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Q.
How many Study Sessions comprise the CFA®
Level 1 Exam Curriculum?
The CFA®
Level 1 Exam 2008, comprises of 18 Study Sessions, which are;
SS 1 - Ethical and
Professional Standards
SS 2 -
Quantitative Methods
SS 3 -
Quantitative Methods
SS 4 - Economics
SS 5 - Economics
SS 6 - Economics
SS 7 - Financial
Statement Analysis
SS 8 - Financial
Statement Analysis
SS 9 - Financial
Statement Analysis
SS 10 - Financial Statement
Analysis
SS 11 - Corporate Finance
SS 12 - Portfolio Management
SS 13 - Analysis of Equity
Investments
SS 14 - Analysis of Equity
Investments
SS 15 - Fixed Income
Investments
SS 16 - Fixed Income
Investments
SS 17 - Derivative Investments
SS 18 - Alternative
Investments
SS 1
- Ethical and Professional Standards - What is taught in this Unit?
Study Session 1 teaches the
candidate, the CFA Institute's Code of Ethics and
Standards of Professional Conduct. This unit also introduces the
candidate to GIPS®, which
are the Global Investment Performance Standards. Our training course for the CFA®
Level 1 Candidates covers this unit over 6 hours of instruction
during 2 separate classes, to provide detailed coverage of the
material contained in the 4 readings assigned for this unit.
Our
students are encouraged to immerse themselves in this study session
throughout the course of their learning, since we feel that it is
only possible to genuinely assimilate the learning content through
detailed and longer term exposure to these topics. Further, this
unit is studied in increasing detail throughout the 3 years of the
CFA Program and is one of the most important topics covered in the
exam.
At Finance Grid, this unit is taught towards the end of the
training program, when the student has developed competence in
various investment scenarios so that ethics and integrity in conduct
can be taught and tested in an applied context. Students are
required to complete an detailed assignment on Ethics and GIPS®, from
the original CFA texts.
SS 2
- Quantitative Methods - What is taught in this unit of the Level 1
Course?
This unit seeks to develop the
quantitative analysis tools that the student will use for the entire
CFA® Program. There are two
integral components of this unit; Time Value of Money and,
Statistics and Probability Theory. Time Value concepts form the
basis of techniques used in Discounted Cash Flow Analysis; such as
Net Present Value and Internal Rate of Return as well as techniques
and methods for calculating Rates of Return.
In the Statistics
section, the candidate is introduced to Inferential and Descriptive
Statistics and gets acquainted with Measures of Central Tendency and
Measures of Dispersion. Under Probability, the student is taught
definitions of variables, conditional probability, joint
probability, Baye's Theorem as well as problems in Counting.
Among CFA®
Level 1 candidates worldwide, there are many who only have moderate
skills in Mathematics. The CFA®
Program progressively gets more quantitative as the candidate moves
from Level 1 to Level 2.
There are 4
readings in this study session and at Finance Grid, this unit is
allocated 5 hours of instruction spread over 2 classes. The student
is assigned a problem set from the original CFA texts, to complete
over a weekend, also several questions are solved during class
instruction
SS 3
- Quantitative Methods - What is taught in this unit of the course?
This unit teaches Common
Probability Distributions including the all-important 'Standard
Normal Distribution'. The relationship between Normal and Log-Normal
Distributions is explored. Another section in this unit introduces
the Monte-Carlo Simulation and its applications. Sampling
concepts and methodologies are covered in detail, and the
student will learn about point and confidence interval estimates for
a population parameter, along-with the concept of the 'Central Limit
Theorem'.
Next, the unit deals with Hypothesis Testing
together with Type 1 and Type 2 error estimates. The unit ends with
an introduction to Technical Analysis, with some theory and
an introduction to simple trading rules.
In this unit, the biggest stumbling block for most students is
hypothesis testing. The solution lies is sufficient practice in this
area and a focus on being able to correctly frame the hypothesis
basis on a given word problem. The rest is mechanical problem
solving. In this section it is also important to understand how tail
probabilities need to be dealt with depending on if the test is a
one-tailed or two-tailed test.
The 4 readings in this unit are
assigned 4 hours of instruction over 2 separate classes.
SS 4
- Microeconomics - What is taught in this unit of the CFA Level 1
Course?
In Microeconomics, the most
important concepts taught are Elasticity of demand and
supply, and the concept of Allocative Efficiency, which is
taught by developing an understanding of Marginal Cost and Marginal
Benefit Curves. The concepts of Consumer Surplus and Producer
Surplus are also introduced. The unit then goes on to explore
economic inefficiencies in Markets due to price ceilings and
price floors. The incidence of taxation is taught in light of
inelasticity of demand relative to inelasticity of supply. Topics in
Organizing Production are then studied with a focus on
technological and economic efficiency. This unit ends with a
detailed topic review on Output and Cost analysis based on
Product Curves and Cost Curves. The student is also required to
develop an understanding of Diminishing Returns, and Economies of
scale.
Students who
have had no previous exposure to Economics find this unit as well as
units 5 and 6 to be very tough indeed. Economics has a vocabulary of
its own and a lot of time can be lost if students arrive in class
lectures without having reviewed these concepts earlier.
