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Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

Ethics 1.1.a explain ethics New

describe the role of a code of ethics in

Ethics 1.1.b New

defining a profession

Ethics 1.1.c identify challenges to ethical behavior New

describe the need for high ethical

Ethics 1.1.d New

standards in the investment industry

distinguish between ethical and legal

Ethics 1.1.e New

standards

describe and apply a framework for

Ethics 1.1.f New

ethical decision making

describe the structure of the CFA describe the structure of the CFA

Institute Professional Conduct Program Institute Professional Conduct Program

Ethics 1.1.a 1.2.a

and the process for the enforcement of and the process for the enforcement of

the Code and Standards the Code and Standards

state the six components of the Code of state the six components of the Code of

Ethics 1.1.b Ethics and the seven Standards of 1.2.b Ethics and the seven Standards of

Professional Conduct Professional Conduct

explain the ethical responsibilities explain the ethical responsibilities

required by the Code and Standards, required by the Code and Standards,

Ethics 1.1.c 1.2.c

including the sub-sections of each including the sub-sections of each

Standard Standard

Ethics 1.2.a Code of Ethics and Standards of 1.3.a of Ethics and Standards of Professional

Professional Conduct to situations Conduct to situations involving issues of

involving issues of professional integrity professional integrity

distinguish between conduct that distinguish between conduct that

conforms to the Code and Standards conforms to the Code and Standards

Ethics 1.2.b 1.3.b

and conduct that violates the Code and and conduct that violates the Code and

Standards Standards

recommend practices and procedures recommend practices and procedures

designed to prevent violations of the designed to prevent violations of the

Ethics 1.2.c 1.3.c

Code of Ethics and Standards of Code of Ethics and Standards of

Professional Conduct Professional Conduct

explain why the GIPS standards were explain why the GIPS standards were

created, what parties the GIPS created, what parties the GIPS

Ethics 1.3.a 1.4.a

standards apply to, and who is served standards apply to, and who is served

by the standards by the standards

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

explain the construction and purpose of explain the construction and purpose of

Ethics 1.3.b 1.4.b

composites in performance reporting composites in performance reporting

explain the requirements for

Ethics 1.3.c 1.4.c

verification explain the requirements for verification

describe the key features of the GIPS describe the key features of the GIPS

Ethics 1.4.a standards and the fundamentals of 1.5.a standards and the fundamentals of

compliance compliance

describe the scope of the GIPS describe the scope of the GIPS

standards with respect to an standards with respect to an investment

Ethics 1.4.b 1.5.b

investment firms definition and firms definition and historical

historical performance record performance record

explain how the GIPS standards are explain how the GIPS standards are

implemented in countries with existing implemented in countries with existing

standards for performance reporting standards for performance reporting

Ethics 1.4.c 1.5.c

and describe the appropriate response and describe the appropriate response

when the GIPS standards and local when the GIPS standards and local

regulations conflict regulations conflict

describe the nine major sections of the describe the nine major sections of the

Ethics 1.4.d 1.5.d

GIPS standards GIPS standards

interpret interest rates as required interpret interest rates as required rates

Quantitative 2.5.a rates of return, discount rates, or 2.6.a of return, discount rates, or opportunity

opportunity costs costs

explain an interest rate as the sum of a explain an interest rate as the sum of a

real risk-free rate, and premiums that real risk-free rate and premiums that

Quantitative 2.5.b 2.6.b

compensate investors for bearing compensate investors for bearing

distinct types of risk distinct types of risk

calculate and interpret the effective calculate and interpret the effective

annual rate, given the stated annual annual rate, given the stated annual

Quantitative 2.5.c 2.6.c

interest rate and the frequency of interest rate and the frequency of

compounding compounding

Quantitative 2.5.d solve time value of money problems for 2.6.d solve time value of money problems for

different frequencies of compounding different frequencies of compounding

calculate and interpret the future value calculate and interpret the future value

(FV) and present value (PV) of a single (FV) and present value (PV) of a single

Quantitative 2.5.e sum of money, an ordinary annuity, an 2.6.e sum of money, an ordinary annuity, an

annuity due, a perpetuity (PV only), annuity due, a perpetuity (PV only), and

and a series of unequal cash flows a series of unequal cash flows

demonstrate the use of a time line in demonstrate the use of a time line in

Quantitative 2.5.f modeling and solving time value of 2.6.f modeling and solving time value of

money problems money problems

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

calculate and interpret the net present calculate and interpret the net present

Quantitative 2.6.a value (NPV) and the internal rate of 2.7.a value (NPV) and the internal rate of

return (IRR) of an investment return (IRR) of an investment

contrast the NPV rule to the IRR rule, contrast the NPV rule to the IRR rule,

Quantitative 2.6.b and identify problems associated with 2.7.b and identify problems associated with

the IRR rule the IRR rule

calculate and interpret a holding period calculate and interpret a holding period

Quantitative 2.6.c 2.7.c

return (total return) return (total return)

calculate and compare the money- calculate and compare the money-

weighted and time-weighted rates of weighted and time-weighted rates of

Quantitative 2.6.d return of a portfolio and evaluate the 2.7.d return of a portfolio and evaluate the

performance of portfolios based on performance of portfolios based on

these measures these measures

calculate and interpret the bank calculate and interpret the bank

discount yield, holding period yield, discount yield, holding period yield,

Quantitative 2.6.e effective annual yield, and money 2.7.e effective annual yield, and money

market yield for U.S. Treasury bills and market yield for US Treasury bills and

other money market instruments other money market instruments

convert among holding period yields, convert among holding period yields,

Quantitative 2.6.f money market yields, effective annual 2.7.f money market yields, effective annual

yields, and bond equivalent yields yields, and bond equivalent yields

distinguish between descriptive distinguish between descriptive

statistics and inferential statistics, statistics and inferential statistics,

Quantitative 2.7.a between a population and a sample, 2.8.a between a population and a sample,

and among the types of measurement and among the types of measurement

scales scales

define a parameter, a sample statistic, define a parameter, a sample statistic,

Quantitative 2.7.b 2.8.b

and a frequency distribution and a frequency distribution

calculate and interpret relative calculate and interpret relative

frequencies and cumulative relative frequencies and cumulative relative

Quantitative 2.7.c 2.8.c

frequencies, given a frequency frequencies, given a frequency

distribution distribution

describe the properties of a data set describe the properties of a data set

Quantitative 2.7.d presented as a histogram or a 2.8.d presented as a histogram or a

frequency polygon frequency polygon

calculate and interpret measures of calculate and interpret measures of

central tendency, including the central tendency, including the

population mean, sample mean, population mean, sample mean,

Quantitative 2.7.e 2.8.e

arithmetic mean, weighted average or arithmetic mean, weighted average or

mean, geometric mean, harmonic mean, geometric mean, harmonic

mean, median, and mode mean, median, and mode

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

calculate and interpret quartiles, calculate and interpret quartiles,

Quantitative 2.7.f 2.8.f

quintiles, deciles, and percentiles quintiles, deciles, and percentiles

calculate and interpret 1) a range and a calculate and interpret 1) a range and a

mean absolute deviation and 2) the mean absolute deviation and 2) the

Quantitative 2.7.g 2.8.g

variance and standard deviation of a variance and standard deviation of a

population and of a sample population and of a sample

calculate and interpret the proportion calculate and interpret the proportion of

Quantitative 2.7.h of observations falling within a specified 2.8.h observations falling within a specified

number of standard deviations of the number of standard deviations of the

mean using Chebyshevs inequality mean using Chebyshevs inequality

calculate and interpret the coefficient of calculate and interpret the coefficient of

Quantitative 2.7.i 2.8.i

variation and the Sharpe ratio variation and the Sharpe ratio

explain skewness and the meaning of a explain skewness and the meaning of a

Quantitative 2.7.j positively or negatively skewed return 2.8.j positively or negatively skewed return

distribution distribution

describe the relative locations of the describe the relative locations of the

Quantitative 2.7.k mean, median, and mode for a 2.8.k mean, median, and mode for a

unimodal, nonsymmetrical distribution unimodal, nonsymmetrical distribution

explain measures of sample skewness explain measures of sample skewness

Quantitative 2.7.l 2.8.l

and kurtosis and kurtosis

compare the use of arithmetic and compare the use of arithmetic and

Quantitative 2.7.m geometric means when analyzing 2.8.m geometric means when analyzing

investment returns investment returns

define a random variable, an outcome, define a random variable, an outcome,

Quantitative 2.8.a an event, mutually exclusive events, 2.9.a an event, mutually exclusive events,

and exhaustive events and exhaustive events

state the two defining properties of state the two defining properties of

probability and distinguish among probability and distinguish among

Quantitative 2.8.b 2.9.b

empirical, subjective, and a priori empirical, subjective, and a priori

probabilities probabilities

Quantitative 2.8.c state the probability of an event in 2.9.c state the probability of an event in

terms of odds for and against the event terms of odds for and against the event

distinguish between unconditional and distinguish between unconditional and

Quantitative 2.8.d 2.9.d

conditional probabilities conditional probabilities

explain the multiplication, addition, and explain the multiplication, addition, and

Quantitative 2.8.e 2.9.e

total probability rules total probability rules

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

calculate and interpret 1) the joint calculate and interpret 1) the joint

probability of two events, 2) the probability of two events, 2) the

probability that at least one of two probability that at least one of two

Quantitative 2.8.f events will occur, given the probability 2.9.f events will occur, given the probability

of each and the joint probability of the of each and the joint probability of the

two events, and 3) a joint probability of two events, and 3) a joint probability of

any number of independent events any number of independent events

distinguish between dependent and distinguish between dependent and

Quantitative 2.8.g 2.9.g

independent events independent events

calculate and interpret an unconditional calculate and interpret an unconditional

Quantitative 2.8.h probability using the total probability 2.9.h probability using the total probability

rule rule

explain the use of conditional explain the use of conditional

Quantitative 2.8.i 2.9.i

expectation in investment applications expectation in investment applications

explain the use of a tree diagram to explain the use of a tree diagram to

Quantitative 2.8.j 2.9.j

represent an investment problem represent an investment problem

calculate and interpret covariance and calculate and interpret covariance and

Quantitative 2.8.k 2.9.k

correlation correlation

calculate and interpret the expected calculate and interpret the expected

value, variance, and standard deviation value, variance, and standard deviation

Quantitative 2.8.l 2.9.l

of a random variable and of returns on of a random variable and of returns on

a portfolio a portfolio

calculate and interpret covariance given calculate and interpret covariance given

Quantitative 2.8.m 2.9.m

a joint probability function a joint probability function

calculate and interpret an updated calculate and interpret an updated

Quantitative 2.8.n 2.9.n

probability using Bayes formula probability using Bayes formula

identify the most appropriate method

to solve a particular counting problem, identify the most appropriate method to

Quantitative 2.8.o and solve counting problems using 2.9.o solve a particular counting problem and

factorial, combination, and permutation solve counting problems using factorial,

concepts combination, and permutation concepts

define a probability distribution and define a probability distribution and

distinguish between discrete and distinguish between discrete and

Quantitative 3.9.a 3.10.a

continuous random variables and their continuous random variables and their

probability functions probability functions

describe the set of possible outcomes describe the set of possible outcomes of

Quantitative 3.9.b 3.10.b

of a specified discrete random variable a specified discrete random variable

interpret a cumulative distribution interpret a cumulative distribution

Quantitative 3.9.c 3.10.c

function function

calculate and interpret probabilities for calculate and interpret probabilities for

Quantitative 3.9.d a random variable, given its cumulative 3.10.d a random variable, given its cumulative

distribution function distribution function

Finance or Accounting Questions? Go to passingscoreforum.com 5

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

define a discrete uniform random define a discrete uniform random

Quantitative 3.9.e variable, a Bernoulli random variable, 3.10.e variable, a Bernoulli random variable,

and a binomial random variable and a binomial random variable

calculate and interpret probabilities calculate and interpret probabilities

Quantitative 3.9.f given the discrete uniform and the 3.10.f given the discrete uniform and the

binomial distribution functions binomial distribution functions

construct a binomial tree to describe construct a binomial tree to describe

Quantitative 3.9.g 3.10.g

stock price movement stock price movement

Quantitative 3.9.h calculate and interpret tracking error 3.10.h calculate and interpret tracking error

define the continuous uniform define the continuous uniform

distribution and calculate and interpret distribution and calculate and interpret

