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InsidersChoice
To
CFA 2007 Level I Certification:
The Candidates Guide to Chartered Financial
Analyst Learning Outcome Statements
Authors
Jane Vessey, CFA
M. Afdal Pamilih, CFA
David Stewart
Published by
TotalRecall Publications, Inc.
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Friendswood, TX 77546
281-992-3131
TotalRecall Publications, Inc.
This Book Sponsored by The Center For Financial Certification, Inc.
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This book is dedicated to our fantastic children Adam and Julia who we love very much.
Jane Vessey & M. Afdal Pamilih
This Study Guide is dedicated to the widow(er)s and orphans of the “Silent Spring”. Those who
have sacrificed loved ones to the obscurity of quiet study and endured weekend sacrifice above
and beyond the call of continuing education. On the alter of a profession’s highest accreditation
these unsung heroes have sacrificed time with their spouse, shopping with Mom, and pitch and
catch with Dad. These patient supporters have endured tense attitudes, unfinished chores, extra
duties, and received the respect and appreciation of all who have studied throughout the “Silent
Spring”.
In particular, never ending thanks to:
Carol Lee, Mary Elizabeth, Sophia Victoria, David Todd II
David Stewart
InsidersChoice®
To CFA 2007 Level I Certification:
The Candidates Guide to Chartered Financial
Analyst Learning Outcome Statements
BY
Authors
Jane Vessey, CFA
M. Afdal Pamilih, CFA
Contributing Author
David Stewart
Jane Vessey
Jane Vessey manages a training company in the United Kingdom specializing in financial
analysis and investment. She is a visiting lecturer at Cass Business School teaching classes in asset
management and valuation. She also teaches a CFA® revision course at ISMA (the business
school at Reading University) and is an associate at a leading London financial training company
where she teaches courses covering investment management and related topics. She has
developed online training programs for students taking the CFA examinations and teaches CFA
courses for UKSIP (the UK Society of Investment Professionals).
Jane graduated in Mathematics from Oxford University, United Kingdom, and is a CFA charter
holder. She has some eighteen years experience working in the investment industry, starting out
as an equity analyst before becoming an investment manager. She was based in London and
Tokyo and took responsibility for managing equity portfolios invested in the Japanese and other
Asian markets. In 1990, Jane moved to Indonesia and established and ran an investment
management operation on behalf of Mees Pierson. She took responsibility for all areas of the
business, including investment, operations, marketing and administration. While in Asia, Jane
was involved in providing training to capital market participants and state officials and teaching
in courses provided by local universities.
M. Afdal Pamilih
Afdal has 18 yearsʹ experience working in the finance industry. He started his career with J.P.
Morgan, and then with County NatWest Government Securities, in New York specializing in
the development of quantitative products for foreign exchange and fixed income markets.
After returning to Indonesia in 1989 he was responsible for the development of investment
services and subsequently treasury management for leading banks in Jakarta.
Afdal has developed web‐based training programs for the CFA examinations and has wide
teaching experience, including instructing at the School of Management, University of Surrey,
United Kingdom.
He obtained a MSc in Mathematics from the University of Texas at Arlington and holds the
Chartered Financial Analyst (ʺCFAʺ) qualification.
David Stewart:
David Stewart has extensive experience in venture capital and business structural
reorganizations. As president of a private client broker dealer firm, he has business valuation and
project valuation experience on the venture capital side and portfolio management on the asset
management side. His analysis, commentary, books, and study guides have appeared in the
financial management, securities, and exam prep industries.
David has collaborated with experts in the field to produce the 2001 through 2007 editions of this
study guide. His extensive research into the CFA exam program and past exam histories, field
work, and consistent review of CFA Institute information allows him and his co‐authors to
deliver high quality and up to date information.
About the Book:
InsidersChoice to CFA Level I Certification teaches the entire CFA Level I curriculum, eliminating the
impossible task of predicting what will be covered on the actual examination. Its purpose is to help you
master the Learning Outcome Statements as quickly and as effectively as possible so you can pass the CFA
Level I exam your first time. This one compact study guide and accompanying test engine will give you
with all the information, practice exams, and test-taking tips that you need to reach a passing level and feel
confident that you are ready for the real exam.
You can also feel confident that your are getting some of the best advice and coaching available, since our
authors are not only CFA charter holders and successful investment professionals, but also teach CFA
exam preparation courses in college, online, and in seminars. You get the benefit of their combined
international experience.
This book is divided into Study Sessions (1 – 18) and Appendix A (Exhibits 1 – 3). Appendix A is a
collection of Exhibits and flow charts for condensed reference and review, including examples of
accounting statements, puts and calls, PE breakdown, and financial ratios.
How to Use FinancialExams Study Notes:
Thank you for buying TotalRecall Publication’s Study Guide.
