Level 1 Los 2014

CFA Level 1 - LOS Changes 2013 - 2014
Topic
LOS
Ethics
1.1.a
Ethics
1.1.b
Ethics
1.1.c
Ethics
1.2.a
Ethics
1.2.b
Ethics
1.2.c
Ethics
1.3.a
Ethics
1.3.b
Ethics
1.3.c
Level I 2013
Level I - 2014
LOS
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
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
1.1.a
1.1.b
1.1.c
1.2.a
1.2.b
1.2.c
1.3.a
1.3.b
1.3.c
Compared
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.
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.
www.passingscore.net
Ethics
1.4.a
Ethics
1.4.b
Ethics
1.4.c
Ethics
1.4.d
Quantitative
2.5.a
Quantitative
2.5.b
Quantitative
2.5.c
Quantitative
2.5.d
Quantitative
2.5.e
Quantitative
2.5.f
Quantitative
2.6.a
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
firms definition and historical
performance record
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
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
1.4.a
1.4.b
1.4.c
1.4.d
2.5.a
2.5.b
2.5.c
2.5.d
2.5.e
2.5.f
2.6.a
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
firms definition and historical
performance record;
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;
annual rate, given the stated annual
interest rate and the frequency of
compounding;
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;
Quantitative
2.6.b
Quantitative
2.6.c
Quantitative
2.6.d
Quantitative
2.6.e
Quantitative
2.6.f
Quantitative
2.7.a
Quantitative
2.7.b
Quantitative
2.7.c
Quantitative
2.7.d
Quantitative
2.7.e
Quantitative
2.7.f
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
calculate and interpret the bank
discount yield, holding period yield,
effective annual yield, and money
market yield for US 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
2.6.b
2.6.c
2.6.d
2.6.e
2.6.f
2.7.a
2.7.b
2.7.c
2.7.d
2.7.e
2.7.f
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;
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;
Quantitative
2.7.g
Quantitative
2.7.h
Quantitative
2.7.i
Quantitative
2.7.j
Quantitative
2.7.k
Quantitative
2.7.l
Quantitative
2.7.m
Quantitative
2.8.a
Quantitative
2.8.b
Quantitative
2.8.c
Quantitative
2.8.d
Quantitative
2.8.e
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
calculate and interpret the proportion of
observations falling within a specified
number of standard deviations of the
mean using Chebyshevs inequality
calculate and interpret the coefficient of
variation and the Sharpe ratio
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
explain 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
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
2.7.g
2.7.h
2.7.i
2.7.j
2.7.k
2.7.l
2.7.m
2.8.a
2.8.b
2.8.c
2.8.d
2.8.e
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;
calculate and interpret the proportion of
observations falling within a specified
number of standard deviations of the
mean using Chebyshevs inequality;
calculate and interpret the coefficient of
variation and the Sharpe ratio;
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;
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;
Wording
Change
Quantitative
2.8.f
Quantitative
2.8.g
Quantitative
2.8.h
Quantitative
2.8.i
Quantitative
2.8.j
Quantitative
2.8.k
Quantitative
2.8.l
Quantitative
2.8.m
Quantitative
2.8.n
Quantitative
2.8.o
Quantitative
3.9.a
Quantitative
3.9.b
Quantitative
3.9.c
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
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 the
factorial, combination, and permutation
notations
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
2.8.f
2.8.g
2.8.h
2.8.i
2.8.j
2.8.k
2.8.l
2.8.m
2.8.n
2.8.o
3.9.a
3.9.b
3.9.c
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;
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;
Wording
Change
Quantitative
3.9.d
Quantitative
3.9.e
Quantitative
3.9.f
Quantitative
3.9.g
Quantitative
3.9.h
Quantitative
3.9.i
Quantitative
3.9.j
Quantitative
3.9.k
Quantitative
3.9.l
Quantitative
3.9.m
Quantitative
3.9.n
Quantitative
3.9.o
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
calculate and interpret tracking error
define the continuous uniform
distribution and calculate and interpret
probabilities, given a continuous
uniform distribution
explain the key properties of the normal
distribution
distinguish between a univariate and a
multivariate distribution, and explain
the role of correlation in the
multivariate normal distribution
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 Roys safety-first
criterion
explain the relationship between normal
and lognormal distributions and why the
lognormal distribution is used to model
asset prices
3.9.d
3.9.e
3.9.f
3.9.g
3.9.h
3.9.i
3.9.j
3.9.k
3.9.l
3.9.m
3.9.n
3.9.o
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;
calculate and interpret tracking error;
define the continuous uniform
distribution and calculate and interpret
probabilities, given a continuous
uniform distribution;
explain the key properties of the normal
distribution;
distinguish between a univariate and a
multivariate distribution, and explain
the role of correlation in the
multivariate normal distribution;
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 Roys safety-first
criterion;
explain the relationship between normal
and lognormal distributions and why the
lognormal distribution is used to model
asset prices;
Quantitative
3.9.p
Quantitative
3.9.q
Quantitative
3.9.r
Quantitative
3.10.a
Quantitative
3.10.b
Quantitative
3.10.c
Quantitative
3.10.d
Quantitative
3.10.e
Quantitative
3.10.f
Quantitative
3.10.g
Quantitative
3.10.h
Quantitative
3.10.i
Quantitative
3.10.j
Quantitative
3.10.k
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 major applications and
limitations
compare Monte Carlo simulation and
historical simulation
define simple random sampling and a
sampling distribution
explain sampling error
distinguish between simple random and
stratified random sampling
distinguish between time-series and
cross-sectional data
explain the central limit theorem and its
importance
calculate and interpret the standard
error of the sample mean
identify and describe desirable
properties of an estimator
distinguish between a point estimate
and a confidence interval estimate of a
population parameter
describe the properties of Students tdistribution 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
3.9.p
3.9.q
3.9.r
3.10.a
3.10.b
3.10.c
3.10.d
3.10.e
3.10.f
3.10.g
3.10.h
3.10.i
3.10.j
3.10.k
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 major applications and
limitations;
compare Monte Carlo simulation and
historical simulation.
define simple random sampling and a
sampling distribution;
explain sampling error;
distinguish between simple random and
stratified random sampling;
distinguish between time-series and
cross-sectional data;
explain the central limit theorem and its
importance;
calculate and interpret the standard
error of the sample mean;
identify and describe desirable
properties of an estimator;
distinguish between a point estimate
and a confidence interval estimate of a
population parameter;
describe properties of Students tdistribution 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.
Quantitative
3.11.a
define a hypothesis, describe the steps

of hypothesis testing, describe and
interpret the choice of the null and
alternative hypotheses, and distinguish
between one-tailed and two-tailed tests
of hypotheses
Quantitative
3.11.a
3.11.b
Quantitative
3.11.b
Quantitative
3.11.c
Quantitative
3.11.d
Quantitative
3.11.e
Quantitative
3.11.f
Quantitative
3.11.g
Quantitative
3.11.h
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
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
hypothesis test concerning the mean
difference of two normally distributed
populations
3.11.c
3.11.d
3.11.e
3.11.f
3.11.g
3.11.h
3.11.i
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;
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;
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;
hypothesis test concerning the mean
difference of two normally distributed
populations;
Separation
Separation
Quantitative
3.11.i
Quantitative
3.11.j
Quantitative
3.12.a
Quantitative
3.12.b
Quantitative
3.12.c
Quantitative
3.12.d
Quantitative
3.12.e
Quantitative
3.12.f
Quantitative
3.12.g
Quantitative
3.12.h
Economics
4.13.a
Economics
4.13.b
Economics
4.13.c

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 the
situations in which the use of
nonparametric tests may be appropriate
explain the principles of technical
analysis, its applications, and its
underlying assumptions
describe the construction of and
interpret different types of technical
analysis charts
explain the uses of trend, support,
resistance lines, and change in polarity
identify and interpret common chart
patterns
describe common technical analysis
indicators: price-based, momentum
oscillators, sentiment, and flow of funds
explain the use of cycles by technical
analysts
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
distinguish among types of markets
explain the principles of demand and
supply
describe causes of shifts in and
movements along demand and supply
curves
3.11.j
3.11.k
3.12.a
3.12.b
3.12.c
3.12.d
3.12.e
3.12.f
3.12.g
3.12.h
4.13.a
4.13.b
4.13.c

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;
describe common chart patterns;
describe common technical analysis
indicators (price-based, momentum
oscillators, sentiment, and flow of
funds);
explain how technical analysts use
cycles;
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.
distinguish among types of markets;
explain the principles of demand and
supply;
describe causes of shifts in and
movements along demand and supply
curves;
Wording
Change
Wording
Change
Wording
Change
Economics
4.13.d
describe the process of aggregating

demand and supply curves, the concept
of equilibrium, and mechanisms by
which markets achieve equilibrium
Economics
4.13.d
4.13.e
Economics
4.13.e
Economics
4.13.f
Economics
4.13.g
Economics
4.13.h
Economics
4.13.i
Economics
4.13.j
Economics
4.13.k
Economics
4.13.l
Economics
4.14.a
Economics
4.14.b
distinguish between stable and unstable

equilibria and identify instances of such
equilibria
calculate and interpret individual and
aggregate demand, 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
describe the types of auctions and
calculate the winning price(s) of an
auction
calculate and interpret consumer
surplus, producer surplus, and total
surplus
analyze the effects of government
regulation and intervention on demand
and supply
forecast the effect of the introduction
and the removal of a market
interference (eg, a price floor or ceiling)
on price and quantity
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
4.13.f
4.13.g
4.13.h
4.13.i
4.13.j
4.13.k
4.13.l
4.13.m
4.14.a
4.14.b
describe the process of aggregating

demand and supply curves;
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;
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;
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;
Separation
Separation
Wording
Change
Wording
Change
10
Economics
4.14.c
Economics
4.14.d
Economics
4.14.e
Economics
4.14.f
Economics
4.15.a
Economics
4.15.b
Economics
4.15.c
Economics
4.15.d
Economics
4.15.e
Economics
4.15.g
Economics
4.15.f
Economics
4.15.h
Economics
4.15.i
Economics
4.15.j
Economics
4.15.k
Economics
4.15.l
Economics
4.16.a
calculate and interpret a budget

constraint
determine a consumers 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
describe the firms factors of production
calculate and interpret total, average,
marginal, fixed, and variable costs
determine and describe breakeven and
shutdown points of production
describe approaches to determining the
profit-maximizing level of output
explain how economies of scale and
diseconomies of scale affect costs
distinguish between short-run and longrun profit maximization
distinguish among decreasing-cost,
constant-cost, and increasing-cost
industries and describe the long-run
supply of each
calculate and interpret total, marginal,
and average product of labor
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 the characteristics of perfect
competition, monopolistic competition,
oligopoly, and pure monopoly
4.14.c
4.14.d
4.14.e
4.14.f
4.15.a
4.15.b
4.15.c
4.15.d
4.15.e
4.15.f
4.15.g
4.15.h
4.15.i
4.15.j
4.15.k
4.15.l
4.16.a
calculate and interpret a budget