Quantitative 3.9.i 3.10.i

probabilities, given a continuous probabilities, given a continuous

uniform distribution uniform distribution

explain the key properties of the explain the key properties of the normal

Quantitative 3.9.j 3.10.j

normal distribution distribution

distinguish between a univariate and a distinguish between a univariate and a

multivariate distribution, and explain multivariate distribution and explain the

Quantitative 3.9.k 3.10.k

the role of correlation in the role of correlation in the multivariate

multivariate normal distribution normal distribution

determine the probability that a determine the probability that a

Quantitative 3.9.l normally distributed random variable 3.10.l normally distributed random variable

lies inside a given interval lies inside a given interval

define the standard normal distribution, define the standard normal distribution,

explain how to standardize a random explain how to standardize a random

Quantitative 3.9.m variable, and calculate and interpret 3.10.m variable, and calculate and interpret

probabilities using the standard normal probabilities using the standard normal

distribution distribution

define shortfall risk, calculate the safety- define shortfall risk, calculate the safety-

first ratio, and select an optimal first ratio, and select an optimal

Quantitative 3.9.n 3.10.n

portfolio using Roys safety-first portfolio using Roys safety-first

criterion criterion

explain the relationship between explain the relationship between normal

normal and lognormal distributions and and lognormal distributions and why the

Quantitative 3.9.o 3.10.o

why the lognormal distribution is used lognormal distribution is used to model

to model asset prices asset prices

distinguish between discretely and distinguish between discretely and

continuously compounded rates of continuously compounded rates of

return, and calculate and interpret a return and calculate and interpret a

Quantitative 3.9.p 3.10.p

continuously compounded rate of continuously compounded rate of

return, given a specific holding period return, given a specific holding period

return return

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

explain Monte Carlo simulation and explain Monte Carlo simulation and

Quantitative 3.9.q 3.10.q

describe its applications and limitations describe its applications and limitations

compare Monte Carlo simulation and compare Monte Carlo simulation and

Quantitative 3.9.r 3.10.r

historical simulation historical simulation

define simple random sampling and a define simple random sampling and a

Quantitative 3.10.a 3.11.a

sampling distribution sampling distribution

Quantitative 3.10.b explain sampling error 3.11.b explain sampling error

distinguish between simple random and distinguish between simple random and

Quantitative 3.10.c 3.11.c

stratified random sampling stratified random sampling

distinguish between time-series and distinguish between time-series and

Quantitative 3.10.d 3.11.d

cross-sectional data cross-sectional data

explain the central limit theorem and explain the central limit theorem and its

Quantitative 3.10.e 3.11.e

its importance importance

calculate and interpret the standard calculate and interpret the standard

Quantitative 3.10.f 3.11.f

error of the sample mean error of the sample mean

identify and describe desirable identify and describe desirable

Quantitative 3.10.g 3.11.g

properties of an estimator properties of an estimator

distinguish between a point estimate distinguish between a point estimate

Quantitative 3.10.h and a confidence interval estimate of a 3.11.h and a confidence interval estimate of a

population parameter population parameter

describe properties of Students t- describe properties of Students t-

Quantitative 3.10.i distribution and calculate and interpret 3.11.i distribution and calculate and interpret

its degrees of freedom its degrees of freedom

calculate and interpret a confidence calculate and interpret a confidence

interval for a population mean, given a interval for a population mean, given a

normal distribution with 1) a known normal distribution with 1) a known

Quantitative 3.10.j 3.11.j

population variance, 2) an unknown population variance, 2) an unknown

population variance, or 3) an unknown population variance, or 3) an unknown

variance and a large sample size variance and a large sample size

describe the issues regarding selection describe the issues regarding selection

of the appropriate sample size, data- of the appropriate sample size, data-

Quantitative 3.10.k mining bias, sample selection bias, 3.11.k mining bias, sample selection bias,

survivorship bias, look-ahead bias, and survivorship bias, look-ahead bias, and

time-period bias time-period bias

define a hypothesis, describe the steps define a hypothesis, describe the steps

of hypothesis testing, and describe and of hypothesis testing, and describe and

Quantitative 3.11.a 3.12.a

interpret the choice of the null and interpret the choice of the null and

alternative hypotheses alternative hypotheses

distinguish between one-tailed and two- distinguish between one-tailed and two-

Quantitative 3.11.b 3.12.b

tailed tests of hypotheses tailed tests of hypotheses

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

explain a test statistic, Type I and Type explain a test statistic, Type I and Type

II errors, a significance level, and how II errors, a significance level, and how

Quantitative 3.11.c 3.12.c

significance levels are used in significance levels are used in

hypothesis testing hypothesis testing

explain a decision rule, the power of a explain a decision rule, the power of a

test, and the relation between test, and the relation between

Quantitative 3.11.d 3.12.d

confidence intervals and hypothesis confidence intervals and hypothesis

tests tests

distinguish between a statistical result distinguish between a statistical result

Quantitative 3.11.e 3.12.e

and an economically meaningful result and an economically meaningful result

explain and interpret the p-value as it explain and interpret the p-value as it

Quantitative 3.11.f 3.12.f

relates to hypothesis testing relates to hypothesis testing

identify the appropriate test statistic identify the appropriate test statistic

and interpret the results for a and interpret the results for a

hypothesis test concerning the hypothesis test concerning the

population mean of both large and population mean of both large and small

Quantitative 3.11.g 3.12.g

small samples when the population is samples when the population is

normally or approximately normally normally or approximately normally

distributed and the variance is 1) distributed and the variance is 1) known

known or 2) unknown or 2) unknown

identify the appropriate test statistic identify the appropriate test statistic

and interpret the results for a and interpret the results for a

hypothesis test concerning the equality hypothesis test concerning the equality

of the population means of two at least of the population means of two at least

Quantitative 3.11.h 3.12.h

approximately normally distributed approximately normally distributed

populations, based on independent populations, based on independent

random samples with 1) equal or 2) random samples with 1) equal or 2)

unequal assumed variances unequal assumed variances

identify the appropriate test statistic identify the appropriate test statistic

and interpret the results for a and interpret the results for a

Quantitative 3.11.i hypothesis test concerning the mean 3.12.i hypothesis test concerning the mean

difference of two normally distributed difference of two normally distributed

populations populations

identify the appropriate test statistic identify the appropriate test statistic

and interpret the results for a and interpret the results for a

hypothesis test concerning 1) the hypothesis test concerning 1) the

variance of a normally distributed variance of a normally distributed

Quantitative 3.11.j 3.12.j

population, and 2) the equality of the population, and 2) the equality of the

variances of two normally distributed variances of two normally distributed

populations based on two independent populations based on two independent

random samples random samples

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

distinguish between parametric and

nonparametric tests and describe distinguish between parametric and

Quantitative 3.11.k situations in which the use of 3.12.k nonparametric tests and describe

nonparametric tests may be situations in which the use of

appropriate nonparametric tests may be appropriate

explain principles of technical analysis, explain principles of technical analysis,

Quantitative 3.12.a its applications, and its underlying 3.13.a its applications, and its underlying

assumptions assumptions

describe the construction of different describe the construction of different

Quantitative 3.12.b types of technical analysis charts and 3.13.b types of technical analysis charts and

interpret them interpret them

explain uses of trend, support, explain uses of trend, support,

Quantitative 3.12.c 3.13.c

resistance lines, and change in polarity resistance lines, and change in polarity

Quantitative 3.12.d describe common chart patterns 3.13.d describe common chart patterns

describe common technical analysis describe common technical analysis

indicators (price-based, momentum indicators (price-based, momentum

Quantitative 3.12.e 3.13.e

oscillators, sentiment, and flow of oscillators, sentiment, and flow of

funds) funds)

explain how technical analysts use explain how technical analysts use

Quantitative 3.12.f 3.13.f

cycles cycles

describe the key tenets of Elliott Wave describe the key tenets of Elliott Wave

Quantitative 3.12.g Theory and the importance of Fibonacci 3.13.g Theory and the importance of Fibonacci

numbers numbers

describe intermarket analysis as it describe intermarket analysis as it

Quantitative 3.12.h relates to technical analysis and asset 3.13.h relates to technical analysis and asset

allocation allocation

Economics 4.13.a distinguish among types of markets Removed

explain the principles of demand and

Economics 4.13.b Removed

supply

describe causes of shifts in and

Economics 4.13.c movements along demand and supply Removed

curves

describe the process of aggregating

Economics 4.13.d Removed

demand and supply curves

describe the concept of equilibrium

Economics 4.13.e (partial and general), and mechanisms Removed

by which markets achieve equilibrium

distinguish between stable and

unstable equilibria, including price

Economics 4.13.f Removed

bubbles, and identify instances of such

equilibria

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

calculate and interpret individual and

aggregate demand, and inverse

Economics 4.13.g demand and supply functions, and Removed

interpret individual and aggregate

demand and supply curves

calculate and interpret the amount of

Economics 4.13.h excess demand or excess supply Removed

associated with a non-equilibrium price

the winning price(s) of an auction

calculate and interpret consumer

Economics 4.13.j surplus, producer surplus, and total Removed

surplus

describe how government regulation

Economics 4.13.k and intervention affect demand and Removed

supply

forecast the effect of the introduction

and the removal of a market

Economics 4.13.l Removed

interference (e.g., a price floor or

ceiling) on price and quantity

calculate and interpret price, income, calculate and interpret price, income,

and cross-price elasticities of demand and cross-price elasticities of demand

Economics 4.13.m 4.14.a

and describe factors that affect each and describe factors that affect each

measure measure

describe consumer choice theory and

Economics 4.14.a Removed

utility theory

describe the use of indifference curves,

Economics 4.14.b opportunity sets, and budget Removed

constraints in decision making

calculate and interpret a budget

Economics 4.14.c Removed

constraint

determine a consumers equilibrium

Economics 4.14.d bundle of goods based on utility Removed

analysis

compare substitution and income

Economics 4.14.e 4.14.b

effects compare substitution and income effects

distinguish between normal goods and

Wording

Economics 4.14.f inferior goods, and explain Giffen goods 4.14.c distinguish between normal goods and

Change

and Veblen goods in this context inferior goods

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

calculate, interpret, and compare

Economics 4.15.a accounting profit, economic profit, Removed

normal profit, and economic rent

calculate and interpret and compare

Economics 4.15.b Removed

total, average, and marginal revenue

Economics 4.15.c describe a firms factors of production Removed

calculate and interpret total, average,

Economics 4.15.d Removed

marginal, fixed, and variable costs

describe approaches to determining the

Economics 4.15.f Removed

profit-maximizing level of output

distinguish between short-run and long-

Economics 4.15.h Removed

run profit maximization

distinguish among decreasing-cost,

constant-cost, and increasing-cost

Economics 4.15.i Removed

industries and describe the long-run

supply of each

calculate and interpret total, marginal,

Economics 4.15.j Removed

and average product of labor

determine the optimal combination of

Economics 4.15.l Removed

resources that minimizes cost

describe the phenomenon of

diminishing marginal returns and Wording

Economics 4.15.k 4.14.d

calculate and interpret the profit- describe the phenomenon of diminishing Change

maximizing utilization level of an input marginal returns

determine and describe breakeven and determine and describe breakeven and

Economics 4.15.e 4.14.e

shutdown points of production shutdown points of production

describe how economies of scale and describe how economies of scale and

Economics 4.15.g 4.14.f

diseconomies of scale affect costs diseconomies of scale affect costs

describe characteristics of perfect describe characteristics of perfect

Economics 4.16.a competition, monopolistic competition, 4.15.a competition, monopolistic competition,

oligopoly, and pure monopoly oligopoly, and pure monopoly

explain relationships between price, explain relationships between price,

marginal revenue, marginal cost, marginal revenue, marginal cost,

Economics 4.16.b 4.15.b

economic profit, and the elasticity of economic profit, and the elasticity of

demand under each market structure demand under each market structure

describe a firms supply function under describe a firms supply function under

Economics 4.16.c 4.15.c

each market structure each market structure

describe and determine the optimal describe and determine the optimal

Economics 4.16.d price and output for firms under each 4.15.d price and output for firms under each

market structure market structure

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

explain factors affecting long-run

Economics 4.16.e equilibrium under each market 4.15.e explain factors affecting long-run

structure equilibrium under each market structure

describe pricing strategy under each describe pricing strategy under each

Economics 4.16.f 4.15.f

market structure market structure

describe the use and limitations of describe the use and limitations of

Economics 4.16.g concentration measures in identifying 4.15.g concentration measures in identifying

market structure market structure

identify the type of market structure identify the type of market structure

Economics 4.16.h 4.15.h

within which a firm operates within which a firm operates

calculate and explain gross domestic calculate and explain gross domestic

Economics 5.17.a product (GDP) using expenditure and 4.16.a product (GDP) using expenditure and

income approaches income approaches

compare the sum-of-value-added and compare the sum-of-value-added and

Economics 5.17.b value-of-final-output methods of 4.16.b value-of-final-output methods of

