pricing strategy under each market structure describe the use and limitations of concentration measures in identifying market structure identify the type of market structure within which a firm operates calculate and explain gross domestic product (GDP) using expenditure and income approaches compare the sum-of-value-added and value-of-final-output methods of calculating GDP 5.17.c compare nominal and real GDP and calculate and interpret the GDP deflator compare GDP, national income, 5.17.d personal income, and personal disposable income explain the fundamental relationship 5.17.e among saving, investment, the fiscal balance, and the trade balance 5.17.c 5.17.d 5.17.e compare nominal and real GDP and calculate and interpret the GDP deflator compare GDP, national income, personal income, and personal disposable income explain the fundamental relationship among saving, investment, the fiscal balance, and the trade balance or Accounting Questions? Go to passingscoreforum.com 11
5.17.f 5.17.g 5.17.h 5.17.i 5.17.j 5.17.k 5.17.l 5.17.m 5.17.n 5.17.o 5.18.a 5.18.b explain the IS and LM curves and how they combine to generate the aggregate demand curve explain the aggregate supply curve in the short run and long run explain causes of movements along and shifts in aggregate demand and supply curves describe how fluctuations in aggregate demand and aggregate supply cause short-run changes in the economy and the business cycle distinguish between the following types of macroeconomic equilibria: long-run full employment, short-run recessionary gap, short-run inflationary gap, and short-run stagflation explain how a short-run macroeconomic equilibrium may occur at a level above or below full employment analyze the effect of combined changes in aggregate supply and demand on the economy describe sources, measurement, and sustainability of economic growth describe the production function approach to analyzing the sources of economic growth distinguish between input growth and growth of total factor productivity as components of economic growth describe the business cycle and its phases describe how resource use, housing sector activity, and external trade sector activity vary as an economy moves through the business cycle 5.17.f 5.17.g 5.17.h 5.17.i 5.17.j 5.17.k 5.17.l 5.17.m 5.17.n 5.17.o 5.18.a 5.18.b explain the IS and LM curves and how they combine to generate the aggregate demand curve explain the aggregate supply curve in the short run and long run explain causes of movements along and shifts in aggregate demand and supply curves describe how fluctuations in aggregate demand and aggregate supply cause short-run changes in the economy and the business cycle distinguish between the following types of macroeconomic equilibria: long-run full employment, short-run recessionary gap, short-run inflationary gap, and short-run stagflation explain how a short-run macroeconomic equilibrium may occur at a level above or below full employment analyze the effect of combined changes in aggregate supply and demand on the economy describe sources, measurement, and sustainability of economic growth describe the production function approach to analyzing the sources of economic growth distinguish between input growth and growth of total factor productivity as components of economic growth describe the business cycle and its phases describe how resource use, housing sector activity, and external trade sector activity vary as an economy moves through the business cycle 5.18.c describe theories of the business cycle 5.18.c describe theories of the business cycle 5.18.d describe types of unemployment and describe types of unemployment and 5.18.d measures of unemployment measures of unemployment 5.18.e explain inflation, hyperinflation, explain inflation, hyperinflation, 5.18.e disinflation, and deflation disinflation, and deflation or Accounting Questions? Go to passingscoreforum.com 12
5.18.f explain the construction of indices used explain the construction of indices used 5.18.f to measure inflation to measure inflation 5.18.g compare inflation measures, including compare inflation measures, including 5.18.g their uses and limitations their uses and limitations 5.18.h distinguish between cost-push and distinguish between cost-push and 5.18.h demand-pull inflation demand-pull inflation 5.18.i describe economic indicators, including describe economic indicators, including 5.18.i their uses and limitations their uses and limitations 5.19.a compare monetary and fiscal policy 5.19.a compare monetary and fiscal policy 5.19.b describe functions and definitions of describe functions and definitions of 5.19.b money money 5.19.c explain the money creation process 5.19.c explain the money creation process 5.19.d describe theories of the demand for describe theories of the demand for and 5.19.d and supply of money supply of money 5.19.e describe the Fisher effect 5.19.e describe the Fisher effect 5.19.f describe roles and objectives of central describe roles and objectives of central 5.19.f banks banks 5.19.g