constraint;
determine a consumers 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;
describe a firms factors of production;
calculate and interpret total, average,
marginal, fixed, and variable costs;
determine and describe breakeven and
shutdown points of production;
describe approaches to determining the
profit-maximizing level of output;
describe how economies of scale and
diseconomies of scale affect costs;
distinguish between short-run and longrun profit maximization;
distinguish among decreasing-cost,
constant-cost, and increasing-cost
industries and describe the long-run
supply of each;
calculate and interpret total, marginal,
and average product of labor;
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;
Wording
Change
11
Economics
4.16.b
Economics
4.16.c
Economics
4.16.d
Economics
4.16.e
Economics
4.16.f
Economics
4.16.g
Economics
4.16.h
Economics
5.17.a
Economics
5.17.b
Economics
explain the relationships between price,

marginal revenue, marginal cost,
economic profit, and the elasticity of
demand under each market structure
describe the firms supply function
under each market structure
describe and determine the optimal
price and output for firms under each
market structure
4.16.b
4.16.c
4.16.d
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 a
firm is operating within
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
4.16.e
5.17.c
compare nominal and real GDP and

calculate and interpret the GDP deflator
5.17.c
Economics
5.17.d
5.17.d
Economics
5.17.e
Economics
5.17.f
Economics
5.17.g
compare GDP, national income, personal

income, and personal disposable income
explain the fundamental relationship
among saving, investment, the fiscal
balance, and the trade balance
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
4.16.f
4.16.g
4.16.h
5.17.a
5.17.b
5.17.e
5.17.f
5.17.g
explain relationships between price,

marginal revenue, marginal cost,
economic profit, and the elasticity of
demand under each market structure;
describe a firms 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;
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;
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;
Wording
Change
12
Economics
5.17.h
Economics
5.17.i
Economics
5.17.j
Economics
5.17.k
Economics
5.17.l
Economics
5.17.m
Economics
5.17.n
Economics
5.18.a
Economics
5.18.b
Economics
5.18.c
Economics
5.18.d
Economics
5.18.e
Economics
5.18.f
Economics
5.18.g
Economics
5.18.h
Economics
5.18.i
explain the 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
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 the 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
explain the typical patterns of resource
use fluctuation, housing sector activity,
and external trade sector activity, as an
economy moves through the business
cycle
describe theories of the business cycle
describe types of unemployment and
measures of unemployment
explain inflation, hyperinflation,
disinflation, and deflation
explain the construction of indices used
to measure inflation
compare inflation measures, including
their uses and limitations
distinguish between cost-push and
demand-pull inflation
describe economic indicators, including
their uses and limitations
5.17.h
5.17.i
5.17.j
5.17.k
5.17.l
5.17.m
5.17.n
5.18.a
5.18.b
5.18.c
5.18.d
5.18.e
5.18.f
5.18.g
5.18.h
5.18.i
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;
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;
describe theories of the business cycle;
describe types of unemployment and
measures of unemployment;
explain inflation, hyperinflation,
disinflation, and deflation;
explain the construction of indices used
to measure inflation;
compare inflation measures, including
their uses and limitations;
distinguish between cost-push and
demand-pull inflation;
describe economic indicators, including
their uses and limitations;
Wording
Change
13
Economics
5.18.j
Economics
5.19.a
Economics
5.19.b
Economics
5.19.c
Economics
5.19.d
Economics
5.19.e
Economics
5.19.f
Economics
5.19.g
Economics
5.19.h
Economics
5.19.i
Economics
5.19.j
Economics
5.19.k
Economics
5.19.l
Economics
5.19.m
Economics
5.19.n
Economics
5.19.o
Economics
5.19.p
Economics
5.19.q
Economics
5.19.r
identify the past, current, or expected

future business cycle phase of an
economy based on economic indicators
compare monetary and fiscal policy
describe functions and definitions of
money
explain the money creation process
describe theories of the demand for and
supply of money
describe the Fisher effect
describe the roles and objectives of
central banks
contrast the costs of expected and
unexpected
describe the implementation of
monetary policy
describe the qualities of effective central
banks
explain the relationships between
monetary policy and economic growth,
inflation, interest, and exchange rates
contrast the use of inflation, interest
rate, and exchange rate targeting by
central banks
determine whether a monetary policy is
expansionary or contractionary
describe the limitations of monetary
policy
describe the roles and objectives of
fiscal policy
describe the tools of fiscal policy,
including their advantages and
disadvantages
describe the arguments for and against
being concerned with the size of a fiscal
deficit (relative to GDP)
explain the implementation of fiscal
policy and the difficulties of
implementation
determine whether a fiscal policy is
expansionary or contractionary
Removed
5.19.a
5.19.b
5.19.c
5.19.d
5.19.e
5.19.f
5.19.g
5.19.h
5.19.i
5.19.j
5.19.k
5.19.l
5.19.m
5.19.n
5.19.o
5.19.p
5.19.q
5.19.r
compare monetary and fiscal policy;

describe functions and definitions of
money;
explain the money creation process;
describe theories of the demand for and
supply of money;
describe the Fisher effect;
describe roles and objectives of central
banks;
contrast the costs of expected and
unexpected inflation;
describe tools used to implement
monetary policy;
describe qualities of effective central
banks;
explain the relationships between
monetary policy and economic growth,
inflation, interest, and exchange rates;
contrast the use of inflation, interest
rate, and exchange rate targeting by
central banks;
determine whether a monetary policy is
expansionary or contractionary;
Wording
Change
describe limitations of monetary policy;

describe roles and objectives of fiscal
policy;
describe tools of fiscal policy, including
their advantages and disadvantages;
describe the arguments about whether
the size of a national debt relative to
GDP matters;
explain the implementation of fiscal
policy and difficulties of
implementation;
determine whether a fiscal policy is
expansionary or contractionary;
Wording
Change
14
Economics
5.19.s
Economics
6.20.a
Economics
6.20.b
Economics
6.20.c
Economics
6.20.d
Economics
6.20.e
Economics
6.20.f
Economics
6.20.g
Economics
6.20.h
Economics
6.20.i
Economics
6.21.a
Economics
6.21.b
Economics
6.21.c
Economics
6.21.d
explain the interaction of monetary and

fiscal policy
compare gross domestic product and
gross national product
describe the benefits and costs of
international trade
distinguish between comparative
advantage and absolute advantage
explain the Ricardian and
HeckscherOhlin 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 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
calculate and interpret the percentage
change in a currency relative to another
currency
calculate and interpret currency crossrates
5.19.s
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
6.21.a
6.21.b
6.21.c
6.21.d
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
HeckscherOhlin 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 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;
calculate and interpret the percentage
change in a currency relative to another
currency;
calculate and interpret currency crossrates;
15
Economics
6.21.e
Economics
6.21.f
Economics
6.21.g
Economics
6.21.h
Economics
6.21.i
Financial
Reporting
6.21.j
Financial
Reporting
7.22.a
Financial
Reporting
7.22.b
Financial
Reporting
7.22.c
Financial
Reporting
7.22.d
Financial
Reporting
7.22.e
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
describe exchange rate regimes
explain the impact of exchange rates on
countries international trade and capital
flows
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 companys performance
and financial position
describe the importance of financial
statement notes and supplementary
informationincluding disclosures of
accounting policies, methods, and
estimates and managements
commentary
describe the objective of audits of
financial statements, the types of audit
reports, and the importance of effective
internal controls
identify and explain information sources
that analysts use in financial statement
analysis besides annual financial
statements and supplementary
information
6.21.e
6.21.f
6.21.g
6.21.h
6.21.i
6.21.j
7.22.a
7.22.b
7.22.c
7.22.d
7.22.e
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;
describe exchange rate regimes;
explain the effects of exchange rates on
countries international trade and capital
flows.
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 companys performance
and financial position;
describe the importance of financial
statement notes and supplementary
informationincluding disclosures of
accounting policies, methods, and
estimates and managements
commentary;
describe the objective of audits of
financial statements, the types of audit
reports, and the importance of effective
internal controls;
identify and describe information
sources that analysts use in financial
statement analysis besides annual
financial statements and supplementary
information;
Wording
Change
Wording
Change
16
Financial
Reporting
7.22.f
Financial
Reporting
7.23.a
Financial
Reporting
7.23.b
Financial
Reporting
7.23.c
Financial
Reporting
7.23.d
Financial
Reporting
7.23.e
Financial
Reporting
Financial
Reporting
7.23.f
7.23.g
Financial
Reporting
7.24.a
Financial
Reporting
7.24.b
Financial
Reporting
7.24.c
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
explain the process of recording
business transactions using an
accounting system based on the
accounting equation
explain the need for accruals and other
adjustments in preparing financial
statements
explain 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
explain 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 the roles and desirable
attributes of financial reporting standardsetting bodies and regulatory
authorities in establishing and enforcing
reporting standards, and describe the
role of the International Organization of
Securities Commissions
describe the status of global
convergence of accounting standards
and ongoing barriers to developing one
universally accepted set of financial
reporting standards
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
7.24.c
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;
describe the status of global
convergence of accounting standards
and ongoing barriers to developing one
universally accepted set of financial
reporting standards;
Wording
Change
Wording
Change
Wording
Change
Wording
Change
17
Financial
Reporting
7.24.d
Financial
Reporting
7.24.e
Financial
Reporting
7.24.f
Financial
Reporting
7.24.g
Financial
Reporting
7.24.h
Financial
Reporting
7.24.i
Financial
Reporting
8.25.a
Financial
Reporting
8.25.b
Financial
Reporting
8.25.c
describe the International Accounting

Standards Boards 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 IFRS
compare key concepts of financial
reporting standards under IFRS and US
GAAP reporting systems
identify the characteristics of a coherent
financial reporting framework and the
barriers to creating such a framework
explain the 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
describe the 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 the
implications of revenue recognition
principles for financial analysis
calculate revenue given information that
might influence the choice of revenue
recognition method
7.24.d
7.24.e
7.24.f
7.24.g
7.24.h
7.24.i
8.25.a
8.25.b
8.25.c
describe the International Accounting