calculating GDP calculating GDP

Economics 5.17.c compare nominal and real GDP and 4.16.c compare nominal and real GDP and

calculate and interpret the GDP deflator calculate and interpret the GDP deflator

compare GDP, national income,

Economics 5.17.d personal income, and personal 4.16.d compare GDP, national income, personal

disposable income income, and personal disposable income

explain the fundamental relationship explain the fundamental relationship

Economics 5.17.e among saving, investment, the fiscal 4.16.e among saving, investment, the fiscal

balance, and the trade balance balance, and the trade balance

explain the IS and LM curves and how explain the IS and LM curves and how

Economics 5.17.f they combine to generate the 4.16.f they combine to generate the aggregate

aggregate demand curve demand curve

explain the aggregate supply curve in explain the aggregate supply curve in

Economics 5.17.g 4.16.g

the short run and long run the short run and long run

explain causes of movements along and explain causes of movements along and

Economics 5.17.h shifts in aggregate demand and supply 4.16.h shifts in aggregate demand and supply

curves curves

describe how fluctuations in aggregate describe how fluctuations in aggregate

demand and aggregate supply cause demand and aggregate supply cause

Economics 5.17.i 4.16.i

short-run changes in the economy and short-run changes in the economy and

the business cycle the business cycle

distinguish between the following types distinguish between the following types

of macroeconomic equilibria: long-run of macroeconomic equilibria: long-run

Economics 5.17.j full employment, short-run 4.16.j full employment, short-run recessionary

recessionary gap, short-run inflationary gap, short-run inflationary gap, and

gap, and short-run stagflation short-run stagflation

Finance or Accounting Questions? Go to passingscoreforum.com 12

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

explain how a short-run

macroeconomic equilibrium may occur explain how a short-run macroeconomic

Economics 5.17.k 4.16.k

at a level above or below full equilibrium may occur at a level above

employment or below full employment

analyze the effect of combined changes analyze the effect of combined changes

Economics 5.17.l in aggregate supply and demand on the 4.16.l in aggregate supply and demand on the

economy economy

describe sources, measurement, and describe sources, measurement, and

Economics 5.17.m 4.16.m

sustainability of economic growth sustainability of economic growth

describe the production function describe the production function

Economics 5.17.n approach to analyzing the sources of 4.16.n approach to analyzing the sources of

economic growth economic growth

distinguish between input growth and distinguish between input growth and

Economics 5.17.o growth of total factor productivity as 4.16.o growth of total factor productivity as

components of economic growth components of economic growth

describe the business cycle and its describe the business cycle and its

Economics 5.18.a 4.17.a

phases phases

describe how resource use, housing describe how resource use, housing

sector activity, and external trade sector activity, and external trade sector

Economics 5.18.b 4.17.b

sector activity vary as an economy activity vary as an economy moves

moves through the business cycle through the business cycle

Economics 5.18.c describe theories of the business cycle 4.17.c describe theories of the business cycle

describe types of unemployment and describe types of unemployment and Wording

Economics 5.18.d 4.17.d

measures of unemployment compare measures of unemployment Change

explain inflation, hyperinflation, explain inflation, hyperinflation,

Economics 5.18.e 4.17.e

disinflation, and deflation disinflation, and deflation

explain the construction of indices used explain the construction of indices used

Economics 5.18.f 4.17.f

to measure inflation to measure inflation

compare inflation measures, including compare inflation measures, including

Economics 5.18.g 4.17.g

their uses and limitations their uses and limitations

distinguish between cost-push and distinguish between cost-push and

Economics 5.18.h 4.17.h

demand-pull inflation demand-pull inflation

describe economic indicators, including interpret a set of economic indicators Wording

Economics 5.18.i 4.17.i

their uses and limitations and describe their uses and limitations Change

Economics 5.19.a compare monetary and fiscal policy 5.18.a compare monetary and fiscal policy

describe functions and definitions of describe functions and definitions of

Economics 5.19.b 5.18.b

money money

Economics 5.19.c explain the money creation process 5.18.c explain the money creation process

describe theories of the demand for describe theories of the demand for and

Economics 5.19.d 5.18.d

and supply of money supply of money

Economics 5.19.e describe the Fisher effect 5.18.e describe the Fisher effect

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe roles and objectives of central describe roles and objectives of central

Economics 5.19.f 5.18.f

banks banks

contrast the costs of expected and contrast the costs of expected and

Economics 5.19.g 5.18.g

unexpected inflation unexpected inflation

describe tools used to implement describe tools used to implement

Economics 5.19.h 5.18.h

monetary policy monetary policy

describe the monetary transmission describe the monetary transmission

Economics 5.19.i 5.18.i

mechanism mechanism

describe qualities of effective central describe qualities of effective central

Economics 5.19.j 5.18.j

banks banks

explain the relationships between explain the relationships between

Economics 5.19.k monetary policy and economic growth, 5.18.k monetary policy and economic growth,

inflation, interest, and exchange rates inflation, interest, and exchange rates

contrast the use of inflation, interest contrast the use of inflation, interest

Economics 5.19.l rate, and exchange rate targeting by 5.18.l rate, and exchange rate targeting by

central banks central banks

determine whether a monetary policy is determine whether a monetary policy is

Economics 5.19.m 5.18.m

expansionary or contractionary expansionary or contractionary

Economics 5.19.n describe limitations of monetary policy 5.18.n describe limitations of monetary policy

describe roles and objectives of fiscal describe roles and objectives of fiscal

Economics 5.19.o 5.18.o

policy policy

describe tools of fiscal policy, including describe tools of fiscal policy, including

Economics 5.19.p 5.18.p

their advantages and disadvantages their advantages and disadvantages

describe the arguments about whether describe the arguments about whether

Economics 5.19.q the size of a national debt relative to 5.18.q the size of a national debt relative to

GDP matters GDP matters

Economics 5.19.r explain the implementation of fiscal 5.18.r explain the implementation of fiscal

policy and difficulties of implementation policy and difficulties of implementation

determine whether a fiscal policy is determine whether a fiscal policy is

Economics 5.19.s 5.18.s

expansionary or contractionary expansionary or contractionary

explain the interaction of monetary and explain the interaction of monetary and

Economics 5.19.t 5.18.t

fiscal policy fiscal policy

compare gross domestic product and compare gross domestic product and

Economics 6.20.a 5.19.a

gross national product gross national product

describe benefits and costs of describe benefits and costs of

Economics 6.20.b 5.19.b

international trade international trade

distinguish between comparative distinguish between comparative

Economics 6.20.c 5.19.c

advantage and absolute advantage advantage and absolute advantage

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

explain the Ricardian and explain the Ricardian and

HeckscherOhlin models of trade and HeckscherOhlin models of trade and

Economics 6.20.d 5.19.d

the source(s) of comparative advantage the source(s) of comparative advantage

in each model in each model

compare types of trade and capital compare types of trade and capital

Economics 6.20.e restrictions and their economic 5.19.e restrictions and their economic

implications implications

explain motivations for and advantages explain motivations for and advantages

Economics 6.20.f of trading blocs, common markets, and 5.19.f of trading blocs, common markets, and

economic unions economic unions

describe common objectives of capital describe common objectives of capital

Economics 6.20.g 5.19.g

restrictions imposed by governments restrictions imposed by governments

describe the balance of payments describe the balance of payments

Economics 6.20.h 5.19.h

accounts including their components accounts including their components

explain how decisions by consumers, explain how decisions by consumers,

Economics 6.20.i firms, and governments affect the 5.19.i firms, and governments affect the

balance of payments balance of payments

describe functions and objectives of the describe functions and objectives of the

international organizations that international organizations that facilitate

Economics 6.20.j facilitate trade, including the World 5.19.j trade, including the World Bank, the

Bank, the International Monetary Fund, International Monetary Fund, and the

and the World Trade Organization World Trade Organization

define an exchange rate, and define an exchange rate and distinguish

distinguish between nominal and real between nominal and real exchange

Economics 6.21.a 5.20.a

exchange rates and spot and forward rates and spot and forward exchange

exchange rates rates

describe functions of and participants in describe functions of and participants in

Economics 6.21.b 5.20.b

the foreign exchange market the foreign exchange market

calculate and interpret the percentage calculate and interpret the percentage

Economics 6.21.c change in a currency relative to 5.20.c change in a currency relative to another

another currency currency

calculate and interpret currency cross- calculate and interpret currency cross-

Economics 6.21.d 5.20.d

rates rates

convert forward quotations expressed

on a points basis or in percentage convert forward quotations expressed

Economics 6.21.e 5.20.e

terms into an outright forward on a points basis or in percentage terms

quotation into an outright forward quotation

explain the arbitrage relationship explain the arbitrage relationship

Economics 6.21.f between spot rates, forward rates, and 5.20.f between spot rates, forward rates, and

interest rates interest rates

calculate and interpret a forward calculate and interpret a forward

Economics 6.21.g 5.20.g

discount or premium discount or premium

Finance or Accounting Questions? Go to passingscoreforum.com 15

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

calculate and interpret the forward rate calculate and interpret the forward rate

Economics 6.21.h consistent with the spot rate and the 5.20.h consistent with the spot rate and the

interest rate in each currency interest rate in each currency

Economics 6.21.i describe exchange rate regimes 5.20.i describe exchange rate regimes

explain the effects of exchange rates on explain the effects of exchange rates on

Economics 6.21.j countries international trade and 5.20.j countries international trade and capital

capital flows flows

Financial describe the roles of financial reporting describe the roles of financial reporting

7.22.a 6.21.a

Reporting and financial statement analysis and financial statement analysis

describe the roles of the statement of describe the roles of the statement of

financial position, statement of financial position, statement of

Financial comprehensive income, statement of comprehensive income, statement of

7.22.b 6.21.b

Reporting changes in equity, and statement of changes in equity, and statement of

cash flows in evaluating a companys cash flows in evaluating a companys

performance and financial position performance and financial position

describe the importance of financial describe the importance of financial

statement notes and supplementary statement notes and supplementary

Financial informationincluding disclosures of informationincluding disclosures of

7.22.c 6.21.c

Reporting accounting policies, methods, and accounting policies, methods, and

estimates and managements estimates and managements

commentary commentary

describe the objective of audits of describe the objective of audits of

Financial financial statements, the types of audit financial statements, the types of audit

7.22.d 6.21.d

Reporting reports, and the importance of effective reports, and the importance of effective

internal controls internal controls

identify and describe information identify and describe information

sources that analysts use in financial sources that analysts use in financial

Financial

7.22.e statement analysis besides annual 6.21.e statement analysis besides annual

Reporting

financial statements and supplementary financial statements and supplementary

information information

Financial describe the steps in the financial describe the steps in the financial

7.22.f 6.21.f

Reporting statement analysis framework statement analysis framework

describe how business activities are describe how business activities are

Financial

7.23.a classified for financial reporting 6.22.a classified for financial reporting

Reporting

purposes purposes

explain the relationship of financial explain the relationship of financial

Financial statement elements and accounts, and statement elements and accounts, and

7.23.b 6.22.b

Reporting classify accounts into the financial classify accounts into the financial

statement elements statement elements

Financial explain the accounting equation in its explain the accounting equation in its

7.23.c 6.22.c

Reporting basic and expanded forms basic and expanded forms

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe the process of recording describe the process of recording

Financial business transactions using an business transactions using an

7.23.d 6.22.d

Reporting accounting system based on the accounting system based on the

accounting equation accounting equation

describe the need for accruals and describe the need for accruals and

Financial

7.23.e valuation adjustments in preparing 6.22.e valuation adjustments in preparing

Reporting

financial statements financial statements

describe the relationships among the describe the relationships among the

Financial income statement, balance sheet, income statement, balance sheet,

7.23.f 6.22.f

Reporting statement of cash flows, and statement statement of cash flows, and statement

of owners equity of owners equity

Financial describe the flow of information in an describe the flow of information in an

7.23.g 6.22.g

Reporting accounting system accounting system

Financial describe the use of the results of the describe the use of the results of the

7.23.h 6.22.h

Reporting accounting process in security analysis accounting process in security analysis

describe the objective of financial describe the objective of financial

Financial statements and the importance of statements and the importance of

7.24.a 6.23.a

Reporting financial reporting standards in security financial reporting standards in security

analysis and valuation analysis and valuation

describe roles and desirable attributes describe roles and desirable attributes

of financial reporting standard-setting of financial reporting standard-setting

bodies and regulatory authorities in bodies and regulatory authorities in

Financial

7.24.b establishing and enforcing reporting 6.23.b establishing and enforcing reporting

Reporting

standards, and describe the role of the standards, and describe the role of the

International Organization of Securities International Organization of Securities