contrast the costs of expected and contrast the costs of expected and 5.19.g unexpected inflation unexpected inflation 5.19.h describe tools used to implement describe tools used to implement 5.19.h monetary policy monetary policy 5.19.i describe the monetary transmission describe the monetary transmission 5.19.i mechanism mechanism 5.19.j describe qualities of effective central describe qualities of effective central 5.19.j banks banks 5.19.k explain the relationships between monetary policy and economic growth, inflation, interest, and exchange rates 5.19.k explain the relationships between monetary policy and economic growth, inflation, interest, and exchange rates 5.19.l 5.19.m contrast the use of inflation, interest rate, and exchange rate targeting by central banks determine whether a monetary policy is expansionary or contractionary 5.19.l 5.19.m contrast the use of inflation, interest rate, and exchange rate targeting by central banks determine whether a monetary policy is expansionary or contractionary 5.19.n describe limitations of monetary policy 5.19.n describe limitations of monetary policy 5.19.o describe roles and objectives of fiscal describe roles and objectives of fiscal 5.19.o policy policy 5.19.p describe tools of fiscal policy, including describe tools of fiscal policy, including 5.19.p their advantages and disadvantages their advantages and disadvantages 5.19.q describe the arguments about whether the size of a national debt relative to GDP matters 5.19.q describe the arguments about whether the size of a national debt relative to GDP matters or Accounting Questions? Go to passingscoreforum.com 13
5.19.r explain the implementation of fiscal policy and difficulties of implementation 5.19.s determine whether a fiscal policy is expansionary or contractionary 5.19.t explain the interaction of monetary and fiscal policy 6.20.a compare gross domestic product and gross national product 6.20.b describe benefits and costs of international trade 6.20.c distinguish between comparative advantage and absolute advantage explain the Ricardian and 6.20.d Heckscher Ohlin models of trade and the source(s) of comparative advantage in each model compare types of trade and capital 6.20.e restrictions and their economic implications explain motivations for and advantages 6.20.f of trading blocs, common markets, and economic unions 6.20.g describe common objectives of capital restrictions imposed by governments 6.20.h describe the balance of payments accounts including their components explain how decisions by consumers, 6.20.i firms, and governments affect the balance of payments describe functions and objectives of the international organizations that 6.20.j facilitate trade, including the World Bank, the International Monetary Fund, and the World Trade Organization define an exchange rate, and 6.21.a distinguish between nominal and real exchange rates and spot and forward exchange rates 6.21.b describe functions of and participants in the foreign exchange market 5.19.r 5.19.s 5.19.t 6.20.a 6.20.b 6.20.c 6.20.d 6.20.e 6.20.f 6.20.g 6.20.h 6.20.i 6.20.j 6.21.a 6.21.b explain the implementation of fiscal policy and difficulties of implementation determine whether a fiscal policy is expansionary or contractionary explain the interaction of monetary and fiscal policy compare gross domestic product and gross national product describe benefits and costs of international trade distinguish between comparative advantage and absolute advantage explain the Ricardian and Heckscher Ohlin models of trade and the source(s) of comparative advantage in each model compare types of trade and capital restrictions and their economic implications explain motivations for and advantages of trading blocs, common markets, and economic unions describe common objectives of capital restrictions imposed by governments describe the balance of payments accounts including their components explain how decisions by consumers, firms, and governments affect the balance of payments describe functions and objectives of the international organizations that facilitate trade, including the World Bank, the International Monetary Fund, and the World Trade Organization define an exchange rate, and distinguish between nominal and real exchange rates and spot and forward exchange rates describe functions of and participants in the foreign exchange market or Accounting Questions? Go to passingscoreforum.com 14