Standards Boards 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 IFRS;
compare key concepts of financial
reporting standards under IFRS and
U.S. 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;
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;
Wording
Change
18
Financial
Reporting
8.25.d
Financial
Reporting
8.25.e
Financial
Reporting
8.25.f
Financial
Reporting
8.25.g
Financial
Reporting
8.25.h
Financial
Reporting
8.25.i
Financial
Reporting
8.25.j
Financial
Reporting
8.25.k
Financial
Reporting
8.25.l
Financial
Reporting
Financial
Reporting
Financial
Reporting
8.26.a
8.26.b
8.26.c
describe the general principles of

expense recognition, specific expense
recognition applications, and the
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
companys 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
evaluate a companys financial
performance using common-size income
statements and financial ratios based on
the income statement
describe, calculate, and interpret
comprehensive income
describe other comprehensive income,
and identify the major types of items
included in it
describe the elements of the balance
sheet: assets, liabilities, and equity
describe the uses and limitations of the
balance sheet in financial analysis
describe alternative formats of balance
sheet presentation
8.25.d
8.25.e
8.25.f
8.25.g
8.25.h
8.25.i
8.25.j
8.25.k
8.25.l
8.26.a
8.26.b
8.26.c
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
companys 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;
evaluate a companys financial
performance using common-size income
statements and financial ratios based on
the income statement;
comprehensive income;
describe other comprehensive income,
and identify major types of items
included in it.
describe the elements of the balance
sheet: assets, liabilities, and equity;
describe uses and limitations of the
balance sheet in financial analysis;
describe alternative formats of balance
sheet presentation;
19
Financial
Reporting
8.26.d
Financial
Reporting
8.26.e
Financial
Reporting
Financial
Reporting
8.26.f
8.26.g
Financial
Reporting
8.26.h
Financial
Reporting
8.26.i
Financial
Reporting
8.27.a
Financial
Reporting
8.27.b
Financial
Reporting
8.27.c
Financial
Reporting
8.27.d
Financial
Reporting
8.27.e
Financial
Reporting
8.27.f
Financial
Reporting
8.27.g
distinguish between current and noncurrent assets, and current and noncurrent liabilities
describe different types of assets and
liabilities and the measurement bases of
each
describe the components of
shareholders equity
analyze balance sheets and statements
of changes in equity
convert balance sheets to common-size
balance sheets and interpret the
common-size balance sheets
calculate and interpret liquidity and
solvency ratios
compare cash flows from operating,
investing, and financing activities and
classify cash flow items as relating to
one of those three categories given a
description of the items
describe how non-cash investing and
financing activities are reported
contrast cash flow statements prepared
under International Financial Reporting
Standards (IFRS) and US generally
accepted accounting principles (US
GAAP)
distinguish between the direct and
indirect methods of presenting cash
from operating activities and describe
the arguments in favor of each method
describe how the cash flow statement is
linked to the income statement and the
balance sheet
describe the steps in the preparation of
direct and indirect cash flow
statements, including how cash flows
can be computed using income
statement and balance sheet data
convert cash flows from the indirect to
direct method
8.26.d
8.26.e
8.26.f
8.26.g
8.26.h
8.26.i
8.27.a
8.27.b
8.27.c
8.27.d
8.27.e
8.27.f
8.27.g
distinguish between current and noncurrent assets, and current and noncurrent liabilities;
describe different types of assets and
liabilities and the measurement bases of
each;
describe the components of
shareholders equity;
analyze balance sheets and statements
of changes in equity;
convert balance sheets to common-size
balance sheets and interpret commonsize balance sheets;
calculate and interpret liquidity and
solvency ratios.
compare cash flows from operating,
investing, and financing activities and
classify cash flow items as relating to
one of those three categories given a
description of the items;
describe how non-cash investing and
financing activities are reported;
contrast cash flow statements prepared
under International Financial Reporting
Standards (IFRS) and U.S. generally
accepted accounting principles (U.S.
GAAP);
distinguish between the direct and
indirect methods of presenting cash
from operating activities and describe
arguments in favor of each method;
describe how the cash flow statement is
linked to the income statement and the
balance sheet;
describe the steps in the preparation of
direct and indirect cash flow
statements, including how cash flows
can be computed using income
statement and balance sheet data;
convert cash flows from the indirect to
direct method;
20
Financial
Reporting
8.27.h
Financial
Reporting
8.27.i
Financial
Reporting
8.28.a
Financial
Reporting
8.28.b
Financial
Reporting
8.28.c
Financial
Reporting
8.28.d
Financial
Reporting
8.28.e
analyze and interpret both reported and

common-size cash flow statements
calculate and interpret free cash flow to
the firm, free cash flow to equity, and
performance and coverage cash flow
ratios
describe tools and techniques used in
financial analysis, including their uses
and limitations
classify, calculate, and interpret activity,
liquidity, solvency, profitability, and
valuation ratios
describe the relationships among ratios
and evaluate a company using ratio
analysis
demonstrate the application of DuPont
analysis of return on equity, and
calculate and interpret the effects of
changes in its components
calculate and interpret ratios used in
equity analysis, credit analysis, and
segment analysis
Financial
Reporting
8.27.h
8.27.i
8.28.a
8.28.b
8.28.c
8.28.d
8.28.e
8.28.f
Financial
Reporting
8.28.f
Financial
Reporting
9.29.a
Financial
Reporting
9.29.b
Financial
Reporting
9.29.c
describe how ratio analysis and other

techniques can be used to model and
forecast earnings
distinguish between costs included in
inventories and costs recognized as
expenses in the period in which they are
incurred
describe different inventory valuation
methods (cost formulas)
calculate cost of sales and ending
inventory using different inventory
valuation methods and explain the
impact of the inventory valuation
method choice on gross profit
8.28.g
9.29.a
9.29.b
9.29.c
analyze and interpret both reported and

common-size cash flow statements;
calculate and interpret free cash flow to
the firm, free cash flow to equity, and
performance and coverage cash flow
ratios.
describe tools and techniques used in
financial analysis, including their uses
and limitations;
classify, calculate, and interpret activity,
liquidity, solvency, profitability, and
valuation ratios;
describe relationships among ratios and
evaluate a company using ratio
analysis;
demonstrate the application of DuPont
analysis of return on equity, and
calculate and interpret effects of
changes in its components;
calculate and interpret ratios used in
equity analysis and credit analysis;
explain the requirements for segment
reporting, and calculate and interpret
segment ratios;
describe how ratio analysis and other
techniques can be used to model and
forecast earnings.
distinguish between costs included in
inventories and costs recognized as
expenses in the period in which they are
incurred;
describe different inventory valuation
methods (cost formulas);
calculate cost of sales and ending
inventory using different inventory
valuation methods and explain the
effect of the inventory valuation method
choice on gross profit;
Wording
Change
NEW
Wording
Change
21
Financial
Reporting
9.29.d
Financial
Reporting
9.29.e
Financial
Reporting
9.29.f
Financial
Reporting
9.29.g
Financial
Reporting
9.29.h
Financial
Reporting
9.30.a
Financial
Reporting
9.30.b
Financial
Reporting
9.30.c
Financial
Reporting
9.30.d
Financial
Reporting
9.30.e
calculate and compare cost of sales,

gross profit, and ending inventory using
perpetual and periodic inventory
systems
compare and contrast cost of sales,
ending inventory, and gross profit using
different inventory valuation methods
describe the measurement of inventory
at the lower of cost and net realisable
value
describe the financial statement
presentation of and disclosures relating
to inventories
calculate and interpret ratios used to
evaluate inventory management
distinguish between costs that are
capitalized and costs that are expensed
in the period in which they are incurred
compare the financial reporting of the
following classifications of intangible
assets: purchased, internally developed,
acquired in a business combination
describe the different depreciation
methods for property, plant, and
equipment, the effect of the choice of
depreciation method on the financial
statements, and the effects of
assumptions concerning useful life and
residual value on depreciation expense
calculate depreciation expense
describe the different amortization
methods for intangible assets with finite
lives, the effect of the choice of
amortization method on the financial
residual value on amortization expense
9.29.d
9.29.e
9.29.f
9.29.g
9.29.h
9.30.a
9.30.b
9.30.c
9.30.d
9.30.e
calculate and compare cost of sales,

gross profit, and ending inventory using
perpetual and periodic inventory
systems;
compare cost of sales, ending inventory,
and gross profit using different
inventory valuation methods;
describe the measurement of inventory
at the lower of cost and net realisable
value;
to inventories;
calculate and interpret ratios used to
evaluate inventory management.
Wording
Change
distinguish between costs that are

capitalized and costs that are expensed
in the period in which they are incurred;
compare the financial reporting of the
following types of intangible assets:
purchased, internally developed,
acquired in a business combination;
describe the different depreciation
methods for property, plant, and
equipment, the effect of the choice of
depreciation method on the financial
residual value on depreciation expense;
Wording
Change
calculate depreciation expense;

describe the different amortization
methods for intangible assets with finite
lives, the effect of the choice of
amortization method on the financial
residual value on amortization expense;
22
Financial
Reporting
Financial
Reporting
9.30.f
9.30.g
Financial
Reporting
9.30.h
Financial
Reporting
9.30.i
Financial
Reporting
9.30.j
Financial
Reporting
9.30.k
Financial
Reporting
9.31.a
Financial
Reporting
9.31.b
Financial
Reporting
9.31.c
Financial
Reporting
9.31.d
Financial
Reporting
9.31.e
9.30.f
calculate amortization expense

describe the revaluation model
explain the imparment of property,
plant, and equipment, and intangible
assets
explain the derecognition of property,
plant, and equipment, and intangible
assets
to property, plant, and equipment, and
intangible assets
compare the financial reporting of
investment property with that of
property, plant, and equipment
describe the differences between
accounting profit and taxable income,
and define key terms, including deferred
tax assets, deferred tax liabilities,
valuation allowance, taxes payable, and
income tax expense
explain how deferred tax liabilities and
assets are created and the factors that
determine how a company's deferred
tax liabilities and assets should be
treated for the purposes of financial
analysis
determine the tax base of a company's
assets and liabilities
calculate income tax expense, income
taxes payable, deferred tax assets, and
deferred tax liabilities, and calculate and
interpret the adjustment to the financial
statements related to a change in the
income tax rate
evaluate the impact of tax rate changes
on a company's financial statements
and ratios
9.30.g
9.30.h
9.30.i
9.30.j
9.30.k
9.31.a
9.31.b
9.31.c
9.31.d
9.31.e
calculate amortization expense;

describe the revaluation model;
explain the imparment of property,
plant, and equipment and intangible
assets;
explain the derecognition of property,
plant, and equipment and intangible
assets;
to property, plant, and equipment and
intangible assets;
compare the financial reporting of
investment property with that of
property, plant, and equipment.
describe the differences between
accounting profit and taxable income,
and define key terms, including deferred
tax assets, deferred tax liabilities,
valuation allowance, taxes payable, and
income tax expense;
explain how deferred tax liabilities and
assets are created and the factors that
determine how a companys deferred
tax liabilities and assets should be
treated for the purposes of financial
analysis;
calculate the tax base of a companys
assets and liabilities;
calculate income tax expense, income
taxes payable, deferred tax assets, and
deferred tax liabilities, and calculate and
interpret the adjustment to the financial
statements related to a change in the
income tax rate;
evaluate the impact of tax rate changes
on a company's financial statements
and ratios;
Wording
Change
23
Financial
Reporting
9.31.f
Financial
Reporting
9.31.g
Financial
Reporting
9.31.h
Financial
Reporting
9.31.i
Financial
Reporting
9.31.j
Financial
Reporting
9.32.a
Financial
Reporting
9.32.b
Financial
Reporting
Financial
Reporting
9.32.c
9.32.d
Financial
Reporting
9.32.e
Financial
Reporting
9.32.f
Financial
Reporting
9.32.g
distinguish between temporary and