Commissions Commissions

describe the status of global describe the status of global

convergence of accounting standards convergence of accounting standards

Financial

7.24.c and ongoing barriers to developing one 6.23.c and ongoing barriers to developing one

Reporting

universally accepted set of financial universally accepted set of financial

reporting standards reporting standards

describe the International Accounting describe the International Accounting

Standards Boards conceptual Standards Boards conceptual

framework, including the objective and framework, including the objective and

Financial qualitative characteristics of financial qualitative characteristics of financial

7.24.d 6.23.d

Reporting statements, required reporting statements, required reporting

elements, and constraints and elements, and constraints and

assumptions in preparing financial assumptions in preparing financial

statements statements

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe general requirements for

Financial financial statements under describe general requirements for

7.24.e 6.23.e

Reporting International Financial Reporting financial statements under International

Standards (IFRS) Financial Reporting Standards (IFRS)

Financial

7.24.f reporting standards under IFRS and US 6.23.f reporting standards under IFRS and US

Reporting

generally accepted accounting generally accepted accounting principles

principles (US GAAP) reporting systems (US GAAP) reporting systems

identify characteristics of a coherent identify characteristics of a coherent

Financial

7.24.g financial reporting framework and the 6.23.g financial reporting framework and the

Reporting

barriers to creating such a framework barriers to creating such a framework

describe implications for financial describe implications for financial

analysis of differing financial reporting analysis of differing financial reporting

Financial

7.24.h systems and the importance of 6.23.h systems and the importance of

Reporting

monitoring developments in financial monitoring developments in financial

reporting standards reporting standards

Financial analyze company disclosures of analyze company disclosures of

7.24.i 6.23.i

Reporting significant accounting policies significant accounting policies

describe the components of the income describe the components of the income

Financial

8.25.a statement and alternative presentation 7.24.a statement and alternative presentation

Reporting

formats of that statement formats of that statement

describe general principles of revenue describe general principles of revenue

recognition and accrual accounting, recognition and accrual accounting,

specific revenue recognition specific revenue recognition applications

applications (including accounting for (including accounting for long-term

Financial

8.25.b long-term contracts, installment sales, 7.24.b contracts, installment sales, barter

Reporting

barter transactions, gross and net transactions, gross and net reporting of

reporting of revenue), and implications revenue), and implications of revenue

of revenue recognition principles for recognition principles for financial

financial analysis analysis

calculate revenue given information calculate revenue given information that

Financial

8.25.c that might influence the choice of 7.24.c might influence the choice of revenue

Reporting

revenue recognition method recognition method

describe key aspects of the converged

describe key aspects of the converged accounting standards for revenue

Financial accounting standards issued by the recognition issued by the International Wording

8.25.d 7.24.d

Reporting International Accounting Standards Accounting Standards Board and Change

Board and Financial Accounting Financial Accounting Standards Board in

Standards Board in May 2014 May 2014

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe general principles of expense describe general principles of expense

recognition, specific expense recognition, specific expense recognition

Financial

8.25.e recognition applications, and 7.24.e applications, and implications of

Reporting

implications of expense recognition expense recognition choices for financial

choices for financial analysis analysis

describe the financial reporting

treatment and analysis of non-recurring describe the financial reporting

Financial items (including discontinued treatment and analysis of non-recurring Wording

8.25.f 7.24.f

Reporting operations, extraordinary items, items (including discontinued Change

unusual or infrequent items) and operations, unusual or infrequent items)

changes in accounting policies and changes in accounting policies

distinguish between the operating and distinguish between the operating and

Financial

8.25.g non-operating components of the 7.24.g non-operating components of the

Reporting

income statement income statement

describe how earnings per share is describe how earnings per share is

calculated and calculate and interpret a calculated and calculate and interpret a

Financial companys earnings per share (both companys earnings per share (both

8.25.h 7.24.h

Reporting basic and diluted earnings per share) basic and diluted earnings per share)

for both simple and complex capital for both simple and complex capital

structures structures

distinguish between dilutive and distinguish between dilutive and

Financial antidilutive securities, and describe the antidilutive securities and describe the

8.25.i 7.24.i

Reporting implications of each for the earnings implications of each for the earnings per

per share calculation share calculation

Financial convert income statements to common- convert income statements to common-

8.25.j 7.24.j

Reporting size income statements size income statements

evaluate a companys financial evaluate a companys financial

Financial performance using common-size performance using common-size income

8.25.k 7.24.k

Reporting income statements and financial ratios statements and financial ratios based on

based on the income statement the income statement

Financial describe, calculate, and interpret describe, calculate, and interpret

8.25.l 7.24.l

Reporting comprehensive income comprehensive income

describe other comprehensive income, describe other comprehensive income

Financial

8.25.m and identify major types of items 7.24.m and identify major types of items

Reporting

included in it included in it

Financial describe the elements of the balance describe the elements of the balance

8.26.a 7.25.a

Reporting sheet: assets, liabilities, and equity sheet: assets, liabilities, and equity

Financial describe uses and limitations of the describe uses and limitations of the

8.26.b 7.25.b

Reporting balance sheet in financial analysis balance sheet in financial analysis

Financial describe alternative formats of balance describe alternative formats of balance

8.26.c 7.25.c

Reporting sheet presentation sheet presentation

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

distinguish between current and non- distinguish between current and non-

Financial

8.26.d current assets, and current and non- 7.25.d current assets and current and non-

Reporting

current liabilities current liabilities

describe different types of assets and describe different types of assets and

Financial

8.26.e liabilities and the measurement bases 7.25.e liabilities and the measurement bases of

Reporting

of each each

Financial describe the components of describe the components of

8.26.f 7.25.f

Reporting shareholders equity shareholders equity

convert balance sheets to common-size convert balance sheets to common-size

Financial

8.26.g balance sheets and interpret common- 7.25.g balance sheets and interpret common-

Reporting

size balance sheets size balance sheets

Financial calculate and interpret liquidity and calculate and interpret liquidity and

8.26.h 7.25.h

Reporting solvency ratios solvency ratios

compare cash flows from operating, compare cash flows from operating,

investing, and financing activities and investing, and financing activities and

Financial

8.27.a classify cash flow items as relating to 7.26.a classify cash flow items as relating to

Reporting

one of those three categories given a one of those three categories given a

description of the items description of the items

Financial describe how non-cash investing and describe how non-cash investing and

8.27.b 7.26.b

Reporting financing activities are reported financing activities are reported

contrast cash flow statements prepared contrast cash flow statements prepared

under International Financial Reporting under International Financial Reporting

Financial

8.27.c Standards (IFRS) and U.S. generally 7.26.c Standards (IFRS) and US generally

Reporting

accepted accounting principles (U.S. accepted accounting principles (US

GAAP) GAAP)

distinguish between the direct and distinguish between the direct and

Financial indirect methods of presenting cash indirect methods of presenting cash

8.27.d 7.26.d

Reporting from operating activities and describe from operating activities and describe

arguments in favor of each method arguments in favor of each method

describe how the cash flow statement describe how the cash flow statement is

Financial

8.27.e is linked to the income statement and 7.26.e linked to the income statement and the

Reporting

the balance sheet balance sheet

describe the steps in the preparation of describe the steps in the preparation of

direct and indirect cash flow direct and indirect cash flow

Financial

8.27.f statements, including how cash flows 7.26.f statements, including how cash flows

Reporting

can be computed using income can be computed using income

statement and balance sheet data statement and balance sheet data

Financial convert cash flows from the indirect to convert cash flows from the indirect to

8.27.g 7.26.g

Reporting direct method direct method

Financial analyze and interpret both reported analyze and interpret both reported and

8.27.h 7.26.h

Reporting and common-size cash flow statements common-size cash flow statements

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

calculate and interpret free cash flow to calculate and interpret free cash flow to

Financial the firm, free cash flow to equity, and the firm, free cash flow to equity, and

8.27.i 7.26.i

Reporting performance and coverage cash flow performance and coverage cash flow

ratios ratios

describe tools and techniques used in describe tools and techniques used in

Financial

8.28.a financial analysis, including their uses 7.27.a financial analysis, including their uses

Reporting

and limitations and limitations

classify, calculate, and interpret classify, calculate, and interpret activity,

Financial

8.28.b activity, liquidity, solvency, profitability, 7.27.b liquidity, solvency, profitability, and

Reporting

and valuation ratios valuation ratios

Financial

8.28.c describe relationships among ratios and 7.27.c describe relationships among ratios and

Reporting

evaluate a company using ratio analysis evaluate a company using ratio analysis

demonstrate the application of DuPont demonstrate the application of DuPont

Financial analysis of return on equity, and analysis of return on equity and

8.28.d 7.27.d

Reporting calculate and interpret effects of calculate and interpret effects of

changes in its components changes in its components

Financial calculate and interpret ratios used in calculate and interpret ratios used in

8.28.e 7.27.e

Reporting equity analysis and credit analysis equity analysis and credit analysis

explain the requirements for segment explain the requirements for segment

Financial

8.28.f reporting, and calculate and interpret 7.27.f reporting and calculate and interpret

Reporting

segment ratios segment ratios

describe how ratio analysis and other describe how ratio analysis and other

Financial

8.28.g techniques can be used to model and 7.27.g techniques can be used to model and

Reporting

forecast earnings forecast earnings

distinguish between costs included in distinguish between costs included in

Financial inventories and costs recognised as inventories and costs recognised as

9.29.a 8.28.a

Reporting expenses in the period in which they expenses in the period in which they are

are incurred incurred

Financial describe different inventory valuation describe different inventory valuation

9.29.b 8.28.b

Reporting methods (cost formulas) methods (cost formulas)

calculate and compare cost of sales, calculate and compare cost of sales,

gross profit, and ending inventory using gross profit, and ending inventory using

Financial

9.29.c different inventory valuation methods 8.28.c different inventory valuation methods

Reporting

and using perpetual and periodic and using perpetual and periodic

inventory systems inventory systems

calculate and explain how inflation and calculate and explain how inflation and

deflation of inventory costs affect the deflation of inventory costs affect the

Financial

9.29.d financial statements and ratios of 8.28.d financial statements and ratios of

Reporting

companies that use different inventory companies that use different inventory

valuation methods valuation methods

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

explain LIFO reserve and LIFO explain LIFO reserve and LIFO

Financial

9.29.e liquidation and their effects on financial 8.28.e liquidation and their effects on financial

Reporting

statements and ratios statements and ratios

convert a companys reported financial convert a companys reported financial

Financial

9.29.f statements from LIFO to FIFO for 8.28.f statements from LIFO to FIFO for

Reporting

purposes of comparison purposes of comparison

describe the measurement of inventory describe the measurement of inventory

Financial

9.29.g at the lower of cost and net realisable 8.28.g at the lower of cost and net realisable

Reporting

value value

describe implications of valuing describe implications of valuing

Financial

9.29.h inventory at net realisable value for 8.28.h inventory at net realisable value for

Reporting

financial statements and ratios financial statements and ratios

describe the financial statement describe the financial statement

Financial

9.29.i presentation of and disclosures relating 8.28.i presentation of and disclosures relating

Reporting

to inventories to inventories

explain issues that analysts should explain issues that analysts should

Financial consider when examining a companys consider when examining a companys

9.29.j 8.28.j

Reporting inventory disclosures and other sources inventory disclosures and other sources

of information of information

calculate and compare ratios of calculate and compare ratios of

Financial

9.29.k companies, including companies that 8.28.k companies, including companies that

Reporting

use different inventory methods use different inventory methods

analyze and compare the financial analyze and compare the financial

Financial statements of companies, including statements of companies, including

9.29.l 8.28.l

Reporting companies that use different inventory companies that use different inventory

methods methods

distinguish between costs that are distinguish between costs that are

Financial

9.30.a capitalised and costs that are expensed 8.29.a capitalised and costs that are expensed

Reporting

in the period in which they are incurred in the period in which they are incurred

compare the financial reporting of the compare the financial reporting of the

Financial following types of intangible assets: following types of intangible assets:

9.30.b 8.29.b

Reporting purchased, internally developed, purchased, internally developed,

acquired in a business combination acquired in a business combination

explain and evaluate how capitalising explain and evaluate how capitalising

Financial versus expensing costs in the period in versus expensing costs in the period in

9.30.c 8.29.c

Reporting which they are incurred affects financial which they are incurred affects financial

statements and ratios statements and ratios

describe the different depreciation describe the different depreciation

Financial methods for property, plant, and methods for property, plant, and

9.30.d 8.29.d

Reporting equipment and calculate depreciation equipment and calculate depreciation

expense expense

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe how the choice of depreciation describe how the choice of depreciation

method and assumptions concerning method and assumptions concerning

Financial

9.30.e useful life and residual value affect 8.29.e useful life and residual value affect