At Finance
Grid, the emphasis in teaching Economics is to develop the
student's vocabulary in economics and to present the concepts so
that they are simple to understand by means of interactive graphs
that form part of our lecture presentations, in which the
dynamics of the economic processes can be seen and understood
visually through the material presented in class.
There are 5 units
in this reading, and it is allocated 3 hours during 1 class lecture.
The instruction is backed up by additional resources and study aids
presented to the students to help them sustain the learning achieved
in class by reviewing the additional resources.
SS 5
- Macroeconomics - What is taught in this unit of the CFA Level 1
course?
The Macroeconomics unit starts
with a topic review on Perfect Competition as a market
structure in which the output, revenue, cost and profitability of a
firm in a perfectly competitive environment are studied. At the
other extreme, the Monopoly market structure is taught and
its differences from the Perfectly Competitive structure are
analyzed. Monopoly price-setting strategies are studied and the
regulation of monopolies is reviewed. Further along the unit, market
structures in between the the two extremes of Perfect Competition
and Monopoly are studied. These are Oligopoly and Monopolistic
Competition. Next we study the supply and demand in Factor
Markets. These are factors of production; including Labor,
Physical Capital and Financial Capital. The next chapter in the unit
focuses on Unemployment, Business Cycles and Measures of
Inflation. The unit ends with a discussion of the various
schools of thought in Macroeconomics.
This study
unit is very interesting for most students and at the end of it
everyone feels they have learnt a lot. From the perspective of the
exam, the most critical component of this unit is to understand the
workings of the various market structures and the key differences
between each. The scheduled
instruction for this unit is covered over 3 hours in one lecture,
backed up with a weekend assignment.
SS 6
- Monetary Economics - What is taught in this unit?
This unit starts with a
discussion of Money and Banking and the role of the Federal
Reserve in the US, and how it conducts its Monetary Policy. The
Quantity Theory of Money is introduced, measures of Money, and the
Creation of Money is explored. The unit moves on to teaching the
interaction of Money, Interest Rates and the Price Level and the
relationship of these with Real GDP. In this section, the
student is taught to differentiate between inflation and the price
level and the difference between the effects of anticipated versus
unanticipated inflation. Also, the impact of inflation on
unemployment is studied using the framework of the Phillips curve.
The unit ends with a reading each on Fiscal Policy and
Monetary Policy.
By the time
students arrive at this unit, they have usually developed an
in-depth understanding of several key concepts in economics, which
makes this reading fairly easy to grasp. This study unit has a
fairly theoretical focus and involves memorizing more than a few
concepts. This unit is assigned 3 hours of instruction over one
class.
At Finance Grid, the 3 units
on Economics are taught towards the second half of our training
program, during the 8th and 9th weeks of instruction.
SS 7
- Financial Statement Analysis - What is taught in this unit of the
CFA Level 1 course?
This is the first of a series
of 4 units that collectively form the bulk of the CFA Level 1 exam.
Unit SS - 7 provides an introduction to the structure of the
Principal Financial Statements; Income Statement, Balance Sheet,
Statement of Cash-flows and the Statement of Changes in
Stockholders' Equity. The general framework of performing an
analysis of the data in these statements is also introduced. The
student is also taught the use of supplementary information in
performing the financial analysis.
The next topic in this unit deals
with Mechanics of Preparing Financial Statements. The student
is exposed to a discussion of the information flows in the
accounting system and the relationship of the accounts as they
appear in the various statements. The next topic review draws
attention to Standards and Regulation in Financial Reporting.
The US and International Financial Reporting Standards are
discussed. This unit has 3 readings in the current curriculum.
This unit is assigned 3 hours
of instruction over a single class lecture. This lecture lays the
all-important foundation for the next three units as well. The most
challenging area for the students is understanding the flow of
accounting information and how changes in various accounts impact
each set of financial statement.
SS 8
- Financial Statement Analysis - What is taught in this unit of the
CFA Level 1 course?
This unit drills deep into the
various financial statement introduced in the previous unit. The
first topic immerses the student in the Income Statement;
with considerable details on all component accounts affecting the
income statement. These are the revenue accounts, the expense
accounts, the depreciation accounts and the inventory cost accounts.
The operating and non-operating items on the income statement are
analyzed separately.
The topic then moves on to describing the
calculation of earnings per share, EPS, and the the effect of
dilutive securities on EPS. Common size analysis is also taught in
this section. The second reading in this unit dissects the
Balance Sheet. Its component sections; assets, liabilities and
stockholders' equity are analyzed. Activities that remain off the
balance sheet are discussed and common size balance sheet analysis
is taught. The third topic deals with the Cash-flow Statement,
looking at its methods of construction and its relationship with
both the income statement and the balance sheet. Free Cash-flow
concepts are also introduced.
This unit is assigned 3 hours
of instruction over one class lecture. The unit is primarily
conceptual, the most challenging area for the students often being
the third reading, on the cash-flow statement. The concepts taught
in class are reinforced through a detailed assignment from the CFA
texts to cover the topics in this unit and the previous one. Some
students are assigned extra work on this topic to develop mastery of
the concepts.
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