permanent differences in pre-tax
accounting income and taxable income
describe the valuation allowance for
deferred tax assetswhen it is required
and what impact it has on financial
statements
compare a company's deferred tax
items
analyze disclosures relating to deferred
tax items and the effective tax rate
reconciliation, and explain how
information included in these
disclosures affects a company's financial
statements and financial ratios
identify the key provisions of and
differences between income tax
accounting under IFRS and US GAAP
determine the initial recognition, initial
measurement and subsequent
measurement of bonds
discuss the effective interest method
and calculate interest expense,
amortisation of bond
discounts/premiums, and interest
payments
discuss the derecognition of debt
explain the role of debt covenants in
protecting creditors
discuss the financial statement
to debt
discuss the motivations for leasing
assets instead of purchasing them
distinguish between a finance lease and
an operating lease from the
perspectives of the lessor and the
lessee
9.31.f
9.31.g
9.31.h
9.31.i
9.31.j
9.32.a
9.32.b
9.32.c
9.32.d
9.32.e
9.32.f
9.32.g
distinguish between temporary and

permanent differences in pre-tax
accounting income and taxable income;
describe the valuation allowance for
deferred tax assetswhen it is required
and what impact it has on financial
statements;
compare a companys deferred tax
items;
analyze disclosures relating to deferred
tax items and the effective tax rate
reconciliation, and explain how
information included in these
disclosures affects a companys financial
statements and financial ratios;
identify the key provisions of and
differences between income tax
accounting under IFRS and U.S. GAAP.
measurement and subsequent
measurement of bonds;
describe the effective interest method
and calculate interest expense,
amortisation of bond
discounts/premiums, and interest
payments;
explain the derecognition of debt;
describe the role of debt covenants in
protecting creditors;
to debt;
explain the motivations for leasing
assets instead of purchasing them;
distinguish between a finance lease and
an operating lease from the
perspectives of the lessor and the
lessee;
Wording
Change
Wording
Change
Wording
Change
Wording
Change
Wording
Change
24
Financial
Reporting
Financial
Reporting
Financial
Reporting
9.32.h
9.32.i
9.32.j
Financial
Reporting
9.32.k
Financial
Reporting
9.32.l
Financial
Reporting
10.33.a
Financial
Reporting
10.33.b
Financial
Reporting
10.33.c
Financial
Reporting
Financial
Reporting
10.33.d

measurement, and subsequent
measurement of finance leases
compare the disclosures relating to
finance and operating leases
describe defined contribution and
defined benefit pension plans
compare the presentation and
disclosure of defined contribution and
calculate and interpret leverage and
coverage ratios
describe incentives that might induce a
companys management to overreport
or underreport earnings
describe activities that will result in a
low quality of earnings
describe the three conditions that are
generally present when fraud occurs,
including the risk factors related to
these conditions
describe common accounting warning
signs and methods for detecting each
9.32.h
9.32.i
9.32.j
9.32.k
9.32.l
10.33.a
10.33.b
10.33.c
10.33.d
10.34.a
Financial
Reporting
10.34.a
Financial
Reporting
10.35.a
Financial
Reporting
10.35.b
analyze and describe the following ways

to manipulate the cash flow statement:
stretching out payables financing of
payables securitization of receivables
and using stock buybacks to offset
dilution of earnings
evaluate a companys past financial
performance and explain how a
companys strategy is reflected in past
financial performance
prepare a basic projection of a
companys future net income and cash
flow
10.34.b
10.35.a
10.35.b

measurement, and subsequent
measurement of finance leases;
compare the disclosures relating to
finance and operating leases;
compare the presentation and
disclosure of defined contribution and
defined benefit pension plans;
calculate and interpret leverage and
coverage ratios.
describe incentives that might induce a
companys executives to manage
reported earnings, financial positions,
and cash flows;
describe activities that will result in a
low quality of earnings;
describe the three conditions that are
generally present when fraud occurs,
including the risk factors related to
these conditions;
describe common accounting warning
signs and methods for detecting each.
describe reasons for investors to assess
the quality of cash flow statements;
analyze and describe the following ways
to manage or manipulate the cash flow
statement: stretching out payables,
financing of payables, securitization of
receivables, issuing stock options, and
using stock buybacks.
evaluate a companys past financial
performance and explain how a
companys strategy is reflected in past
financial performance;
forecast a companys future net income
and cash flow;
Wording
Change
NEW
Wording
Change
Wording
Change
25
Financial
Reporting
10.35.c
Corporate
Finance
10.35.d
Corporate
Finance
10.35.e
Corporate
Finance
11.36.a
Corporate
Finance
11.36.b
Corporate
Finance
11.36.c
Corporate
Finance
11.36.d
Corporate
Finance
11.36.e
Corporate
Finance
11.36.f
describe the role of financial statement

analysis in assessing the credit quality
of a potential debt investment
describe the use of financial statement
analysis in screening for potential equity
investments
determine and justify appropriate
analyst adjustments to a companys
financial statements to facilitate
comparison with another company
describe the capital budgeting process,
including the typical steps of the
process, and distinguish among the
various categories of capital projects
describe the basic principles of capital
budgeting, including cash flow
estimation
explain how the evaluation and
selection of capital projects is affected
by mutually exclusive projects, project
sequencing, and capital rationing
calculate and interpret the results using
each of the following methods to
evaluate a single capital project: net
present value (NPV), internal rate of
return (IRR), payback period,
discounted payback period, and
profitability index (PI)
explain the NPV profile, compare the
NPV and IRR methods when evaluating
independent and mutually exclusive
projects, and describe the problems
associated with each of the evaluation
methods
describe and account for the relative
popularity of the various capital
budgeting methods and explain the
relation between NPV and company
value and stock price
10.35.c
10.35.d
10.35.e
11.36.a
11.36.b
11.36.c
11.36.d
11.36.e
describe the role of financial statement

analysis in assessing the credit quality
of a potential debt investment;
describe the use of financial statement
analysis in screening for potential equity
investments;
explain appropriate analyst adjustments
to a companys financial statements to
facilitate comparison with another
company.
describe the capital budgeting process,
including the typical steps of the
process, and distinguish among the
various categories of capital projects;
describe the basic principles of capital
budgeting, including cash flow
estimation;
explain how the evaluation and
selection of capital projects is affected
by mutually exclusive projects, project
sequencing, and capital rationing;
calculate and interpret the results using
each of the following methods to
evaluate a single capital project: net
present value (NPV), internal rate of
return (IRR), payback period,
discounted payback period, and
profitability index (PI);
explain the NPV profile, compare the
NPV and IRR methods when evaluating
independent and mutually exclusive
projects, and describe the problems
associated with each of the evaluation
methods;
Wording
Change
Removed
26
Corporate
Finance
11.36.g
Corporate
Finance
11.37.a
Corporate
Finance
11.37.b
Corporate
Finance
11.37.c
Corporate
Finance
11.37.d
Corporate
Finance
11.37.e
Corporate
Finance
11.37.f
Corporate
Finance
11.37.g
Corporate
Finance
11.37.h
Corporate
Finance
11.37.i
Corporate
Finance
11.37.j
describe the expected relations among

an investments NPV, company value,
and share price
calculate and interpret the weighted
average cost of capital (WACC) of a
company
describe how taxes affect the cost of
capital from different capital sources
explain alternative methods of
calculating the weights used in the
WACC, including the use of the
companys target capital structure
explain how the marginal cost of capital
and the investment opportunity
schedule are used to determine the
optimal capital budget
explain the marginal cost of capitals
role in determining the net present
value of a project
calculate and interpret the cost of fixed
rate debt capital using the yield-tomaturity approach and the debt-rating
approach
calculate and interpret the cost of
noncallable, nonconvertible preferred
stock
equity capital using the capital asset
pricing model approach, the dividend
discount model approach, and the bondyield-plus risk-premium approach
calculate and interpret the beta and
cost of capital for a project
explain the country risk premium in the
estimation of the cost of equity for a
company located in a developing market
11.36.f
11.37.a
11.37.b
11.37.c
11.37.d
11.37.e
11.37.f
11.37.g
11.37.h
11.37.i
11.37.j
describe expected relations among an

investments NPV, company value, and
share price.
calculate and interpret the weighted
average cost of capital (WACC) of a
company;
describe how taxes affect the cost of
capital from different capital sources;
explain alternative methods of
calculating the weights used in the
WACC, including the use of the
companys target capital structure;
explain how the marginal cost of capital
and the investment opportunity
schedule are used to determine the
optimal capital budget;
explain the marginal cost of capitals
role in determining the net present
value of a project;
calculate and interpret the cost of debt
capital using the yield-to-maturity
approach and the debt-rating approach;
noncallable, nonconvertible preferred
stock;
equity capital using the capital asset
pricing model approach, the dividend
discount model approach, and the bondyield-plus risk-premium approach;
calculate and interpret the beta and
cost of capital for a project;
describe uses of country risk premiums

in estimating the cost of equity;
Wording
Change
Wording
Change
27
Corporate
Finance
11.37.k
Corporate
Finance
11.37.l
Corporate
Finance
11.38.a
Corporate
Finance
11.38.b
Corporate
Finance
11.38.c
Corporate
Finance
11.38.d
Corporate
Finance
11.38.e
Corporate
Finance
11.39.a
Corporate
Finance
11.39.b
Corporate
Finance
11.39.c
Corporate
Finance
11.39.d
describe the marginal cost of capital

schedule, explain why it may be upwardsloping with respect to additional
capital, and calculate and interpret its
break-points
explain and demonstrate the correct
treatment of flotation costs
define and explain leverage, business
risk, sales risk, operating risk, and
financial risk, and classify a risk, given a
description
calculate and interpret the degree of
operating leverage, the degree of
financial leverage, and the degree of
total leverage
describe the effect of financial leverage
on a companys net income and return
on equity
calculate the breakeven quantity of
sales and determine the company's net
income at various sales levels
calculate and interpret the operating
breakeven quantity of sales
describe regular cash dividends, extra
dividends, stock dividends, stock splits,
and reverse stock splits, including their
expected effect on a shareholders
wealth and a companys financial ratios
describe dividend payment chronology,
including the significance of declaration,
holder-of-record, ex-dividend, and
payment dates
compare share repurchase methods
calculate and compare the effects of a
share repurchase on earnings per share
when 1) the repurchase is financed with
the companys excess cash and 2) the
company uses funded debt to finance
the repurchase
11.37.k
11.37.l
11.38.a
11.38.b
11.38.c
11.38.d
11.38.e
11.39.a
11.39.b
11.39.c
11.39.d
describe the marginal cost of capital