Reporting

depreciation expense, financial depreciation expense, financial

statements, and ratios statements, and ratios

describe the different amortisation

Financial methods for intangible assets with describe the different amortisation

9.30.f 8.29.f

Reporting finite lives and calculate amortisation methods for intangible assets with finite

expense lives and calculate amortisation expense

describe how the choice of amortisation describe how the choice of amortisation

method and assumptions concerning method and assumptions concerning

Financial

9.30.g useful life and residual value affect 8.29.g useful life and residual value affect

Reporting

amortisation expense, financial amortisation expense, financial

statements, and ratios statements, and ratios

Financial

9.30.h 8.29.h

Reporting describe the revaluation model describe the revaluation model

explain the impairment of property, explain the impairment of property,

Financial

9.30.i plant, and equipment and intangible 8.29.i plant, and equipment and intangible

Reporting

assets assets

explain the derecognition of property, explain the derecognition of property,

Financial

9.30.j plant, and equipment and intangible 8.29.j plant, and equipment and intangible

Reporting

assets assets

explain and evaluate how impairment, explain and evaluate how impairment,

revaluation, and derecognition of revaluation, and derecognition of

Financial

9.30.k property, plant, and equipment and 8.29.k property, plant, and equipment and

Reporting

intangible assets affect financial intangible assets affect financial

statements and ratios statements and ratios

describe the financial statement describe the financial statement

Financial presentation of and disclosures relating presentation of and disclosures relating

9.30.l 8.29.l

Reporting to property, plant, and equipment and to property, plant, and equipment and

intangible assets intangible assets

analyze and interpret financial analyze and interpret financial

Financial statement disclosures regarding statement disclosures regarding

9.30.m 8.29.m

Reporting property, plant, and equipment and property, plant, and equipment and

intangible assets intangible assets

compare the financial reporting of compare the financial reporting of

Financial

9.30.n investment property with that of 8.29.n investment property with that of

Reporting

property, plant, and equipment property, plant, and equipment

explain and evaluate how leasing rather explain and evaluate how leasing rather

Financial

9.30.o than purchasing assets affects financial 8.29.o than purchasing assets affects financial

Reporting

statements and ratios statements and ratios

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

explain and evaluate how finance explain and evaluate how finance leases

leases and operating leases affect and operating leases affect financial

Financial

9.30.p financial statements and ratios from 8.29.p statements and ratios from the

Reporting

the perspective of both the lessor and perspective of both the lessor and the

the lessee lessee

Financial accounting profit and taxable income, accounting profit and taxable income

9.31.a and define key terms, including 8.30.a and define key terms, including deferred

Reporting

deferred tax assets, deferred tax tax assets, deferred tax liabilities,

liabilities, valuation allowance, taxes valuation allowance, taxes payable, and

payable, and income tax expense income tax expense

explain how deferred tax liabilities and explain how deferred tax liabilities and

assets are created and the factors that assets are created and the factors that

Financial determine how a companys deferred determine how a companys deferred

9.31.b 8.30.b

Reporting tax liabilities and assets should be tax liabilities and assets should be

treated for the purposes of financial treated for the purposes of financial

analysis analysis

Financial calculate the tax base of a companys calculate the tax base of a companys

9.31.c 8.30.c

Reporting assets and liabilities assets and liabilities

calculate income tax expense, income calculate income tax expense, income

taxes payable, deferred tax assets, and taxes payable, deferred tax assets, and

Financial deferred tax liabilities, and calculate deferred tax liabilities, and calculate and

9.31.d 8.30.d

Reporting and interpret the adjustment to the interpret the adjustment to the financial

financial statements related to a statements related to a change in the

change in the income tax rate income tax rate

evaluate the impact of tax rate changes evaluate the impact of tax rate changes

Financial

9.31.e on a companys financial statements 8.30.e on a companys financial statements

Reporting

and ratios and ratios

distinguish between temporary and distinguish between temporary and

Financial

9.31.f permanent differences in pre-tax 8.30.f permanent differences in pre-tax

Reporting

accounting income and taxable income accounting income and taxable income

describe the valuation allowance for describe the valuation allowance for

Financial deferred tax assetswhen it is required deferred tax assetswhen it is required

9.31.g 8.30.g

Reporting and what impact it has on financial and what impact it has on financial

statements statements

Financial explain recognition and measurement explain recognition and measurement of

9.31.h 8.30.h

Reporting of current and deferred tax items current and deferred tax items

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

tax items and the effective tax rate tax items and the effective tax rate

Financial

9.31.i reconciliation, and explain how 8.30.i reconciliation and explain how

Reporting

information included in these information included in these

disclosures affects a companys disclosures affects a companys financial

financial statements and financial ratios statements and financial ratios

identify the key provisions of and identify the key provisions of and

differences between income tax differences between income tax

Financial accounting under International accounting under International Financial

9.31.j 8.30.j

Reporting Financial Reporting Standards (IFRS) Reporting Standards (IFRS) and US

and US generally accepted accounting generally accepted accounting principles

principles (GAAP) (GAAP)

determine the initial recognition, initial determine the initial recognition, initial

Financial

9.32.a measurement and subsequent 8.31.a measurement and subsequent

Reporting

measurement of bonds measurement of bonds

describe the effective interest method describe the effective interest method

and calculate interest expense, and calculate interest expense,

Financial

9.32.b amortisation of bond 8.31.b amortisation of bond

Reporting

discounts/premiums, and interest discounts/premiums, and interest

payments payments

Financial

9.32.c 8.31.c

Reporting explain the derecognition of debt explain the derecognition of debt

Financial describe the role of debt covenants in describe the role of debt covenants in

9.32.d 8.31.d

Reporting protecting creditors protecting creditors

describe the financial statement describe the financial statement

Financial

9.32.e presentation of and disclosures relating 8.31.e presentation of and disclosures relating

Reporting

to debt to debt

Financial explain motivations for leasing assets explain motivations for leasing assets

9.32.f 8.31.f

Reporting instead of purchasing them instead of purchasing them

distinguish between a finance lease and distinguish between a finance lease and

Financial an operating lease from the an operating lease from the

9.32.g 8.31.g

Reporting perspectives of the lessor and the perspectives of the lessor and the

lessee lessee

determine the initial recognition, initial determine the initial recognition, initial

Financial

9.32.h measurement, and subsequent 8.31.h measurement, and subsequent

Reporting

measurement of finance leases measurement of finance leases

Financial compare the disclosures relating to compare the disclosures relating to

9.32.i 8.31.i

Reporting finance and operating leases finance and operating leases

compare the presentation and compare the presentation and

Financial

9.32.j disclosure of defined contribution and 8.31.j disclosure of defined contribution and

Reporting

defined benefit pension plans defined benefit pension plans

Finance or Accounting Questions? Go to passingscoreforum.com 25

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

Financial calculate and interpret leverage and calculate and interpret leverage and

9.32.k 8.31.k

Reporting coverage ratios coverage ratios

distinguish between financial reporting distinguish between financial reporting

Financial quality and quality of reported results quality and quality of reported results

10.33.a 9.32.a

Reporting (including quality of earnings, cash (including quality of earnings, cash flow,

flow, and balance sheet items) and balance sheet items)

Financial describe a spectrum for assessing describe a spectrum for assessing

10.33.b 9.32.b

Reporting financial reporting quality financial reporting quality

Financial distinguish between conservative and distinguish between conservative and

10.33.c 9.32.c

Reporting aggressive accounting aggressive accounting

describe motivations that might cause describe motivations that might cause

Financial

10.33.d management to issue financial reports 9.32.d management to issue financial reports

Reporting

that are not high quality that are not high quality

describe conditions that are conducive describe conditions that are conducive

Financial

10.33.e to issuing low-quality, or even 9.32.e to issuing low-quality, or even

Reporting

fraudulent, financial reports fraudulent, financial reports

describe mechanisms that discipline describe mechanisms that discipline

Financial financial reporting quality and the financial reporting quality and the

10.33.f 9.32.f

Reporting potential limitations of those potential limitations of those

mechanisms mechanisms

10.33.g 9.32.g

Reporting non-GAAP measures, that could be non-GAAP measures, that could be used

used to influence an analysts opinion to influence an analysts opinion

describe accounting methods (choices describe accounting methods (choices

Financial and estimates) that could be used to and estimates) that could be used to

10.33.h 9.32.h

Reporting manage earnings, cash flow, and manage earnings, cash flow, and

balance sheet items balance sheet items

describe accounting warning signs and describe accounting warning signs and

Financial

10.33.i methods for detecting manipulation of 9.32.i methods for detecting manipulation of

Reporting

information in financial reports information in financial reports

evaluate a companys past financial evaluate a companys past financial

Financial performance and explain how a performance and explain how a

10.34.a 9.33.a

Reporting companys strategy is reflected in past companys strategy is reflected in past

financial performance financial performance

Financial forecast a companys future net income forecast a companys future net income

10.34.b 9.33.b

Reporting and cash flow and cash flow

describe the role of financial statement describe the role of financial statement

Financial

10.34.c analysis in assessing the credit quality 9.33.c analysis in assessing the credit quality

Reporting

of a potential debt investment of a potential debt investment

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe the use of financial statement describe the use of financial statement

Financial

10.34.d analysis in screening for potential 9.33.d analysis in screening for potential equity

Reporting

equity investments investments

explain appropriate analyst explain appropriate analyst adjustments

Financial adjustments to a companys financial to a companys financial statements to

10.34.e 9.33.e

Reporting statements to facilitate comparison facilitate comparison with another

with another company company

Financial

10.34.a New

Reporting describe corporate governance

describe a companys stakeholder

Financial

10.34.b groups and compare interests of New

Reporting

stakeholder groups

describe principalagent and other

Financial relationships in corporate governance

10.34.c New

Reporting and the conflicts that may arise in these

relationships

Financial

10.34.d New

Reporting describe stakeholder management

describe mechanisms to manage

Financial

10.34.e stakeholder relationships and mitigate New

Reporting

associated risks

describe functions and responsibilities of

Financial

10.34.f a companys board of directors and its New

Reporting

committees

describe market and non-market factors

Financial

10.34.g that can affect stakeholder relationships New

Reporting

and corporate governance

identify potential risks of poor corporate

governance and stakeholder

Financial

10.34.h management and identify benefits from New

Reporting

effective corporate governance and

stakeholder management

describe factors relevant to the analysis

Financial

10.34.i of corporate governance and New

Reporting

stakeholder management

Financial describe environmental and social

10.34.j New

Reporting considerations in investment analysis

describe how environmental, social, and

Financial

10.34.k governance factors may be used in New

Reporting

investment analysis

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe the capital budgeting process

Financial

10.35.a and distinguish among the various New

Reporting

categories of capital projects

Financial describe the basic principles of capital

10.35.b New

Reporting budgeting

explain how the evaluation and

Financial selection of capital projects is affected

10.35.c New

Reporting by mutually exclusive projects, project

sequencing, and capital rationing

calculate and interpret net present

value (NPV), internal rate of return

Financial

10.35.d (IRR), payback period, discounted New

Reporting

payback period, and profitability index

(PI) of a single capital project

explain the NPV profile, compare the

NPV and IRR methods when evaluating

Financial independent and mutually exclusive

10.35.e New

Reporting projects, and describe the problems

associated with each of the evaluation

methods

describe expected relations among an

Financial

10.35.f investments NPV, company value, and New

Reporting

share price

describe the capital budgeting process

Corporate

11.35.a and distinguish among the various Removed

Finance

categories of capital projects

Corporate describe the basic principles of capital

11.35.b Removed

Finance budgeting

explain how the evaluation and

Corporate selection of capital projects is affected

11.35.c Removed

Finance by mutually exclusive projects, project

sequencing, and capital rationing

calculate and interpret net present

value (NPV), internal rate of return

Corporate

11.35.d (IRR), payback period, discounted Removed

Finance

payback period, and profitability index

(PI) of a single capital project

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

explain the NPV profile, compare the

NPV and IRR methods when evaluating

Corporate independent and mutually exclusive

11.35.e Removed

Finance projects, and describe the problems

associated with each of the evaluation

methods

describe expected relations among an

Corporate

11.35.f investments NPV, company value, and Removed

Finance

share price

calculate and interpret the weighted calculate and interpret the weighted

Corporate

11.36.a average cost of capital (WACC) of a 10.36.a average cost of capital (WACC) of a

Finance

company company

Corporate describe how taxes affect the cost of describe how taxes affect the cost of

11.36.b 10.36.b

Finance capital from different capital sources capital from different capital sources

describe the use of target capital describe the use of target capital

Corporate structure in estimating WACC and how structure in estimating WACC and how

11.36.c 10.36.c

Finance target capital structure weights may be target capital structure weights may be

determined determined

explain how the marginal cost of capital explain how the marginal cost of capital