The TRP Study Guide that cover the full CFA® Curriculum for Study Sessions 1-18 printed in CFA
Institute’s Program curriculum. Each book has three main sections for each Study Session:
1. CFA curriculum, including Concept Checks
2. Mini Exam
3. Computer practice exam software
You should work through the CFA curriculum from the beginning of each book, page by page. The
learning outcome statements (LOS) have been re-ordered, where necessary, to make learning more intuitive
than in the CFA Institute’s Program curriculum. Our concise writing style minimizes learning time, and
there are numerous Examples to help you master every LOS. The command words are boldface in the LOS
title; the examiners expect that your knowledge reflects the command word.
The TRP Study Guide uses the same terminology, variables, and equations as the used in the Candidate
Readings – material from which CFA Institute constructs the actual CFA examination. Concept Checks
complete each Reading Assignment and they consist of questions to reinforce your knowledge. Answers to
Concept Check questions are at the end of each Study Session. Each Study Session Mini Exam consists of
40 multiple choice exam questions with a level of difficulty and design similar to that of the CFA
examination itself. Allow 60 minutes to complete the Mini Exam (90 seconds per question). Do not attempt
the Mini Exam until you have mastered the CFA curriculum, including Examples and Concept Checks.
Please visit our website at http://www.totalrecallpress.com where you will find other useful material
including our Exam Tips.
Publishing high-quality learning tools is our business, but errors can slip through. If you think you have
found one, please contact us at [email protected].
Corrections will be posted on our websites and emailed directly back to you. Your comments are welcome
at anytime: [email protected].
Best wishes for CFA Level I success!
The CFA Level I Examination Team
Online Information to Know:
1. CFA Program:
http://www.cfainstitute.org/cfaprog
2. The Code of Ethics (Full Text)
http://www.cfainstitute.org/centre/ethics/code
http://www.cfainstitute.org/centre/ethics/code/pdf/english_code.pdf
3. Review the ninth edition of the Standards of Practice Handbook
http://www.cfapubs.org/toc/ccb/2005/2005/3
4. Standards of Practice
Asset Manager Code of Professional Conduct
http://www.cfainstitute.org/centre/ethics/asset/index.html
Research Objectivity Standards
http://www.cfainstitute.org/centre/ethics/ros/index.html
Soft Dollar Learning Module
http://www.cfainstitute.org/centre/ethics/softdollar/
Trade Management Guidelines
http://www.cfainstitute.org/centre/ethics/tmg/index.html
5. Candidate Body Of Knowledge
http://www.cfainstitute.org/cfaprog/courseofstudy/pdf/cbok.pdf
The 18 2007 CFA Level I Study Sessions breakout is as follows:
Ethical and Professional Standards
Study Session 1: Ethical and Professional Standards
Investment Tools
Study Session 2. Quantitative Methods: Basic Concepts
Study Session 3. Quantitative Methods: Application
Study Session 4. Economics: Microeconomic Analysis
Study Session 5. Economics: Macroeconomic Analysis
Study Session 6. Economics: Global Economic Analysis
Study Session 7. Financial Statement Analysis: Basic Concepts, Cash Flow & IASB GAAP
Study Session 8. Financial Statement Analysis: Financial Ratios and Earnings Per Share
Study Session 9. Financial Statement Analysis: Inventories, Long-Term Assets, Economic Reality
Study Session 10. Financial Statement Analysis: Taxes, Balance-Sheet Debt, Economic Reality
Study Session 11. Corporate Finance: Corporate Investing & Financing Decisions
Portfolio Management
Study Session 12. Portfolio Management
Asset Valuation
Study Session 13. Analysis of Equity Investments: Securities Markets
Study Session 14. Analysis of Equity Investments: Industry and Company Analysis
Study Session 15. Analysis of Fixed Income Investments: Basic Concepts
Study Session 16. Analysis of Fixed Income Investments: Analysis and Valuation
Study Session 17. Derivative Investments
Study Session 18. Alternative Investments
Table of Contents
List of Chapters
STUDY SESSION 1 1
STUDY SESSION 2 49
STUDY SESSION 3 143
STUDY SESSION 4 215
STUDY SESSION 5 285
STUDY SESSION 6 357
STUDY SESSION 7 399
STUDY SESSION 8 453
STUDY SESSION 9 489
STUDY SESSION 10 537
STUDY SESSION 11 575
STUDY SESSION 12 643
STUDY SESSION 13 681
STUDY SESSION 14 721
STUDY SESSION 15 773
STUDY SESSION 16 851
STUDY SESSION 17 895
STUDY SESSION 18 963
Terminology 999
Appendix A: 1001
Glossary 1013
FinancialExams Return and Guarantee Policy 1042
FinancialExam Features 1043
Download Instructions 1056
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