schedule, explain why it may be upwardsloping with respect to additional
capital, and calculate and interpret its
break-points;
explain and demonstrate the correct
treatment of flotation costs.
define and explain leverage, business
risk, sales risk, operating risk, and
financial risk, and classify a risk, given a
description;
calculate and interpret the degree of
operating leverage, the degree of
financial leverage, and the degree of
total leverage;
describe the effect of financial leverage
on a companys net income and return
on equity;
calculate the breakeven quantity of
sales and determine the company's net
income at various sales levels;
calculate and interpret the operating
breakeven quantity of sales.
describe regular cash dividends, extra
dividends, stock dividends, stock splits,
and reverse stock splits, including their
expected effect on shareholders wealth
and a companys financial ratios;
describe dividend payment chronology,
including the significance of declaration,
holder-of-record, ex-dividend, and
payment dates;
compare share repurchase methods;
calculate and compare the effect of a
share repurchase on earnings per share
when 1) the repurchase is financed with
the companys excess cash and 2) the
company uses debt to finance the
repurchase;
Wording
Change
28
Corporate
Finance
11.39.e
Corporate
Finance
11.39.f
Corporate
Finance
11.40.a
Corporate
Finance
11.40.b
Corporate
Finance
11.40.c
Corporate
Finance
11.40.d
Corporate
Finance
11.40.e
Corporate
Finance
11.40.f
Corporate
Finance
11.40.g
Corporate
Finance
11.41.a
calculate the effect of a share

repurchase on book value per share
explain why a cash dividend and a share
repurchase of the same amount are
equivalent in terms of the effect on
shareholders wealth, all else being
equal
describe primary and secondary sources
of liquidity and factors that influence a
companys liquidity position
compare a companys liquidity
measures with those of peer companies
evaluate working capital effectiveness of
a company based on its operating and
cash conversion cycles, and compare
the companys effectiveness with that of
peer companies
explain the effect of different types of
cash flows on a companys net daily
cash position
calculate and interpret comparable
yields on various securities, compare
portfolio returns against a standard
benchmark, and evaluate a companys
short-term investment policy guidelines
evaluate a companys management of
accounts receivable, inventory, and
accounts payable over time and
compared to peer companies
evaluate the choices of short-term
funding available to a company and
recommend a financing method
define corporate governance
11.39.e
11.39.f
11.40.a
11.40.b
11.40.c
11.40.d
11.40.e
11.40.f
11.40.g
11.41.a
calculate the effect of a share

repurchase on book value per share;
explain why a cash dividend and a share
repurchase of the same amount are
equivalent in terms of the effect on
shareholders wealth, all else being
equal.
describe primary and secondary sources
of liquidity and factors that influence a
companys liquidity position;
compare a companys liquidity
measures with those of peer
companies;
evaluate working capital effectiveness of
a company based on its operating and
cash conversion cycles, and compare
the companys effectiveness with that of
peer companies;
describe how different types of cash
flows affect a companys net daily cash
position;
Wording
Change
calculate and interpret comparable

yields on various securities, compare
portfolio returns against a standard
benchmark, and evaluate a companys
short-term investment policy guidelines;
evaluate a companys management of
accounts receivable, inventory, and
accounts payable over time and
compared to peer companies;
evaluate the choices of short-term
funding available to a company and
recommend a financing method.
define corporate governance;
29
Corporate
Finance
11.41.b
Corporate
Finance
11.41.c
Corporate
Finance
11.41.d
Corporate
Finance
11.41.e
Corporate
Finance
11.41.f
Corporate
Finance
11.41.g
Portfolio
Management
12.42.a
Portfolio
Management
12.42.b
Portfolio
Management
Portfolio
Management
Portfolio
Management
describe practices related to board and

committee independence, experience,
compensation, external consultants,
and frequency of elections, and
determine whether they are supportive
of shareowner protection
describe board independence and
explain the importance of independent
board members in corporate
governance
identify factors that an analyst should
consider when evaluating the
qualifications of board members
describe the responsibilities of the audit,
compensation, and nominations
committees and identify factors an
investor should consider when
evaluating the quality of each
committee
explain the provisions that should be
included in a strong corporate code of
ethics
evaluate, from a shareowners
perspective, company policies related to
voting rules, shareowner sponsored
proposals, common stock classes, and
takeover defenses
describe the portfolio approach to
investing
describe types of investors and
distinctive characteristics and needs of
each
11.41.b
11.41.c
11.41.d
11.41.e
11.41.f
11.41.g
12.42.a
12.42.b
12.42.c
12.42.c
12.42.d
describe the steps in the portfolio

management process
describe mutual funds and compare
them with other pooled investment
products
12.42.d
12.42.e
describe practices related to board and

committee independence, experience,
compensation, external consultants,
and frequency of elections, and
determine whether they are supportive
of shareowner protection;
describe board independence and
explain the importance of independent
board members in corporate
governance;
identify factors that an analyst should
consider when evaluating the
qualifications of board members;
describe responsibilities of the audit,
compensation, and nominations
committees and identify factors an
investor should consider when
evaluating the quality of each
committee;
explain provisions that should be
included in a strong corporate code of
ethics;
evaluate, from a shareowners
perspective, company policies related to
voting rules, shareowner sponsored
proposals, common stock classes, and
takeover defenses.
describe the portfolio approach to
investing;
describe types of investors and
distinctive characteristics and needs of
each;
defined benefit pension plans;
describe the steps in the portfolio
management process;
describe mutual funds and compare
them with other pooled investment
products.
NEW
30
Portfolio
Management
12.43.a
Portfolio
Management
12.43.c
Portfolio
Management
12.43.b
Portfolio
Management
Portfolio
Management
12.43.d
12.43.e
Portfolio
Management
12.43.f
Portfolio
Management
12.43.g
Portfolio
Management
12.43.h
Portfolio
Management
12.44.a
Portfolio
Management
12.44.b
Portfolio
Management
12.44.c
Portfolio
Management
12.44.d
Portfolio
Management
12.44.e
calculate and interpret major return

measures and describe their appropriate
uses
describe the characteristics of the major
asset classes that investors consider in
forming portfolios
calculate and interpret the mean,
variance, and covariance (or
correlation) of asset returns based on
historical data
explain risk aversion and its implications
for portfolio selection
calculate and interpret portfolio
standard deviation
describe the effect on a portfolios risk
of investing in assets that are less than
perfectly correlated
describe and interpret the minimumvariance and efficient frontiers of risky
assets and the global minimum-variance
portfolio
discuss the selection of an optimal
portfolio, given an investors utility (or
risk aversion) and the capital allocation
line
describe the implications of combining a
risk-free asset with a portfolio of risky
assets
explain the capital allocation line (CAL)
and the capital market line (CML)
explain systematic and nonsystematic
risk, including why an investor should
not expect to receive additional return
for bearing nonsystematic risk
explain return generating models
(including the market model) and their
uses
calculate and interpret beta
12.43.a
12.43.b
12.43.c
12.43.d
12.43.e
12.43.f
12.43.g
12.43.h
12.44.a
12.44.b
12.44.c
12.44.d
12.44.e
calculate and interpret major return

measures and describe their appropriate
uses;
describe characteristics of the major
asset classes that investors consider in
forming portfolios;
calculate and interpret the mean,
variance, and covariance (or
correlation) of asset returns based on
historical data;
explain risk aversion and its implications
for portfolio selection;
calculate and interpret portfolio
standard deviation;
describe the effect on a portfolios risk
of investing in assets that are less than
perfectly correlated;
describe and interpret the minimumvariance and efficient frontiers of risky
assets and the global minimum-variance
portfolio;
discuss the selection of an optimal
portfolio, given an investors utility (or
risk aversion) and the capital allocation
line.
describe the implications of combining a
risk-free asset with a portfolio of risky
assets;
explain the capital allocation line (CAL)
and the capital market line (CML);
explain systematic and nonsystematic
risk, including why an investor should
not expect to receive additional return
for bearing nonsystematic risk;
explain return generating models
(including the market model) and their
uses;
calculate and interpret beta;
31
Portfolio
Management
Portfolio
Management
Portfolio
Management
Portfolio
Management
Portfolio
Management
12.44.f
12.44.g
12.44.h
12.45.a
12.45.b
Portfolio
Management
12.45.c
Portfolio
Management
12.45.d
Portfolio
Management
12.45.e
Portfolio
Management
12.45.f
Portfolio
Management
12.45.g
Equity
13.46.a
Equity
13.46.b
Equity
13.46.c
Equity
13.46.d
explain the capital asset pricing model

(CAPM), including the required
assumptions, and the security market
line (SML)
return of an asset using the CAPM
describe and demonstrate applications
of the CAPM and the SML
describe the reasons for a written
investment policy statement (IPS)
describe the major components of an
IPS
describe risk and return objectives and
how they may be developed for a client
distinguish between the willingness and
the ability (capacity) to take risk in
analyzing an investors financial risk
tolerance
describe the investment constraints of
liquidity, time horizon, tax concerns,
legal and regulatory factors, and unique
circumstances and their implications for
the choice of portfolio assets
explain the specification of asset classes
in relation to asset allocation
discuss the principles of portfolio
construction and the role of asset
allocation in relation to the IPS
explain the main functions of the
financial system
describe classifications of assets and
markets
describe the major types of securities,
currencies, contracts, commodities, and
real assets that trade in organized
markets, including their distinguishing
characteristics and major subtypes
describe types of financial
intermediaries and services that they
provide
12.44.f
12.44.g
12.44.h
12.45.a
12.45.b
12.45.c
12.45.d
12.45.e
12.45.f
12.45.g
13.46.a
13.46.b
13.46.c
13.46.d
explain the capital asset pricing model