Corporate and the investment opportunity and the investment opportunity

11.36.d 10.36.d

Finance schedule are used to determine the schedule are used to determine the

optimal capital budget optimal capital budget

explain the marginal cost of capitals explain the marginal cost of capitals

Corporate

11.36.e role in determining the net present 10.36.e role in determining the net present

Finance

value of a project value of a project

calculate and interpret the cost of debt calculate and interpret the cost of debt

Corporate

11.36.f capital using the yield-to-maturity 10.36.f capital using the yield-to-maturity

Finance

approach and the debt-rating approach approach and the debt-rating approach

calculate and interpret the cost of calculate and interpret the cost of

Corporate

11.36.g noncallable, nonconvertible preferred 10.36.g noncallable, nonconvertible preferred

Finance

stock stock

calculate and interpret the cost of calculate and interpret the cost of

equity capital using the capital asset equity capital using the capital asset

Corporate

11.36.h pricing model approach, the dividend 10.36.h pricing model approach, the dividend

Finance

discount model approach, and the bond- discount model approach, and the bond-

yield-plus risk-premium approach yield-plus risk-premium approach

Corporate calculate and interpret the beta and calculate and interpret the beta and

11.36.i 10.36.i

Finance cost of capital for a project cost of capital for a project

Corporate describe uses of country risk premiums describe uses of country risk premiums

11.36.j 10.36.j

Finance in estimating the cost of equity in estimating the cost of equity

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe the marginal cost of capital describe the marginal cost of capital

schedule, explain why it may be schedule, explain why it may be upward-

Corporate

11.36.k upward-sloping with respect to 10.36.k sloping with respect to additional

Finance

additional capital, and calculate and capital, and calculate and interpret its

interpret its break-points break-points

Corporate explain and demonstrate the correct explain and demonstrate the correct

11.36.l 10.36.l

Finance treatment of flotation costs treatment of flotation costs

define and explain leverage, business define and explain leverage, business

Corporate

11.37.a risk, sales risk, operating risk, and 11.37.a risk, sales risk, operating risk, and

Finance

financial risk, and classify a risk financial risk and classify a risk

calculate and interpret the degree of calculate and interpret the degree of

Corporate operating leverage, the degree of operating leverage, the degree of

11.37.b 11.37.b

Finance financial leverage, and the degree of financial leverage, and the degree of

total leverage total leverage

analyze the effect of financial leverage analyze the effect of financial leverage

Corporate

11.37.c on a companys net income and return 11.37.c on a companys net income and return

Finance

on equity on equity

calculate the breakeven quantity of calculate the breakeven quantity of

Corporate

11.37.d sales and determine the companys net 11.37.d sales and determine the companys net

Finance

income at various sales levels income at various sales levels

Corporate calculate and interpret the operating calculate and interpret the operating

11.37.e 11.37.e

Finance breakeven quantity of sales breakeven quantity of sales

describe regular cash dividends, extra describe regular cash dividends, extra

dividends, liquidating dividends, stock dividends, liquidating dividends, stock

Corporate dividends, stock splits, and reverse dividends, stock splits, and reverse

11.38.a 11.38.a

Finance stock splits, including their expected stock splits, including their expected

effect on shareholders wealth and a effect on shareholders wealth and a

companys financial ratios companys financial ratios

describe dividend payment chronology, describe dividend payment chronology,

Corporate including the significance of including the significance of declaration,

11.38.b 11.38.b

Finance declaration, holder-of-record, ex- holder-of-record, ex-dividend, and

dividend, and payment dates payment dates

Corporate

11.38.c 11.38.c

Finance compare share repurchase methods compare share repurchase methods

calculate and compare the effect of a calculate and compare the effect of a

share repurchase on earnings per share share repurchase on earnings per share

Corporate when 1) the repurchase is financed when 1) the repurchase is financed with

11.38.d 11.38.d

Finance with the companys excess cash and 2) the companys excess cash and 2) the

the company uses debt to finance the company uses debt to finance the

repurchase repurchase

Corporate calculate the effect of a share calculate the effect of a share

11.38.e 11.38.e

Finance repurchase on book value per share repurchase on book value per share

Finance or Accounting Questions? Go to passingscoreforum.com 30

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

explain why a cash dividend and a explain why a cash dividend and a share

share repurchase of the same amount repurchase of the same amount are

Corporate

11.38.f are equivalent in terms of the effect on 11.38.f equivalent in terms of the effect on

Finance

shareholders wealth, all else being shareholders wealth, all else being

equal equal

describe primary and secondary describe primary and secondary sources

Corporate

11.39.a sources of liquidity and factors that 11.39.a of liquidity and factors that influence a

Finance

influence a companys liquidity position companys liquidity position

Corporate

11.39.b compare a companys liquidity 11.39.b compare a companys liquidity

Finance

measures with those of peer companies measures with those of peer companies

evaluate working capital effectiveness evaluate working capital effectiveness of

of a company based on its operating a company based on its operating and

Corporate

11.39.c and cash conversion cycles, and 11.39.c cash conversion cycles and compare the

Finance

compare the companys effectiveness companys effectiveness with that of

with that of peer companies peer companies

describe how different types of cash describe how different types of cash

Corporate

11.39.d flows affect a companys net daily cash 11.39.d flows affect a companys net daily cash

Finance

position position

Corporate yields on various securities, compare yields on various securities, compare

11.39.e 11.39.e

Finance portfolio returns against a standard portfolio returns against a standard

benchmark, and evaluate a companys benchmark, and evaluate a companys

short-term investment policy guidelines short-term investment policy guidelines

evaluate a companys management of evaluate a companys management of

Corporate accounts receivable, inventory, and accounts receivable, inventory, and

11.39.f 11.39.f

Finance accounts payable over time and accounts payable over time and

compared to peer companies compared to peer companies

evaluate the choices of short-term evaluate the choices of short-term

Corporate

11.39.g funding available to a company and 11.39.g funding available to a company and

Finance

recommend a financing method recommend a financing method

Corporate

11.40.a Removed

Finance define corporate governance

describe practices related to board and

committee independence, experience,

Corporate compensation, external consultants,

11.40.b Removed

Finance and frequency of elections, and

determine whether they are supportive

of shareowner protection

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe board independence and

Corporate explain the importance of independent

11.40.c Removed

Finance board members in corporate

governance

identify factors that an analyst should

Corporate

11.40.d consider when evaluating the Removed

Finance

qualifications of board members

describe responsibilities of the audit,

compensation, and nominations

Corporate committees and identify factors an

11.40.e Removed

Finance investor should consider when

evaluating the quality of each

committee

describe provisions that should be

Corporate

11.40.f included in a strong corporate code of Removed

Finance

ethics

evaluate, from a shareowners

perspective, company policies related

Corporate

11.40.g to voting rules, shareowner sponsored Removed

Finance

proposals, common stock classes, and

takeover defenses

Portfolio describe the portfolio approach to describe the portfolio approach to

12.41.a 12.40.a

Management investing investing

describe types of investors and describe types of investors and

Portfolio

12.41.b distinctive characteristics and needs of 12.40.b distinctive characteristics and needs of

Management

each each

Portfolio describe defined contribution and describe defined contribution and

12.41.c 12.40.c

Management defined benefit pension plans defined benefit pension plans

Portfolio describe the steps in the portfolio describe the steps in the portfolio

12.41.d 12.40.d

Management management process management process

describe mutual funds and compare describe mutual funds and compare

Portfolio

12.41.e them with other pooled investment 12.40.e them with other pooled investment

Management

products products

Portfolio

12.42.a 12.41.a

Management define risk management define risk management

Portfolio describe features of a risk management describe features of a risk management

12.42.b 12.41.b

Management framework framework

Portfolio define risk governance and describe define risk governance and describe

12.42.c 12.41.c

Management elements of effective risk governance elements of effective risk governance

Portfolio explain how risk tolerance affects risk explain how risk tolerance affects risk

12.42.d 12.41.d

Management management management

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

Portfolio describe risk budgeting and its role in describe risk budgeting and its role in

12.42.e 12.41.e

Management risk governance risk governance

identify financial and non-financial identify financial and non-financial

Portfolio

12.42.f sources of risk and describe how they 12.41.f sources of risk and describe how they

Management

may interact may interact

describe methods for measuring and describe methods for measuring and

Portfolio modifying risk exposures and factors to modifying risk exposures and factors to

12.42.g 12.41.g

Management consider in choosing among the consider in choosing among the

methods methods

calculate and interpret major return calculate and interpret major return

Portfolio

12.43.a measures and describe their 12.42.a measures and describe their appropriate

Management

appropriate uses uses

describe characteristics of the major describe characteristics of the major

Portfolio

12.43.b asset classes that investors consider in 12.42.b asset classes that investors consider in

Management

forming portfolios forming portfolios

calculate and interpret the mean, calculate and interpret the mean,

Portfolio variance, and covariance (or variance, and covariance (or

12.43.c 12.42.c

Management correlation) of asset returns based on correlation) of asset returns based on

historical data historical data

Portfolio explain risk aversion and its explain risk aversion and its implications

12.43.d 12.42.d

Management implications for portfolio selection for portfolio selection

Portfolio calculate and interpret portfolio calculate and interpret portfolio

12.43.e 12.42.e

Management standard deviation standard deviation

describe the effect on a portfolios risk describe the effect on a portfolios risk

Portfolio

12.43.f of investing in assets that are less than 12.42.f of investing in assets that are less than

Management

perfectly correlated perfectly correlated

describe and interpret the minimum- describe and interpret the minimum-

Portfolio variance and efficient frontiers of risky variance and efficient frontiers of risky

12.43.g 12.42.g

Management assets and the global minimum- assets and the global minimum-variance

variance portfolio portfolio

explain the selection of an optimal explain the selection of an optimal

Portfolio portfolio, given an investors utility (or portfolio, given an investors utility (or

12.43.h 12.42.h

Management risk aversion) and the capital allocation risk aversion) and the capital allocation

line line

describe the implications of combining describe the implications of combining a

Portfolio

12.44.a a risk-free asset with a portfolio of risky 12.43.a risk-free asset with a portfolio of risky

Management

assets assets

Portfolio explain the capital allocation line (CAL) explain the capital allocation line (CAL)

12.44.b 12.43.b

Management and the capital market line (CML) and the capital market line (CML)

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

explain systematic and nonsystematic explain systematic and nonsystematic

Portfolio risk, including why an investor should risk, including why an investor should

12.44.c 12.43.c

Management not expect to receive additional return not expect to receive additional return

for bearing nonsystematic risk for bearing nonsystematic risk

explain return generating models explain return generating models

Portfolio

12.44.d (including the market model) and their 12.43.d (including the market model) and their

Management

uses uses

Portfolio

12.44.e 12.43.e

Management calculate and interpret beta calculate and interpret beta

explain the capital asset pricing model explain the capital asset pricing model

Portfolio

12.44.f (CAPM), including its assumptions, and 12.43.f (CAPM), including its assumptions, and

Management

the security market line (SML) the security market line (SML)

Portfolio calculate and interpret the expected calculate and interpret the expected

12.44.g 12.43.g

Management return of an asset using the CAPM return of an asset using the CAPM

Portfolio describe and demonstrate applications describe and demonstrate applications

12.44.h 12.43.h

Management of the CAPM and the SML of the CAPM and the SML

Portfolio describe the reasons for a written describe the reasons for a written

12.45.a 12.44.a

Management investment policy statement (IPS) investment policy statement (IPS)

Portfolio describe the major components of an describe the major components of an

12.45.b 12.44.b

Management IPS IPS

Portfolio describe risk and return objectives and describe risk and return objectives and

12.45.c 12.44.c

Management how they may be developed for a client how they may be developed for a client

distinguish between the willingness and distinguish between the willingness and

Portfolio the ability (capacity) to take risk in the ability (capacity) to take risk in

12.45.d 12.44.d

Management analyzing an investors financial risk analyzing an investors financial risk

tolerance tolerance

describe the investment constraints of

liquidity, time horizon, tax concerns, describe the investment constraints of

Portfolio legal and regulatory factors, and liquidity, time horizon, tax concerns,

12.45.e 12.44.e

Management unique circumstances and their legal and regulatory factors, and unique

implications for the choice of portfolio circumstances and their implications for

assets the choice of portfolio assets

Portfolio explain the specification of asset explain the specification of asset classes

12.45.f 12.44.f

Management classes in relation to asset allocation in relation to asset allocation

describe the principles of portfolio describe the principles of portfolio

Portfolio

12.45.g construction and the role of asset 12.44.g construction and the role of asset