6.21.c 6.21.d 6.21.e 6.21.f 6.21.g 6.21.h calculate and interpret the percentage change in a currency relative to another currency calculate and interpret currency crossrates convert forward quotations expressed on a points basis or in percentage terms into an outright forward quotation explain the arbitrage relationship between spot rates, forward rates, and interest rates calculate and interpret a forward discount or premium calculate and interpret the forward rate consistent with the spot rate and the interest rate in each currency 6.21.c 6.21.d 6.21.e 6.21.f 6.21.g 6.21.h calculate and interpret the percentage change in a currency relative to another currency calculate and interpret currency crossrates convert forward quotations expressed on a points basis or in percentage terms into an outright forward quotation explain the arbitrage relationship between spot rates, forward rates, and interest rates calculate and interpret a forward discount or premium calculate and interpret the forward rate consistent with the spot rate and the interest rate in each currency 6.21.i describe exchange rate regimes 6.21.i describe exchange rate regimes 6.21.j explain the effects of exchange rates on countries international trade and capital flows 6.21.j explain the effects of exchange rates on countries international trade and capital flows 7.22.a 7.22.b 7.22.c 7.22.d describe the roles of financial reporting and financial statement analysis describe the roles of the key financial statements (statement of financial position, statement of comprehensive income, statement of changes in equity, and statement of cash flows) in evaluating a company s performance and financial position describe the importance of financial statement notes and supplementary information including disclosures of accounting policies, methods, and estimates and management s commentary describe the objective of audits of financial statements, the types of audit reports, and the importance of effective internal controls 7.22.a 7.22.b 7.22.c 7.22.d describe the roles of financial reporting and financial statement analysis describe the roles of the statement of financial position, statement of comprehensive income, statement of changes in equity, and statement of cash flows in evaluating a company s performance and financial position describe the importance of financial statement notes and supplementary information including disclosures of accounting policies, methods, and estimates and management s commentary describe the objective of audits of financial statements, the types of audit reports, and the importance of effective internal controls or Accounting Questions? Go to passingscoreforum.com 15
7.22.e 7.22.f 7.23.a 7.23.b 7.23.c 7.23.d 7.23.e 7.23.f 7.23.g 7.24.a 7.24.b identify and describe information sources that analysts use in financial statement analysis besides annual financial statements and supplementary information describe the steps in the financial statement analysis framework explain the relationship of financial statement elements and accounts, and classify accounts into the financial statement elements explain the accounting equation in its basic and expanded forms describe the process of recording business transactions using an accounting system based on the accounting equation describe the need for accruals and other adjustments in preparing financial statements describe the relationships among the income statement, balance sheet, statement of cash flows, and statement of owners equity describe the flow of information in an accounting system describe the use of the results of the accounting process in security analysis describe the objective of financial statements and the importance of financial reporting standards in security analysis and valuation describe roles and desirable attributes of financial reporting standard-setting bodies and regulatory authorities in establishing and enforcing reporting standards, and describe the role of the International Organization of Securities Commissions 7.22.e 7.22.f 7.23.a 7.23.b 7.23.c 7.23.d 7.23.e 7.23.f 7.23.g 7.23.h 7.24.a 7.24.b identify and describe information sources that analysts use in financial statement analysis besides annual financial statements and supplementary information describe the steps in the financial statement analysis framework describe how business activities are classified for financial reporting purposes explain the relationship of financial statement elements and accounts, and classify accounts into the financial statement elements explain the accounting equation in its basic and expanded forms describe the process of recording business transactions using an accounting system based on the accounting equation describe the need for accruals and valuation adjustments in preparing financial statements describe the relationships among the income statement, balance sheet, statement of cash flows, and statement of owners equity describe the flow of information in an accounting system describe the use of the results of the accounting process in security analysis describe the objective of financial statements and the importance of financial reporting standards in security analysis and valuation describe roles and desirable attributes of financial reporting standard-setting bodies and regulatory authorities in establishing and enforcing reporting standards, and describe the role of the International Organization of Securities Commissions or Accounting Questions? Go to passingscoreforum.com 16