(CAPM), including its assumptions, and
the security market line (SML);
return of an asset using the CAPM;
describe and demonstrate applications
of the CAPM and the SML.
describe the reasons for a written
investment policy statement (IPS);
describe the major components of an
IPS;
Wording
Change
describe risk and return objectives and

how they may be developed for a client;
distinguish between the willingness and
the ability (capacity) to take risk in
analyzing an investors financial risk
tolerance;
describe the investment constraints of
liquidity, time horizon, tax concerns,
legal and regulatory factors, and unique
circumstances and their implications for
the choice of portfolio assets;
explain the specification of asset classes
in relation to asset allocation;
discuss the principles of portfolio
construction and the role of asset
allocation in relation to the IPS.
explain the main functions of the
financial system;
describe classifications of assets and
markets;
describe the major types of securities,
currencies, contracts, commodities, and
real assets that trade in organized
markets, including their distinguishing
characteristics and major subtypes;
describe types of financial
intermediaries and services that they
provide;
32
Equity
13.46.e
Equity
13.46.f
Equity
13.46.g
Equity
13.46.h
Equity
13.46.i
Equity
13.46.j
Equity
13.46.k
Equity
13.46.l
Equity
13.47.a
Equity
13.47.b
Equity
13.47.c
Equity
13.47.d
Equity
13.47.e
Equity
13.47.f
Equity
13.47.g
Equity
Equity
13.47.h
13.47.i
Equity
13.47.j
Equity
13.47.k
compare positions an investor can take

in an asset
calculate and interpret the leverage
ratio, the rate of return on a margin
transaction, and the security price at
which the investor would receive a
margin call
compare execution, validity, and
clearing instructions
compare market orders with limit orders
define primary and secondary markets
and explain how secondary markets
support primary markets
describe how securities, contracts, and
currencies are traded in quote-driven,
order-driven, and brokered markets
describe characteristics of a wellfunctioning financial system
describe objectives of market regulation
describe a security market index
calculate and interpret the value, price
return, and total return of an index
describe the choices and issues in index
construction and management
compare the different weighting
methods used in index construction
calculate and analyze the value and
return of an index given its weighting
method
describe rebalancing and reconstitution
of an index
describe uses of security market indices
describe types of equity indices
describe types of fixed-income indices
describe indices representing alternative
investments
compare types of security market
indices
13.46.e
13.46.f
13.46.g
13.46.h
13.46.i
13.46.j
13.46.k
13.46.l
13.47.a
13.47.b
13.47.c
13.47.d
13.47.e
13.47.f
13.47.g
13.47.h
13.47.i
13.47.j
13.47.k
compare positions an investor can take

in an asset;
calculate and interpret the leverage
ratio, the rate of return on a margin
transaction, and the security price at
which the investor would receive a
margin call;
compare execution, validity, and
clearing instructions;
compare market orders with limit
orders;
define primary and secondary markets
and explain how secondary markets
support primary markets;
describe how securities, contracts, and
currencies are traded in quote-driven,
order-driven, and brokered markets;
describe characteristics of a wellfunctioning financial system;
describe objectives of market
regulation.
describe a security market index;
calculate and interpret the value, price
return, and total return of an index;
describe the choices and issues in index
construction and management;
compare the different weighting
methods used in index construction;
calculate and analyze the value and
return of an index given its weighting
method;
describe rebalancing and reconstitution
of an index;
describe uses of security market
indices;
describe types of equity indices;
describe types of fixed-income indices;
describe indices representing alternative
investments;
compare types of security market
indices.
33
Equity
13.48.a
Equity
13.48.b
Equity
13.48.c
Equity
13.48.d
Equity
13.48.e
Equity
13.48.f
Equity
13.48.g
Equity
14.49.a
Equity
14.49.b
Equity
14.49.c
Equity
14.49.d
Equity
14.49.e
Equity
14.49.f
Equity
14.49.g
Equity
14.49.h
Equity
14.50.a
describe market efficiency and related

concepts, including their importance to
investment practitioners
distinguish between market value and
intrinsic value
explain factors that affect a markets
efficiency
contrast weak-form, semi-strong-form,
and strong-form market efficiency
explain the implications of each form of
market efficiency for fundamental
analysis, technical analysis, and the
choice between active and passive
portfolio management
describe selected market anomalies
contrast the behavioral finance view of
investor behavior to that of traditional
finance
describe characteristics of types of
equity securities
describe differences in voting rights and
other ownership characteristics among
different equity classes
distinguish between public and private
equity securities
describe methods for investing in nondomestic equity securities
compare the risk and return
characteristics of types of equity
securities
explain the role of equity securities in
the financing of a companys assets
distinguish between the market value
and book value of equity securities
compare a companys cost of equity, its
(accounting) return on equity, and
investors required rates of return
explain the uses of industry analysis
and the relation of industry analysis to
company analysis
13.48.a
13.48.b
13.48.c
13.48.d
13.48.e
13.48.f
13.48.g
14.49.a
14.49.b
14.49.c
14.49.d
14.49.e
14.49.f
14.49.g
14.49.h
14.50.a
describe market efficiency and related

concepts, including their importance to
investment practitioners;
distinguish between market value and
intrinsic value;
explain factors that affect a markets
efficiency;
contrast weak-form, semi-strong-form,
and strong-form market efficiency;
explain the implications of each form of
market efficiency for fundamental
analysis, technical analysis, and the
choice between active and passive
portfolio management;
describe selected market anomalies;
contrast the behavioral finance view of
investor behavior to that of traditional
finance.
describe characteristics of types of
equity securities;
describe differences in voting rights and
other ownership characteristics among
different equity classes;
distinguish between public and private
equity securities;
describe methods for investing in nondomestic equity securities;
compare the risk and return
characteristics of different types of
equity securities;
explain the role of equity securities in
the financing of a companys assets;
distinguish between the market value
and book value of equity securities;
compare a companys cost of equity, its
(accounting) return on equity, and
investors required rates of return.
explain uses of industry analysis and
the relation of industry analysis to
company analysis;
Wording
Change
34
Equity
14.50.b
Equity
14.50.c
Equity
14.50.d
Equity
14.50.e
Equity
14.50.f
Equity
14.50.g
Equity
14.50.h
Equity
14.50.i
Equity
14.50.j
Equity
14.50.k
compare methods by which companies

can be grouped, current industry
classification systems, and classify a
company, given a description of its
activities and the classification system
explain the factors that affect the
sensitivity of a company to the business
cycle and the uses and limitations of
industry and company descriptors such
as growth, defensive, and cyclical
explain the relation of peer group, as
used in equity valuation, to a companys
industry classification
14.50.b
14.50.c
14.50.d
describe the elements that need to be

covered in a thorough industry analysis
describe the principles of strategic
analysis of an industry
explain the effects of barriers to entry,
industry concentration, industry
capacity, and market share stability on
pricing power and return on capital
describe product and industry life cycle
models, classify an industry as to life
cycle phase (eg, embryonic, growth,
shakeout, maturity, and decline) based
on a description of it, and describe the
limitations of the life-cycle concept in
forecasting industry performance
compare characteristics of
representative industries from the
various economic sectors
describe demographic, governmental,
social and technological influences on
industry growth, profitability and risk
14.50.e
describe the elements that should be

covered in a thorough company analysis
14.50.k
14.50.f
14.50.g
14.50.h
14.50.i
14.50.j
compare methods by which companies

can be grouped, current industry
classification systems, and classify a
company, given a description of its
activities and the classification system;
explain the factors that affect the
sensitivity of a company to the business
cycle and the uses and limitations of
industry and company descriptors such
as growth, defensive, and cyclical;
explain the relation of peer group, as
used in equity valuation, to a companys
industry classification;
describe the elements that need to be
covered in a thorough industry analysis;
describe the principles of strategic
analysis of an industry;
explain the effects of barriers to entry,
industry concentration, industry
capacity, and market share stability on
pricing power and return on capital;
describe product and industry life cycle
models, classify an industry as to life
cycle phase (embryonic, growth,
shakeout, maturity, and decline), and
describe limitations of the life-cycle
concept in forecasting industry
performance;
compare characteristics of
representative industries from the
various economic sectors;
describe demographic, governmental,
social, and technological influences on
industry growth, profitability, and risk;
describe the elements that should be
covered in a thorough company
analysis.
Wording
Change
35
Equity
14.51.a
Equity
14.51.b
Equity
14.51.c
Equity
14.51.d
Equity
14.51.e
Equity
14.51.f
Equity
14.51.g
Equity
14.51.h
Equity
14.51.i
Equity
14.51.j
Equity
14.51.k
evaluate whether a security, given its

current market price and a value
estimate, is overvalued, fairly valued, or
undervalued by the market
describe major categories of equity
valuation models
explain the rationale for using presentvalue of cash flow models to value
equity and describe the dividend
discount and free-cash-flow-to-equity
models
calculate the intrinsic value of a noncallable, non-convertible preferred stock
calculate and interpret the intrinsic
value of an equity security based on the
Gordon (constant) growth dividend
discount model or a two-stage dividend
discount model, as appropriate
identify companies for which the
constant growth or a multistage
dividend discount model is appropriate
explain the rationale for using price
multiples to value equity and distinguish
between multiples based on
comparables versus multiples based on
fundamentals
calculate and interpret the following
multiples: price to earnings, price to an
estimate of operating cash flow, price to
sales, and price to book value
explain the use of enterprise value
multiples in equity valuation and
demonstrate the use of enterprise value
multiples to estimate equity value
explain asset-based valuation models
and demonstrate the use of asset-based
models to calculate equity value
explain advantages and disadvantages
of each category of valuation model
14.51.a
14.51.b
14.51.c
14.51.d
14.51.e
14.51.f
14.51.g
14.51.h
14.51.i
14.51.j
14.51.k
evaluate whether a security, given its

current market price and a value
estimate, is overvalued, fairly valued, or
undervalued by the market;
describe major categories of equity
valuation models;
explain the rationale for using present
value models to value equity and
describe the dividend discount and freecash-flow-to-equity models;
calculate the intrinsic value of a noncallable, non-convertible preferred
stock;
calculate and interpret the intrinsic
value of an equity security based on the
Gordon (constant) growth dividend
discount model or a two-stage dividend
discount model, as appropriate;
identify companies for which the
constant growth or a multistage
dividend discount model is appropriate;
explain the rationale for using price
multiples to value equity and distinguish
between multiples based on
comparables versus multiples based on
fundamentals;
calculate and interpret the following
multiples: price to earnings, price to an
estimate of operating cash flow, price to
sales, and price to book value;
describe enterprise value multiples and

their use in estimating equity value;
describe asset-based valuation models
and their use in estimating equity value;
explain advantages and disadvantages
of each category of valuation model.
Wording
Change
Wording
Change
36
Fixed Income 15.52.b
Fixed Income 15.52.a
describe the basic features of a bond,

the various coupon rate structures, and
the structure of floating-rate securities
explain the purposes of a bonds
indenture and describe affirmative and
negative covenants
15.52.a
15.52.b
Fixed Income
15.52.c
Fixed Income
15.52.d
Fixed Income
15.52.e
Fixed Income
15.52.f
Fixed Income
15.53.a
Fixed Income
15.53.b
Fixed Income
15.53.c
Fixed Income
15.53.d
Fixed Income
15.53.e
Fixed Income 15.54.h
Fixed Income
describe the characteristics and

motivation for the various types of debt
issued by corporations (including
corporate bonds, medium-term notes,
structured notes, commercial paper,
negotiable CDs, and bankers
acceptances)
describe the basic features of a fixedincome security;
Separation
describe functions of a bond indenture;
compare affirmative and negative
covenants and identify examples of
each;
describe how legal, regulatory, and tax
considerations affect the issuance and
trading of fixed-income securities;
describe how cash flows of fixed-income
securities are structured;
describe contingency provisions
affecting the timing and/or nature of
cash flows of fixed-income securities
and identify whether such provisions
benefit the borrower or the lender.
describe classifications of global fixedincome markets;
describe the use of interbank offered
rates as reference rates in floating-rate
debt;
describe mechanisms available for
issuing bonds in primary markets;
describe secondary markets for bonds;
describe securities issued by sovereign
governments, non-sovereign
governments, government agencies,
and supranational entities;
Separation
NEW
NEW
NEW
NEW
NEW
NEW
NEW
NEW
Wording
Change
15.53.f
15.53.g
Wording
Change
describe types of debt issued by

corporations;
describe short-term funding alternatives
available to banks;
NEW
37
Fixed Income
Fixed Income 16.56.e
Fixed Income 16.56.d