Management

allocation in relation to the IPS allocation in relation to the IPS

explain the main functions of the explain the main functions of the

Equity 13.46.a 13.45.a

financial system financial system

describe classifications of assets and describe classifications of assets and

Equity 13.46.b 13.45.b

markets markets

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe the major types of securities, describe the major types of securities,

currencies, contracts, commodities, and currencies, contracts, commodities, and

Equity 13.46.c real assets that trade in organized 13.45.c real assets that trade in organized

markets, including their distinguishing markets, including their distinguishing

characteristics and major subtypes characteristics and major subtypes

describe types of financial describe types of financial

Equity 13.46.d intermediaries and services that they 13.45.d intermediaries and services that they

provide provide

compare positions an investor can take compare positions an investor can take

Equity 13.46.e 13.45.e

in an asset in an asset

calculate and interpret the leverage calculate and interpret the leverage

ratio, the rate of return on a margin ratio, the rate of return on a margin

Equity 13.46.f transaction, and the security price at 13.45.f transaction, and the security price at

which the investor would receive a which the investor would receive a

margin call margin call

compare execution, validity, and compare execution, validity, and

Equity 13.46.g 13.45.g

clearing instructions clearing instructions

compare market orders with limit

Equity 13.46.h 13.45.h

orders compare market orders with limit orders

define primary and secondary markets define primary and secondary markets

Equity 13.46.i and explain how secondary markets 13.45.i and explain how secondary markets

support primary markets support primary markets

describe how securities, contracts, and describe how securities, contracts, and

Equity 13.46.j currencies are traded in quote-driven, 13.45.j currencies are traded in quote-driven,

order-driven, and brokered markets order-driven, and brokered markets

describe characteristics of a well- describe characteristics of a well-

Equity 13.46.k 13.45.k

functioning financial system functioning financial system

describe objectives of market

Equity 13.46.l 13.45.l

regulation describe objectives of market regulation

Equity 13.47.a describe a security market index 13.46.a describe a security market index

calculate and interpret the value, price calculate and interpret the value, price

Equity 13.47.b 13.46.b

return, and total return of an index return, and total return of an index

describe the choices and issues in index describe the choices and issues in index

Equity 13.47.c 13.46.c

construction and management construction and management

compare the different weighting compare the different weighting

Equity 13.47.d 13.46.d

methods used in index construction methods used in index construction

calculate and analyze the value and calculate and analyze the value and

Equity 13.47.e return of an index given its weighting 13.46.e return of an index given its weighting

method method

describe rebalancing and reconstitution describe rebalancing and reconstitution

Equity 13.47.f 13.46.f

of an index of an index

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe uses of security market indices describe uses of security market indices

Equity 13.47.h describe types of equity indices 13.46.h describe types of equity indices

Equity 13.47.i describe types of fixed-income indices 13.46.i describe types of fixed-income indices

describe indices representing describe indices representing alternative

Equity 13.47.j 13.46.j

alternative investments investments

compare types of security market compare types of security market

Equity 13.47.k 13.46.k

indices indices

describe market efficiency and related describe market efficiency and related

Equity 13.48.a concepts, including their importance to 13.47.a concepts, including their importance to

investment practitioners investment practitioners

distinguish between market value and distinguish between market value and

Equity 13.48.b 13.47.b

intrinsic value intrinsic value

explain factors that affect a markets explain factors that affect a markets

Equity 13.48.c 13.47.c

efficiency efficiency

contrast weak-form, semi-strong-form, contrast weak-form, semi-strong-form,

Equity 13.48.d 13.47.d

and strong-form market efficiency and strong-form market efficiency

explain the implications of each form of explain the implications of each form of

market efficiency for fundamental market efficiency for fundamental

Equity 13.48.e analysis, technical analysis, and the 13.47.e analysis, technical analysis, and the

choice between active and passive choice between active and passive

portfolio management portfolio management

Equity 13.48.f describe market anomalies 13.47.f describe market anomalies

describe behavioral finance and its describe behavioral finance and its

Equity 13.48.g potential relevance to understanding 13.47.g potential relevance to understanding

market anomalies market anomalies

describe characteristics of types of describe characteristics of types of

Equity 14.49.a 14.48.a

equity securities equity securities

describe differences in voting rights and describe differences in voting rights and

Equity 14.49.b other ownership characteristics among 14.48.b other ownership characteristics among

different equity classes different equity classes

distinguish between public and private distinguish between public and private

Equity 14.49.c 14.48.c

equity securities equity securities

describe methods for investing in non- describe methods for investing in non-

Equity 14.49.d 14.48.d

domestic equity securities domestic equity securities

compare the risk and return compare the risk and return

Equity 14.49.e characteristics of different types of 14.48.e characteristics of different types of

equity securities equity securities

explain the role of equity securities in explain the role of equity securities in

Equity 14.49.f 14.48.f

the financing of a companys assets the financing of a companys assets

distinguish between the market value distinguish between the market value

Equity 14.49.g 14.48.g

and book value of equity securities and book value of equity securities

Finance or Accounting Questions? Go to passingscoreforum.com 36

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

compare a companys cost of equity, its compare a companys cost of equity, its

Equity 14.49.h (accounting) return on equity, and 14.48.h (accounting) return on equity, and

investors required rates of return investors required rates of return

explain uses of industry analysis and explain uses of industry analysis and

Equity 14.50.a the relation of industry analysis to 14.49.a the relation of industry analysis to

company analysis company analysis

compare methods by which companies compare methods by which companies

can be grouped, current industry can be grouped, current industry

Equity 14.50.b classification systems, and classify a 14.49.b classification systems, and classify a

company, given a description of its company, given a description of its

activities and the classification system activities and the classification system

explain the factors that affect the

sensitivity of a company to the explain the factors that affect the

business cycle and the uses and sensitivity of a company to the business

Equity 14.50.c 14.49.c

limitations of industry and company cycle and the uses and limitations of

descriptors such as growth, industry and company descriptors such

defensive, and cyclical as growth, defensive, and cyclical

explain how a companys industry explain how a companys industry

classification can be used to identify a classification can be used to identify a

Equity 14.50.d 14.49.d

potential peer group for equity potential peer group for equity

valuation valuation

describe the elements that need to be describe the elements that need to be

Equity 14.50.e 14.49.e

covered in a thorough industry analysis covered in a thorough industry analysis

describe the principles of strategic describe the principles of strategic

Equity 14.50.f 14.49.f

analysis of an industry analysis of an industry

explain the effects of barriers to entry, explain the effects of barriers to entry,

industry concentration, industry industry concentration, industry

Equity 14.50.g 14.49.g

capacity, and market share stability on capacity, and market share stability on

pricing power and price competition pricing power and price competition

describe industry life cycle models, describe industry life cycle models,

classify an industry as to life cycle classify an industry as to life cycle

Equity 14.50.h stage, and describe limitations of the 14.49.h stage, and describe limitations of the

life-cycle concept in forecasting life-cycle concept in forecasting industry

industry performance performance

compare characteristics of compare characteristics of

Equity 14.50.i representative industries from the 14.49.i representative industries from the

various economic sectors various economic sectors

describe macroeconomic, technological, describe macroeconomic, technological,

demographic, governmental, and social demographic, governmental, and social

Equity 14.50.j 14.49.j

influences on industry growth, influences on industry growth,

profitability, and risk profitability, and risk

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe the elements that should be

Equity 14.50.k covered in a thorough company 14.49.k describe the elements that should be

analysis covered in a thorough company analysis

evaluate whether a security, given its evaluate whether a security, given its

current market price and a value current market price and a value

Equity 14.51.a 14.50.a

estimate, is overvalued, fairly valued, estimate, is overvalued, fairly valued, or

or undervalued by the market undervalued by the market

describe major categories of equity describe major categories of equity

Equity 14.51.b 14.50.b

valuation models valuation models

explain the rationale for using present explain the rationale for using present

value models to value equity and value models to value equity and

Equity 14.51.c 14.50.c

describe the dividend discount and free- describe the dividend discount and free-

cash-flow-to-equity models cash-flow-to-equity models

calculate the intrinsic value of a non-

Equity 14.51.d callable, non-convertible preferred 14.50.d calculate the intrinsic value of a non-

stock callable, non-convertible preferred stock

calculate and interpret the intrinsic calculate and interpret the intrinsic

value of an equity security based on value of an equity security based on the

Equity 14.51.e the Gordon (constant) growth dividend 14.50.e Gordon (constant) growth dividend

discount model or a two-stage dividend discount model or a two-stage dividend

discount model, as appropriate discount model, as appropriate

identify characteristics of companies for identify characteristics of companies for

which the constant growth or a which the constant growth or a

Equity 14.51.f 14.50.f

multistage dividend discount model is multistage dividend discount model is

appropriate appropriate

explain the rationale for using price explain the rationale for using price

multiples to value equity, how the price multiples to value equity, how the price

Equity 14.51.g to earnings multiple relates to 14.50.g to earnings multiple relates to

fundamentals, and the use of multiples fundamentals, and the use of multiples

based on comparables based on comparables

calculate and interpret the following calculate and interpret the following

multiples: price to earnings, price to an multiples: price to earnings, price to an

Equity 14.51.h 14.50.h

estimate of operating cash flow, price estimate of operating cash flow, price to

to sales, and price to book value sales, and price to book value

describe enterprise value multiples and describe enterprise value multiples and

Equity 14.51.i 14.50.i

their use in estimating equity value their use in estimating equity value

Equity 14.51.j describe asset-based valuation models 14.50.j describe asset-based valuation models

and their use in estimating equity value and their use in estimating equity value

explain advantages and disadvantages explain advantages and disadvantages

Equity 14.51.k 14.50.k

of each category of valuation model of each category of valuation model

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe basic features of a fixed- describe basic features of a fixed-

Fixed Income 15.52.a 15.51.a

income security income security

Fixed Income 15.52.b describe content of a bond indenture 15.51.b describe content of a bond indenture

compare affirmative and negative compare affirmative and negative

Fixed Income 15.52.c covenants and identify examples of 15.51.c covenants and identify examples of

each each

describe how legal, regulatory, and tax describe how legal, regulatory, and tax

Fixed Income 15.52.d considerations affect the issuance and 15.51.d considerations affect the issuance and

trading of fixed-income securities trading of fixed-income securities

describe how cash flows of fixed- describe how cash flows of fixed-income

Fixed Income 15.52.e 15.51.e

income securities are structured securities are structured

describe contingency provisions describe contingency provisions

affecting the timing and/or nature of affecting the timing and/or nature of

Fixed Income 15.52.f cash flows of fixed-income securities 15.51.f cash flows of fixed-income securities

and identify whether such provisions and identify whether such provisions

benefit the borrower or the lender benefit the borrower or the lender

describe classifications of global fixed- describe classifications of global fixed-

Fixed Income 15.53.a 15.52.a

income markets income markets

describe the use of interbank offered describe the use of interbank offered

Fixed Income 15.53.b rates as reference rates in floating-rate 15.52.b rates as reference rates in floating-rate

debt debt

describe mechanisms available for describe mechanisms available for

Fixed Income 15.53.c 15.52.c

issuing bonds in primary markets issuing bonds in primary markets

Fixed Income 15.53.d describe secondary markets for bonds 15.52.d describe secondary markets for bonds

describe securities issued by sovereign describe securities issued by sovereign

Fixed Income 15.53.e 15.52.e

governments governments

describe securities issued by non- describe securities issued by non-

sovereign governments, quasi- sovereign governments, quasi-

Fixed Income 15.53.f 15.52.f

government entities, and supranational government entities, and supranational

agencies agencies

describe types of debt issued by describe types of debt issued by

Fixed Income 15.53.g 15.52.g

corporations corporations

describe short-term funding describe short-term funding alternatives

Fixed Income 15.53.h 15.52.h

alternatives available to banks available to banks

describe repurchase agreements

Fixed Income 15.53.i (repos) and the risks associated with 15.52.i describe repurchase agreements (repos)

them and the risks associated with them

calculate a bonds price given a market calculate a bonds price given a market

Fixed Income 15.54.a 15.53.a

discount rate discount rate

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

identify the relationships among a

bonds price, coupon rate, maturity, identify the relationships among a

Fixed Income 15.54.b 15.53.b

and market discount rate (yield-to- bonds price, coupon rate, maturity, and

maturity) market discount rate (yield-to-maturity)

define spot rates and calculate the define spot rates and calculate the price

Fixed Income 15.54.c 15.53.c

price of a bond using spot rates of a bond using spot rates

describe and calculate the flat price, describe and calculate the flat price,

Fixed Income 15.54.d accrued interest, and the full price of a 15.53.d accrued interest, and the full price of a