7.24.c 7.24.d 7.24.e describe the status of global convergence of accounting standards and ongoing barriers to developing one universally accepted set of financial reporting standards describe the International Accounting Standards Board s conceptual framework, including the objective and qualitative characteristics of financial statements, required reporting elements, and constraints and assumptions in preparing financial statements describe general requirements for financial statements under International Standards (IFRS) 7.24.c 7.24.d 7.24.e describe the status of global convergence of accounting standards and ongoing barriers to developing one universally accepted set of financial reporting standards describe the International Accounting Standards Board s conceptual framework, including the objective and qualitative characteristics of financial statements, required reporting elements, and constraints and assumptions in preparing financial statements describe general requirements for financial statements under International Standards (IFRS) 7.24.f 7.24.g 7.24.h 7.24.i 8.25.a compare key concepts of financial reporting standards under IFRS and US generally accepted accounting principles (US GAAP) reporting systems identify characteristics of a coherent financial reporting framework and the barriers to creating such a framework describe implications for financial analysis of differing financial reporting systems and the importance of monitoring developments in financial reporting standards analyze company disclosures of significant accounting policies describe the components of the income statement and alternative presentation formats of that statement 7.24.f 7.24.g 7.24.h 7.24.i 8.25.a compare key concepts of financial reporting standards under IFRS and US generally accepted accounting principles (US GAAP) reporting systems identify characteristics of a coherent financial reporting framework and the barriers to creating such a framework describe implications for financial analysis of differing financial reporting systems and the importance of monitoring developments in financial reporting standards analyze company disclosures of significant accounting policies describe the components of the income statement and alternative presentation formats of that statement or Accounting Questions? Go to passingscoreforum.com 17
8.25.b 8.25.c 8.25.d 8.25.e 8.25.f 8.25.g 8.25.h 8.25.i describe general principles of revenue recognition and accrual accounting, specific revenue recognition applications (including accounting for long-term contracts, installment sales, barter transactions, gross and net reporting of revenue), and implications of revenue recognition principles for financial analysis calculate revenue given information that might influence the choice of revenue recognition method describe general principles of expense recognition, specific expense recognition applications, and implications of expense recognition choices for financial analysis describe the financial reporting treatment and analysis of non-recurring items (including discontinued operations, extraordinary items, unusual or infrequent items) and changes in accounting standards distinguish between the operating and non-operating components of the income statement describe how earnings per share is calculated and calculate and interpret a company s earnings per share (both basic and diluted earnings per share) for both simple and complex capital structures distinguish between dilutive and antidilutive securities, and describe the implications of each for the earnings per share calculation convert income statements to commonsize income statements 8.25.b 8.25.c 8.25.d 8.25.e 8.25.f 8.25.g 8.25.h 8.25.i 8.25.j describe general principles of revenue recognition and accrual accounting, specific revenue recognition applications (including accounting for long-term contracts, installment sales, barter transactions, gross and net reporting of revenue), and implications of revenue recognition principles for financial analysis calculate revenue given information that might influence the choice of revenue recognition method describe key aspects of the converged accounting standards issued by the International Accounting Standards Board and Accounting Standards Board in May 2014 describe general principles of expense recognition, specific expense recognition applications, and implications of expense recognition choices for financial analysis describe the financial reporting treatment and analysis of non-recurring items (including discontinued operations, extraordinary items, unusual or infrequent items) and changes in accounting policies distinguish between the operating and non-operating components of the income statement describe how earnings per share is calculated and calculate and interpret a company s earnings per share (both basic and diluted earnings per share) for both simple and complex capital structures distinguish between dilutive and antidilutive securities, and describe the implications of each for the earnings per share calculation convert income statements to commonsize income statements or Accounting Questions? Go to passingscoreforum.com 18