Fixed Income 15.52.c
Fixed Income 15.52.f
15.53.h
calculate the change in value of a bond
given a change in its discount rate
explain how the price of a bond changes
if the discount rate changes and as the
bond approaches its maturity date
15.54.a
15.54.b
15.54.c
define a spot rate

define accrued interest, full price, and
clean price
explain the provisions for redemption
and retirement of bonds
identify common options embedded in a
bond issue, explain the importance of
embedded options, and identify whether
an option benefits the issuer or the
bondholder
describe methods used by institutional
investors in the bond market to finance
the purchase of a security (ie, margin
buying and repurchase agreements)
explain the risks associated with
investing in bonds
identify the relations among a bonds
coupon rate, the yield required by the
market, and the bonds price relative to
par value (ie, discount, premium, or
equal to par)
15.54.d
describe repurchase agreements (repos)

and their importance to investors who
borrow short term.
calculate a bonds price given a market
discount rate;
identify the relationships among a
bonds price, coupon rate, maturity, and
market discount rate (yield-tomaturity);
define spot rates and calculate the price
of a bond using spot rates;
describe and calculate the flat price,
accrued interest, and the full price of a
bond;
NEW
Wording
Change
Wording
Change
Wording
Change
Wording
Change
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
Fixed Income
15.54.e
Fixed Income
15.54.f
Fixed Income
15.54.g
describe matrix pricing;

calculate and interpret yield measures
for fixed-rate bonds, floating-rate notes,
and money market instruments;
define and compare the spot curve,
yield curve on coupon bonds, par curve,
and forward curve;
NEW
NEW
NEW
38
Fixed Income

15.54.h
calculate and compare yield spread
measures
describe the sources of return from
investing in a bond
Fixed Income

Fixed Income 15.53.g
Fixed Income 15.53.i
15.54.i
16.55.a
16.55.b
distinguish among the alternative
definitions of duration and explain why
effective duration is the most
appropriate measure of interest rate
risk for bonds with embedded options
explain how a bond maturity, coupon,
embedded options and yield level affect
its interest rate risk
identify the relation of the price of a
callable bond to the price of an optionfree bond and the price of the
embedded call option
explain the interest rate risk of a
floating-rate security and why its price
may differ from par value
calculate and interpret the duration and
dollar duration of a bond
describe yield-curve risk and explain
why duration does not account for yieldcurve risk
explain the disadvantages of a callable
or prepayable security to an investor
identify the factors that affect the
reinvestment risk of a security and
explain why prepayable amortizing
securities expose investors to greater
reinvestment risk than nonamortizing
securities
16.55.c
16.55.d
define forward rates and calculate spot

rates from forward rates, forward rates
from spot rates, and the price of a bond
using forward rates;
compare, calculate, and interpret yield
spread measures.
calculate and interpret the sources of
return from investing in a fixed-rate
bond;
define, calculate, and interpret
Macaulay, modified, and effective
durations;
explain why effective duration is the
most appropriate measure of interest
rate risk for bonds with embedded
options;
explain how a bonds maturity, coupon,
embedded options, and yield level affect
its interest rate risk;
NEW
Wording
Change
Wording
Change
NEW
Wording
Change
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
39
Fixed Income 16.58.j
Fixed Income 16.58.k
calculate the duration of a portfolio,

given the duration of the bonds
comprising the portfolio, and explain the
limitations of portfolio duration
calculate the price value of a basis point
(PVBP), and explain its relationship to
duration
16.55.e
16.55.f
distinguish between modified convexity

and effective convexity
describe the convexity measure of a
bond and estimate a bonds percentage
price change, given the bonds duration
and convexity and a specified change in
interest rates
16.55.g
describe the impact of yield volatility on

the interest rate risk of a bond
16.55.i
Fixed Income
16.55.h
16.55.j
calculate the approximate percentage

price change for a bond, given the
bonds effective duration and a specified
change in yield
describe types of credit risk and the
Income 15.53.j
meaning and role of credit ratings
explain liquidity risk and why it might
be important to investors even if they
Income 15.53.k
expect to hold a security to the maturity
date
describe the exchange rate risk an
Income 15.53.l investor faces when a bond makes
payments in a foreign currency
Income 15.53.m explain inflation risk
explain how yield volatility affects the
price of a bond with an embedded
Income 15.53.n option and how changes in volatility
affect the value of a callable bond and a
putable bond
16.55.k
Fixed
16.56.a
Fixed
Fixed
Fixed
Fixed
calculate the duration of a portfolio and

explain the limitations of portfolio
duration;
calculate and interpret the money
duration of a bond and price value of a
basis point (PVBP);
calculate and interpret approximate
convexity and distinguish between
approximate and effective convexity;
estimate the percentage price change of
a bond for a specified change in yield,
given the bonds approximate duration
and convexity;
describe how the term structure of yield
volatility affects the interest rate risk of
a bond;
describe the relationships among a
bonds holding period return, its
duration, and the investment horizon;
explain how changes in credit spread
and liquid affect yield-to-maturity of a
bond and how duration and convexity
can be used to estimate the price effect
of the changes.
describe credit risk and credit-related
risks affecting corporate bonds;
Wording
Change
Wording
Change
Wording
Change
Wording
Change
Wording
Change
NEW
Wording
Change
Wording
Change
REMOVED
REMOVED
REMOVED
REMOVED
40
Fixed Income 15.53.o


Fixed Income 15.54.k
describe sovereign risk and types of

event risk
describe features, credit risk
characteristics, and distribution
methods for government securities
describe the types of securities issued
by the US Department of the Treasury
(eg bills, notes, bonds, and inflation
protection securities), and distinguish
between on-the-run and off-the-run
Treasury securities
describe how stripped Treasury
securities are created and distinguish
between coupon strips and principal
strips
describe the types and characteristics of
securities issued by US federal agencies
describe the types and characteristics of
mortgage-backed securities and explain
the cash flow and prepayment risk for
each type
explain the motivation for creating a
collateralized mortgage obligation
describe the types of securities issued
by municipalities in the United States
and distinguish between tax-backed
debt and revenue bonds
define an asset-backed security,
describe the role of a special purpose
vehicle in an asset-backed securitys
transaction, state the motivation for a
corporation to issue an asset-backed
security, and describe the types of
external credit enhancements for assetbacked securities
describe collateralized debt obligations
describe the mechanisms available for
placing bonds in the primary market
and distinguish between the primary
and secondary markets for bonds
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
41



identify the interest rate policy tools

available to a central bank
describe a yield curve and the various
shapes of the yield curve
explain the basic theories of the term
structure of interest rates and describe
the implications of each theory for the
shape of the yield curve
describe credit spreads and
relationships between credit spreads
and economic conditions
describe how embedded options affect
yield spreads
explain how liquidity and issue-size
affects the yield spread of a bond
relative to other similar securities
calculate the after-tax yield of a taxable
security and the tax-equivalent yield of
a tax-exempt security
define LIBOR and explain its importance
to funded investors who borrow short
term
explain steps in the bond valuation
process
describe types of bonds for which
estimating the expected cash flows is
difficult
calculate the value of a bond (coupon
and zero-coupon)
explain and demonstrate the use of the
arbitrage-free valuation approach and
describe how a dealer can generate an
arbitrage profit if a bond is mispriced
calculate and interpret traditional yield
measures for fixed-rate bonds and
explain their limitations and
assumptions
explain the reinvestment assumption
implicit in calculating yield to maturity
and describe the factors that affect
reinvestment risk
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
42
calculate and interpret the bond

equivalent yield of an annual-pay bond
and the annual-pay yield of a
semiannual-pay bond
describe the calculation of the
theoretical Treasury spot rate curve and
calculate the value of a bond using spot
rates
explain nominal, zero-volatility, and
option-adjusted spreads and the
relations among these spreads and
option cost
explain a forward rate and calculate
spot rates from forward rates, forward
rates from spot rates, and the value of a
bond using forward rates
distinguish between the full valuation
approach (the scenario analysis
approach) and the duration/convexity
approach for measuring interest rate
risk, and explain the advantage of using
the full valuation approach
describe the price volatility
characteristics for option-free, callable,
prepayable, and putable bonds when
interest rates change
describe positive convexity and negative
convexity, and their relation to bond
price and yield
duration of a bond, given information
about how the bonds price will increase
and decrease for given changes in
interest rates
describe credit risk and credit-related
risks affecting corporate bonds
describe seniority rankings of corporate
debt and explain the potential violation
of the priority of claims in a bankruptcy
proceeding
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
REMOVED
16.56.b
describe seniority rankings of corporate

debt and explain the potential violation
of the priority of claims in a bankruptcy
proceeding;
43