bond bond

Fixed Income 15.54.e describe matrix pricing 15.53.e describe matrix pricing

calculate and interpret yield measures calculate and interpret yield measures

Fixed Income 15.54.f for fixed-rate bonds, floating-rate 15.53.f for fixed-rate bonds, floating-rate notes,

notes, and money market instruments and money market instruments

define and compare the spot curve, define and compare the spot curve,

Fixed Income 15.54.g yield curve on coupon bonds, par 15.53.g yield curve on coupon bonds, par curve,

curve, and forward curve and forward curve

define forward rates and calculate spot define forward rates and calculate spot

rates from forward rates, forward rates rates from forward rates, forward rates

Fixed Income 15.54.h 15.53.h

from spot rates, and the price of a bond from spot rates, and the price of a bond

using forward rates using forward rates

compare, calculate, and interpret yield compare, calculate, and interpret yield

Fixed Income 15.54.i 15.53.i

spread measures spread measures

explain benefits of securitization for explain benefits of securitization for

Fixed Income 15.55.a 15.54.a

economies and financial markets economies and financial markets

describe securitization, including the describe securitization, including the

Fixed Income 15.55.b parties involved in the process and the 15.54.b parties involved in the process and the

roles they play roles they play

describe typical structures of describe typical structures of

Fixed Income 15.55.c securitizations, including credit 15.54.c securitizations, including credit

tranching and time tranching tranching and time tranching

describe types and characteristics of describe types and characteristics of

Fixed Income 15.55.d residential mortgage loans that are 15.54.d residential mortgage loans that are

typically securitized typically securitized

describe types and characteristics of describe types and characteristics of

residential mortgage-backed securities, residential mortgage-backed securities,

including mortgage pass-through including mortgage pass-through

Fixed Income 15.55.e 15.54.e

securities and collateralized mortgage securities and collateralized mortgage

obligations, and explain the cash flows obligations, and explain the cash flows

and risks for each type and risks for each type

define prepayment risk and describe define prepayment risk and describe the

Fixed Income 15.55.f the prepayment risk of mortgage- 15.54.f prepayment risk of mortgage-backed

backed securities securities

Finance or Accounting Questions? Go to passingscoreforum.com 40

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

Fixed Income 15.55.g describe characteristics and risks of 15.54.g describe characteristics and risks of

commercial mortgage-backed securities commercial mortgage-backed securities

describe types and characteristics of describe types and characteristics of

non-mortgage asset-backed securities, non-mortgage asset-backed securities,

Fixed Income 15.55.h 15.54.h

including the cash flows and risks of including the cash flows and risks of

each type each type

describe collateralized debt obligations, describe collateralized debt obligations,

Fixed Income 15.55.i 15.54.i

including their cash flows and risks including their cash flows and risks

calculate and interpret the sources of calculate and interpret the sources of

Fixed Income 16.56.a return from investing in a fixed-rate 16.55.a return from investing in a fixed-rate

bond bond

define, calculate, and interpret define, calculate, and interpret

Fixed Income 16.56.b Macaulay, modified, and effective 16.55.b Macaulay, modified, and effective

durations durations

explain why effective duration is the explain why effective duration is the

most appropriate measure of interest most appropriate measure of interest

Fixed Income 16.56.c 16.55.c

rate risk for bonds with embedded rate risk for bonds with embedded

options options

define key rate duration and describe define key rate duration and describe

the use of key rate durations in the use of key rate durations in

Fixed Income 16.56.d measuring the sensitivity of bonds to 16.55.d measuring the sensitivity of bonds to

changes in the shape of the benchmark changes in the shape of the benchmark

yield curve yield curve

explain how a bonds maturity, coupon, explain how a bonds maturity, coupon,

Fixed Income 16.56.e and yield level affect its interest rate 16.55.e and yield level affect its interest rate

risk risk

calculate the duration of a portfolio and calculate the duration of a portfolio and

Fixed Income 16.56.f explain the limitations of portfolio 16.55.f explain the limitations of portfolio

duration duration

calculate and interpret the money calculate and interpret the money

Fixed Income 16.56.g duration of a bond and price value of a 16.55.g duration of a bond and price value of a

basis point (PVBP) basis point (PVBP)

calculate and interpret approximate calculate and interpret approximate

Fixed Income 16.56.h convexity and distinguish between 16.55.h convexity and distinguish between

approximate and effective convexity approximate and effective convexity

estimate the percentage price change estimate the percentage price change of

of a bond for a specified change in a bond for a specified change in yield,

Fixed Income 16.56.i 16.55.i

yield, given the bonds approximate given the bonds approximate duration

duration and convexity and convexity

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe how the term structure of describe how the term structure of yield

Fixed Income 16.56.j yield volatility affects the interest rate 16.55.j volatility affects the interest rate risk of

risk of a bond a bond

describe the relationships among a describe the relationships among a

Fixed Income 16.56.k bonds holding period return, its 16.55.k bonds holding period return, its

duration, and the investment horizon duration, and the investment horizon

explain how changes in credit spread explain how changes in credit spread

and liquidity affect yield-to-maturity of and liquidity affect yield-to-maturity of

Fixed Income 16.56.l a bond and how duration and convexity 16.55.l a bond and how duration and convexity

can be used to estimate the price effect can be used to estimate the price effect

of the changes of the changes

describe credit risk and credit-related describe credit risk and credit-related

Fixed Income 16.57.a 16.56.a

risks affecting corporate bonds risks affecting corporate bonds

describe default probability and loss describe default probability and loss

Fixed Income 16.57.b 16.56.b

severity as components of credit risk severity as components of credit risk

describe seniority rankings of corporate describe seniority rankings of corporate

debt and explain the potential violation debt and explain the potential violation

Fixed Income 16.57.c 16.56.c

of the priority of claims in a bankruptcy of the priority of claims in a bankruptcy

proceeding proceeding

distinguish between corporate issuer distinguish between corporate issuer

credit ratings and issue credit ratings credit ratings and issue credit ratings

Fixed Income 16.57.d 16.56.d

and describe the rating agency practice and describe the rating agency practice

of notching of notching

explain risks in relying on ratings from explain risks in relying on ratings from

Fixed Income 16.57.e 16.56.e

credit rating agencies credit rating agencies

explain the four Cs (Capacity, explain the four Cs (Capacity, Collateral,

Fixed Income 16.57.f Collateral, Covenants, and Character) 16.56.f Covenants, and Character) of traditional

of traditional credit analysis credit analysis

calculate and interpret financial ratios calculate and interpret financial ratios

Fixed Income 16.57.g 16.56.g

used in credit analysis used in credit analysis

evaluate the credit quality of a evaluate the credit quality of a

corporate bond issuer and a bond of corporate bond issuer and a bond of

Fixed Income 16.57.h 16.56.h

that issuer, given key financial ratios of that issuer, given key financial ratios of

the issuer and the industry the issuer and the industry

describe factors that influence the level describe factors that influence the level

Fixed Income 16.57.i 16.56.i

and volatility of yield spreads and volatility of yield spreads

explain special considerations when explain special considerations when

evaluating the credit of high yield, evaluating the credit of high yield,

Fixed Income 16.57.j 16.56.j

sovereign, and non-sovereign sovereign, and non-sovereign

government debt issuers and issues government debt issuers and issues

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

define a derivative, and distinguish define a derivative and distinguish

Derivatives 17.58.a between exchange-traded and over-the- 17.57.a between exchange-traded and over-the-

counter derivatives counter derivatives

contrast forward commitments with contrast forward commitments with

Derivatives 17.58.b 17.57.b

contingent claims contingent claims

define forward contracts, futures define forward contracts, futures

contracts, options (calls and puts), contracts, options (calls and puts),

Derivatives 17.58.c 17.57.c

swaps, and credit derivatives, and swaps, and credit derivatives and

compare their basic characteristics compare their basic characteristics

Derivatives 17.58.d describe purposes of, and controversies 17.57.d describe purposes of, and controversies

related to, derivative markets related to, derivative markets

explain arbitrage and the role it plays in explain arbitrage and the role it plays in

Derivatives 17.58.e determining prices and promoting 17.57.e determining prices and promoting

market efficiency market efficiency

explain how the concepts of arbitrage, explain how the concepts of arbitrage,

Derivatives 17.59.a replication, and risk neutrality are used 17.58.a replication, and risk neutrality are used

in pricing derivatives in pricing derivatives

distinguish between value and price of distinguish between value and price of

Derivatives 17.59.b 17.58.b

forward and futures contracts forward and futures contracts

explain how the value and price of a explain how the value and price of a

forward contract are determined at forward contract are determined at

Derivatives 17.59.c 17.58.c

expiration, during the life of the expiration, during the life of the

contract, and at initiation contract, and at initiation

describe monetary and nonmonetary describe monetary and nonmonetary

benefits and costs associated with benefits and costs associated with

Derivatives 17.59.d holding the underlying asset, and 17.58.d holding the underlying asset and explain

explain how they affect the value and how they affect the value and price of a

price of a forward contract forward contract

define a forward rate agreement and define a forward rate agreement and

Derivatives 17.59.e 17.58.e

describe its uses describe its uses

explain why forward and futures prices explain why forward and futures prices

Derivatives 17.59.f 17.58.f

differ differ

explain how swap contracts are similar explain how swap contracts are similar

Derivatives 17.59.g to but different from a series of forward 17.58.g to but different from a series of forward

contracts contracts

distinguish between the value and price distinguish between the value and price

Derivatives 17.59.h 17.58.h

of swaps of swaps

explain how the value of a European explain how the value of a European

Derivatives 17.59.i 17.58.i

option is determined at expiration option is determined at expiration

explain the exercise value, time value, explain the exercise value, time value,

Derivatives 17.59.j 17.58.j

and moneyness of an option and moneyness of an option

Finance or Accounting Questions? Go to passingscoreforum.com 43

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

identify the factors that determine the

value of an option, and explain how identify the factors that determine the

Derivatives 17.59.k 17.58.k

each factor affects the value of an value of an option and explain how each

option factor affects the value of an option

explain putcall parity for European explain putcall parity for European

Derivatives 17.59.l 17.58.l

options options

explain putcallforward parity for explain putcallforward parity for

Derivatives 17.59.m 17.58.m

European options European options

explain how the value of an option is explain how the value of an option is

Derivatives 17.59.n determined using a one-period binomial 17.58.n determined using a one-period binomial

model model

explain under which circumstances the explain under which circumstances the

Derivatives 17.59.o values of European and American 17.58.o values of European and American

options differ options differ

determine the value at expiration, the determine the value at expiration, the

profit, maximum profit, maximum loss, profit, maximum profit, maximum loss,

breakeven underlying price at breakeven underlying price at

expiration, and payoff graph of the expiration, and payoff graph of the

Derivatives 17.60.a 17.59.a

strategies of buying and selling calls strategies of buying and selling calls

and puts and determine the potential and puts and determine the potential

outcomes for investors using these outcomes for investors using these

strategies strategies

determine the value at expiration, determine the value at expiration,

profit, maximum profit, maximum loss, profit, maximum profit, maximum loss,

breakeven underlying price at breakeven underlying price at

expiration, and payoff graph of a expiration, and payoff graph of a

Derivatives 17.60.b 17.59.b

covered call strategy and a protective covered call strategy and a protective

put strategy, and explain the risk put strategy, and explain the risk

management application of each management application of each

strategy strategy

Alternative compare alternative investments with compare alternative investments with

18.61.a 18.60.a

Investments traditional investments traditional investments

Alternative describe categories of alternative describe categories of alternative

18.61.b 18.60.b

Investments investments investments

describe potential benefits of describe potential benefits of alternative

Alternative

18.61.c alternative investments in the context 18.60.c investments in the context of portfolio

Investments

of portfolio management management

Topic LOS Level I - 2016 (549 LOS) LOS Level I - 2017 (534 LOS) Compared

describe hedge funds, private equity,

real estate, commodities, describe hedge funds, private equity,

infrastructure, and other alternative real estate, commodities, infrastructure,

Alternative

18.61.d investments, including, as applicable, 18.60.d and other alternative investments,

Investments

strategies, sub-categories, potential including, as applicable, strategies, sub-

benefits and risks, fee structures, and categories, potential benefits and risks,

due diligence fee structures, and due diligence

describe, calculate, and interpret describe, calculate, and interpret

Alternative

18.61.e management and incentive fees and 18.60.e management and incentive fees and net-

Investments

net-of-fees returns to hedge funds of-fees returns to hedge funds

describe issues in valuing, and describe issues in valuing and

Alternative calculating returns on, hedge funds, calculating returns on hedge funds,

18.61.f 18.60.f

Investments private equity, real estate, private equity, real estate, commodities,

commodities, and infrastructure and infrastructure

Alternative describe risk management of describe risk management of alternative

18.61.g 18.60.g

Investments alternative investments investments

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