CFA Level 1 - 101 Exemplary Education.

Sharpe Ratio Sharpe Ratio = (E(R) - RFR) / σ Larger ratio is better If (Rt) is higher than RFR, then it becomes Safety First Ratio Central Limit Theorem If we take samples of a population, with a large enough sample size, the distribution of all sample means is normal with: - A mean equal to the population mean - A variance equal to the population variance divided by sample size (σ² / n) Standard Error of Sample Mean σ / n^½ Binomial Probability One of two possible outcomes (i.e. success/failure) Possible outcomes can be demonstrated in binomial tree Use "nCr" on calculator to solve: nCr = P(success)^x * P(failure)^(n-x) P - Value Based on a calculated test statistic, rather than a significance level (which is chosen) p-value = smallest significance level at which an analyst can reject the null hypothesis