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CFA Level I Cheat Sheet

Practice this exam

Ethics

  • 15-20% of exam
  • Code Standards GIPS MNPI Conflicts

Quant

  • 6-9% of exam
  • TVM Returns Statistics Probability Regression

Economics

  • 6-9% of exam
  • Demand Market Structures GDP Policy FX

Financial Statement Analysis

  • 11-14% of exam
  • Statements Cash Flow Inventories Taxes Ratios

Corporate Issuers

  • 6-9% of exam
  • Governance Working Capital NPV WACC Leverage

Equity

  • 11-14% of exam
  • Markets Indexes EMH DDM Multiples

Fixed Income

  • 11-14% of exam
  • Bonds Yields Duration Convexity Credit

Derivatives

  • 5-8% of exam
  • Forwards Futures Swaps Options Arbitrage

Alternatives

  • 7-10% of exam
  • Hedge Funds Private Capital Real Estate Commodities Infrastructure

Portfolio Management

  • 8-12% of exam
  • Risk Diversification CAPM IPS Behavioral

Quick Facts

  • Exam CFA Level I
  • Format 180 MCQ
  • Sessions 2 x 135 min
  • Choices A/B/C
  • Pacing 90 sec/question
  • PSM Required for results
  • MPS Not fixed public
  • Study 300+ hours avg

Seven Standards ET

  • Pro Markets Clients Employers Analysis Conflicts CFA
  • I: professionalism II: markets III: clients IV: employers V: analysis VI: conflicts VII: CFA

Client vs Employer ET

Client

  • Loyalty first
  • Suitability
  • Confidentiality

Employer

  • No harm
  • No stolen work
  • Disclose compensation
  • Client first, employer next

Ethics Action Picker ET

  • Law conflict → Stricter rule ( Minimum conduct )
  • Received MNPI → Do not trade ( Restrict list )
  • Client gift → Employer disclosure ( After gift )
  • Extra compensation → Written consent ( Before work )
  • Unsuitable request → Update IPS ( Client profile )
  • Allocation issue → Fair process ( Not equal )

Ethics Standards ET

  • I(A) Know applicable law
  • I(B) Protect objectivity
  • I(C) No misrepresentation
  • I(D) Avoid professional misconduct
  • I(E) Maintain competence
  • II(A) No MNPI trading
  • II(B) No market manipulation
  • VII(A) Protect exam integrity

MNPI vs Mosaic ET

MNPI

  • Material
  • Nonpublic
  • No trading

Mosaic

  • Public data
  • Immaterial nonpublic
  • Reasoned conclusion
  • Inside fact vs analysis

Client Duties ET

  • III(A) Client loyalty first
  • III(B) Fair client dealing
  • III(C) Check suitability
  • III(D) Fair performance claims
  • III(E) Preserve confidentiality
  • VI(A) Disclose conflicts
  • VI(B) Client trades first
  • VI(C) Disclose referral fees

TWR vs MWR QU

TWR

  • Manager performance
  • Removes cash timing
  • Chain returns

MWR

  • Investor return
  • Cash timing matters
  • IRR method
  • Manager vs investor

Quant Formulas QU

  • FV PV(1+r)^N
  • EAR (1+APR/m)^m-1
  • HPY (P1-P0+D)/P0
  • TWR Chain subperiod returns
  • MWR Portfolio IRR
  • CV s/mean
  • z (x-mean)/s
  • R2 Explained variation

Economics Map EC

  • Elasticity %Qd/%P
  • MR=MC Profit-max output
  • GDP C+I+G+NX
  • AD Total demand
  • SRAS Sticky input costs
  • LRAS Potential output
  • PPP Inflation drives FX
  • IRP Rates drive forwards

CFO Signs FS

  • Assets up subtract; liabilities up add
  • AR up: subtract Inventory up: subtract AP up: add Depreciation: add

FIFO vs LIFO FS

FIFO

  • Old COGS
  • High EI
  • Higher profit

LIFO

  • Recent COGS
  • Low EI
  • Lower taxes
  • Rising prices assumption

FSA Picker FS

  • Liquidity question → Current ratio ( Short-term )
  • Cash conversion → CFO ( Operating quality )
  • Rising prices → FIFO high EI ( Low COGS )
  • Tax timing → DTL/DTA ( Temporary )
  • Leverage risk → Coverage ( Interest safety )
  • ROE drivers → DuPont ( Margin-turn-leverage )

FSA Core FS

  • Assets Resources controlled
  • Liabilities Present obligations
  • Equity Residual interest
  • Revenue Earned inflows
  • Expense Used benefits
  • CFO Operating cash
  • CFI Investing cash
  • CFF Financing cash

DuPont FS

  • ROE = Margin x Turnover x Leverage
  • Margin: profitability Turnover: efficiency Leverage: financing