Derivatives
17.60.a
Derivatives
17.60.b
Derivatives
17.60.c
Derivatives
17.60.d
Derivatives
17.60.e
Derivatives
17.61.a
distinguish between corporate issuer

credit ratings and issue credit ratings
and describe the rating agency practice
of notching
explain risks in relying on ratings from
credit rating agencies
explain the components of traditional
credit analysis
calculate and interpret financial ratios
used in credit analysis
evaluate the credit quality of a
corporate bond issuer and a bond of
that issuer, given key financial ratios of
the issuer and the industry
describe factors that influence the level
and volatility of yield spreads
calculate the return impact of spread
changes
explain special considerations when
evaluating the credit of high yield,
sovereign, and municipal debt issuers
and issues
define a derivative and distinguish
between exchange-traded and over-thecounter derivatives
contrast forward commitments and
contingent claims
define forward contracts, futures
contracts, options (calls and puts), and
swaps and compare their basic
characteristics
describe purposes of and controversies
related to derivative markets
explain arbitrage and the role it plays in
determining prices and promoting
market efficiency
explain delivery/settlement and default
risk for both long and short positions in
a forward contract
16.56.c
16.56.d
16.56.e
16.56.f
16.56.g
16.56.h
16.56.i
16.56.j
17.57.a
17.57.b
17.57.c
17.57.d
17.57.e
17.58.a
distinguish between corporate issuer

credit ratings and issue credit ratings
and describe the rating agency practice
of notching;
explain risks in relying on ratings from
credit rating agencies;
explain the components of traditional
credit analysis;
calculate and interpret financial ratios
used in credit analysis;
evaluate the credit quality of a
corporate bond issuer and a bond of
that issuer, given key financial ratios of
the issuer and the industry;
describe factors that influence the level
and volatility of yield spreads;
calculate the return impact of spread
changes;
explain special considerations when
evaluating the credit of high yield,
sovereign, and municipal debt issuers
and issues.
define a derivative, and distinguish
between exchange-traded and over-thecounter derivatives;
contrast forward commitments with
contingent claims;
define forward contracts, futures
contracts, options (calls and puts),
swaps, and credit derivatives, and
compare their basic characteristics;
describe purposes of, and controversies
related to, derivative markets;
explain arbitrage and the role it plays in
determining prices and promoting
market efficiency.
explain delivery/settlement and default
risk for both long and short positions in
a forward contract;
Wording
Change
44
Derivatives
17.61.b
Derivatives
17.61.c
Derivatives
17.61.d
Derivatives
17.61.e
Derivatives
17.61.f
Derivatives
17.61.g
Derivatives
17.61.h
Derivatives
17.62.a
Derivatives
17.62.b
Derivatives
17.62.c
Derivatives
17.62.d
Derivatives
17.62.e
Derivatives
17.62.f
describe the procedures for settling a

forward contract at expiration, and how
termination prior to expiration can
affect credit risk
distinguish between a dealer and an end
user of a forward contract
describe the characteristics of equity
forward contracts and forward contracts
on zero-coupon and coupon bonds
describe the characteristics of the
Eurodollar time deposit market, and
define LIBOR and Euribor
describe forward rate agreements
(FRAs) and calculate the gain/loss on a
FRA
calculate and interpret the payoff of a
FRA and explain each of the component
terms of the payoff formula
describe the characteristics of currency
forward contracts
describe the characteristics of futures
contracts
compare futures contracts and forward
contracts
distinguish between margin in the
securities markets and margin in the
futures markets, and explain the role of
initial margin, maintenance margin,
variation margin, and settlement in
futures trading
describe price limits and the process of
marking to market, and calculate and
interpret the margin balance, given the
previous days balance and the change
in the futures price
describe how a futures contract can be
terminated at or prior to expiration
describe the characteristics of the
following types of futures contracts:
Treasury bill, Eurodollar, Treasury bond,
stock index, and currency
17.58.b
17.58.c
17.58.d
17.58.e
17.58.f
17.58.g
17.58.h
17.59.a
17.59.b
17.59.c
17.59.d
17.59.e
17.59.f
describe the procedures for settling a

forward contract at expiration, and how
termination prior to expiration can
affect credit risk;
distinguish between a dealer and an end
user of a forward contract;
describe characteristics of equity
forward contracts and forward contracts
on zero-coupon and coupon bonds;
describe characteristics of the
Eurodollar time deposit market, and
define LIBOR and Euribor;
describe forward rate agreements
(FRAs) and calculate the gain/loss on a
FRA;
calculate and interpret the payoff of a
FRA and explain each of the component
terms of the payoff formula;
describe characteristics of currency
forward contracts.
describe the characteristics of futures
contracts;
compare futures contracts and forward
contracts;
distinguish between margin in the
securities markets and margin in the
futures markets, and explain the role of
initial margin, maintenance margin,
variation margin, and settlement in
futures trading;
describe price limits and the process of
marking to market, and calculate and
interpret the margin balance, given the
previous days balance and the change
in the futures price;
describe how a futures contract can be
terminated at or prior to expiration;
describe characteristics of the following
types of futures contracts: Treasury bill,
Eurodollar, Treasury bond, stock index,
and currency.
45
Derivatives
Derivatives
Derivatives
Derivatives
Derivatives
Derivatives
Derivatives
Derivatives
Derivatives
Derivatives
Derivatives
Derivatives
Derivatives
Derivatives
Derivatives
Derivatives
17.63.a
describe call and put options

distinguish between European and
17.63.b
American options
define the concept of moneyness of an
17.63.c
option
compare exchange-traded options and
17.63.d
over-the-counter options
identify the types of options in terms of
17.63.e
the underlying instruments
compare interest rate options with
17.63.f
forward rate agreements (FRAs)
define interest rate caps, floors, and
17.63.g
collars
calculate and interpret option payoffs
17.63.h and explain how interest rate options
differ from other types of options
define intrinsic value and time value,
17.63.i
and explain their relationship
determine the minimum and maximum
17.63.j values of European options and
American options
calculate and interpret the lowest prices
of European and American calls and
17.63.k
puts based on the rules for minimum
values and lower bounds
explain how option prices are affected
17.63.l by the exercise price and the time to
expiration
explain putcall parity for European
options, and explain how putcall parity
17.63.m
is related to arbitrage and the
construction of synthetic options
explain how cash flows on the
17.63.n underlying asset affect putcall parity
and the lower bounds of option prices
determine the directional effect of an
17.63.o interest rate change or volatility change
on an options price
describe the characteristics of swap
17.64.a contracts and explain how swaps are
terminated
17.60.a
describe call and put options;

distinguish between European and
17.60.b
American options;
define the concept of moneyness of an
17.60.c
option;
compare exchange-traded options and
17.60.d
over-the-counter options;
identify the types of options in terms of
17.60.e
the underlying instruments;
compare interest rate options with
17.60.f
forward rate agreements (FRAs);
define interest rate caps, floors, and
17.60.g
collars;
calculate and interpret option payoffs
17.60.h and explain how interest rate options
differ from other types of options;
define intrinsic value and time value,
17.60.i
and explain their relationship;
determine the minimum and maximum
17.60.j values of European options and
American options;
calculate and interpret the lowest prices
of European and American calls and
17.60.k
puts based on the rules for minimum
values and lower bounds;
explain how option prices are affected
17.60.l by the exercise price and the time to
expiration;
explain putcall parity for European
options, and explain how putcall parity
17.60.m
is related to arbitrage and the
construction of synthetic options;
explain how cash flows on the
17.60.n underlying asset affect putcall parity
and the lower bounds of option prices;
determine the directional effect of an
17.60.o interest rate change or volatility change
on an options price.
describe characteristics of swap
17.61.a contracts and explain how swaps are
terminated;
46
Derivatives
17.64.b
Derivatives
17.65.a
Derivatives
17.65.b
Alternative
Investments
Alternative
Investments
18.66.a
18.66.b
Alternative
Investments
18.66.c
Alternative
Investments
18.66.d
Alternative
Investments
18.66.e
Alternative
Investments
18.66.f
describe, calculate, and interpret the

payments of currency swaps, plain
vanilla interest rate swaps, and equity
swaps
determine the value at expiration, the
profit, maximum profit, maximum loss,
breakeven underlying price at
expiration, and payoff graph of the
strategies of buying and selling calls
and puts and determine the potential
outcomes for investors using these
strategies
determine the value at expiration,
expiration, and payoff graph of a
covered call strategy and a protective
put strategy, and explain the risk
management application of each
strategy
compare alternative investments with
traditional investments
describe categories of alternative
investments
describe potential benefits of alternative
investments in the context of portfolio
management
describe hedge funds, private equity,
real estate, commodities, and other
alternative investments, including, as
applicable, strategies, sub-categories,
potential benefits and risks, fee
structures, and due diligence
describe issues in valuing, and
calculating returns on, hedge funds,
private equity, real estate, and
commodities
management and incentive fees and netof-fees returns to hedge funds
17.61.b
17.62.a
17.62.b
18.63.a
18.63.b
18.63.c
18.63.d
18.63.e
18.63.f
describe, calculate, and interpret the

payments of currency swaps, plain
vanilla interest rate swaps, and equity
swaps.
determine the value at expiration, the
expiration, and payoff graph of the
strategies of buying and selling calls
and puts and determine the potential
outcomes for investors using these
strategies;
determine the value at expiration,
expiration, and payoff graph of a
covered call strategy and a protective
put strategy, and explain the risk
management application of each
strategy.
compare alternative investments with
traditional investments;
describe categories of alternative
investments;
describe potential benefits of alternative
investments in the context of portfolio
management;
describe hedge funds, private equity,
real estate, commodities, and other
alternative investments, including, as
applicable, strategies, sub-categories,
potential benefits and risks, fee
structures, and due diligence;
describe issues in valuing, and
calculating returns on, hedge funds,
private equity, real estate, and
commodities;
management and incentive fees and netof-fees returns to hedge funds;
47
Alternative
Investments
18.66.g
Alternative
Investments
18.67.a
Alternative
Investments
18.67.b
Alternative
Investments
18.67.c
describe risk management of alternative

investments
explain the relationship between spot
prices and expected future prices in
terms of contango and backwardation
describe the sources of return and risk
for a commodity investment and the
effect on a portfolio of adding an
allocation to commodities
explain why a commodity index strategy
is generally considered an active
investment
18.63.g
describe risk management of alternative

investments.
REMOVED
REMOVED
REMOVED
48

Level 1 Los 2014

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Level 1 Los 2014

Uploaded by

Copyright:

Available Formats

CFA Level 1 - LOS Changes 2013 - 2014

describe the structure of the CFA

describe the structure of the CFA

describe the key features of the GIPS

describe the key features of the GIPS

contrast the NPV rule to the IRR rule,

contrast the NPV rule to the IRR rule,

calculate and interpret 1) a range and a

calculate and interpret 1) a range and a

calculate and interpret 1) the joint

calculate and interpret 1) the joint

calculate and interpret probabilities for

calculate and interpret probabilities for

distinguish between discretely and

distinguish between discretely and

define a hypothesis, describe the steps

explain a test statistic, Type I and Type

define a hypothesis, describe the steps

identify the appropriate test statistic

identify the appropriate test statistic

describe the process of aggregating

distinguish between stable and unstable

describe the process of aggregating

calculate and interpret a budget

calculate and interpret a budget

explain the relationships between price,

explain factors affecting long-run

compare nominal and real GDP and

compare GDP, national income, personal

explain relationships between price,

explain the causes of movements along

explain causes of movements along and

identify the past, current, or expected

compare monetary and fiscal policy;

describe limitations of monetary policy;

explain the interaction of monetary and

explain the interaction of monetary and

convert forward quotations expressed

convert forward quotations expressed

describe the steps in the financial

describe the steps in the financial

describe the International Accounting

describe the International Accounting

describe the general principles of

describe general principles of expense

analyze and interpret both reported and

describe how ratio analysis and other

analyze and interpret both reported and

calculate and compare cost of sales,

calculate and compare cost of sales,

distinguish between costs that are

calculate depreciation expense;

calculate amortization expense

calculate amortization expense;

distinguish between temporary and

distinguish between temporary and

determine the initial recognition, initial

analyze and describe the following ways

determine the initial recognition, initial

describe the role of financial statement

describe the role of financial statement

describe the expected relations among

describe expected relations among an

describe uses of country risk premiums