FSA Ratios FS

  • Current CA/CL
  • Quick (Cash+AR)/CL
  • Gross margin Gross profit/Sales
  • ROA NI/Avg assets
  • ROE NI/Avg equity
  • Turnover Sales/Avg assets
  • Debt/equity Debt/Equity
  • Coverage EBIT/Interest

NPV vs IRR CO

NPV

  • Value added
  • Dollar measure
  • Best rule

IRR

  • Rate measure
  • Scale problem
  • Multiple roots
  • Value beats rate

Corporate Formulas CO

  • NPV PV inflows - outlay
  • IRR NPV = 0
  • PI PV inflows/outlay
  • WACC wD rd(1-t)+wE re
  • DOL %EBIT/%Sales
  • DFL %EPS/%EBIT
  • CCC DSO+DIO-DPO
  • NWC Current assets - liabilities

Valuation Picker EQ

  • Stable dividends → DDM ( Equity cash )
  • Constant growth → GGM ( g < r )
  • Negative earnings → P/S ( Sales positive )
  • Asset-heavy firm → P/B ( Book useful )
  • Peer comparison → Multiples ( Relative value )
  • Control value → DCF ( Intrinsic value )

Equity Valuation EQ

  • DDM PV expected dividends
  • GGM D1/(r-g)
  • P/E Price/EPS
  • P/B Price/Book
  • P/S Price/Sales
  • EV/EBITDA Enterprise multiple
  • EMH weak Prices reflect history
  • EMH semi Prices reflect public

Duration vs Convexity FI

Duration

  • Slope
  • Linear estimate
  • First order

Convexity

  • Curvature
  • Large moves
  • Second order
  • Line vs curve

Rate Risk Picker FI

  • Single cash flow → PV/FV ( TVM )
  • Uneven cash flows → NPV/IRR ( Calculator CF )
  • Bond price → PV coupons ( Plus par )
  • Yield change → Duration ( Linear )
  • Large yield move → Convexity ( Curved )
  • Credit event → CDS ( Default protection )

Fixed Income Risk FI

  • Coupon Periodic interest
  • YTM Bond IRR
  • Spot rate Zero-coupon yield
  • Forward rate Implied future rate
  • Duration Price-yield sensitivity
  • Convexity Curvature adjustment
  • OAS Option-adjusted spread
  • CDS Credit protection

Option Rights DE

  • Call buys; put sells
  • Long: right Short: obligation Premium: option price

Forward vs Future DE

Forward

  • OTC
  • Custom terms
  • Counterparty risk

Future

  • Exchange traded
  • Standardized
  • Daily settlement
  • Custom vs standardized

Derivatives Map DE

  • Forward Custom OTC commitment
  • Future Exchange-traded commitment
  • Swap Exchange cash flows
  • Call Right to buy
  • Put Right to sell
  • Long Own option right
  • Short Option obligation
  • Arbitrage Riskless mispricing trade

Alternatives Map AL

  • Hedge fund Flexible active strategy
  • Private equity Nonpublic ownership
  • Venture capital Early-stage equity
  • Buyout Control acquisition
  • Real estate Property income
  • Commodity Physical exposure
  • Infrastructure Long-life assets
  • NAV Asset value estimate

CAPM PO

  • Required return = rf + beta premium
  • rf: time beta: market risk MRP: reward

Strategic vs Tactical PO

Strategic

  • Long-run policy
  • Risk targets
  • IPS anchor

Tactical

  • Short-run tilts
  • Market views
  • Active bet
  • Policy vs tilt

Portfolio Core PO

  • Risk Return uncertainty
  • Variance Squared dispersion
  • Correlation -1 to +1
  • Beta Systematic risk
  • CAPM rf + beta(MRP)
  • Sharpe Excess return/sigma
  • IPS Policy roadmap
  • SAA Long-run allocation

Common Traps

MPS vs pass rate

  • MPS is hidden ≠ Pass rate is outcome

Fair vs equal

  • Fair process required ≠ Equal treatment unnecessary

Client gift timing

  • Before: written consent ≠ After: employer disclosure

FIFO inventory

  • Rising prices: high EI ≠ LIFO: high COGS

IRR ranking

  • IRR ignores scale ≠ NPV adds value

Duration sign

  • Rates up ≠ Bond price down

American option

  • Exercise anytime ≠ European at expiry

Correlation limit

  • Minimum is -1 ≠ Maximum is +1

Last Minute

  • 1. Weights: 15-20 ethics first
  • 2. Session split: 90 + 90
  • 3. No penalty for guessing
  • 4. PSM required for results
  • 5. Stricter law controls conduct
  • 6. MNPI blocks trading
  • 7. TWR removes cash timing
  • 8. CFO: assets up subtract
  • 9. NPV beats IRR conflicts
  • 10. Rates up, bonds down
  • 11. Call buys; put sells
  • 12. CAPM prices systematic risk

CFA Level 1

  • Practice Questions 204 questions Study Guide 79 topics Cheat Sheet 96 facts Flashcards 50 cards Shorts 2 short s Videos 1 video Blogs 2 blogs Free CE Podcast