,Contents
1. Foreword
2. Ethical and Professional Standards: SS 1
3. Quantitative Methods: SS 2 & 3
4. Economics: SS 4 & 5
5. Financial Reporting and Analysis: SS 6, 7, 8, & 9
6. Corporate Finance: SS 10 & 11
7. Portfolio Management: SS 12 & 13
8. Equity Investments: SS 14 & 15
9. Fixed Income: SS 16 & 17
10. Derivatives: SS 18
11. Alternative Investments: SS 19
12. Essential Exam Strategies
13. Copyright
,FOREWORD
This book will be a valuable addition to the study tools of any CFA exam candidate. It
offers a very concise and very readable explanation of the major parts of the Level I
CFA curriculum. Here is the disclaimer: this book does not cover every Learning
Outcome Statement (LOS) and, as you are aware, any LOS is “fair game” for the exam.
We have tried to include those LOS that are key concepts in finance and accounting,
have application to other LOS, are complex and difficult for candidates, require
memorization of characteristics or relationships, or are a prelude to LOS at Levels II
and III.
We suggest you use this book as a companion to your other, more comprehensive study
materials. It is easier to carry with you and will allow you to study these key concepts,
definitions, and techniques over and over, which is an important part of mastering the
material. When you get to topics where the coverage here appears too brief or raises
questions in your mind, this is your clue to go back to your SchweserNotes™ or the
textbooks to fill in the gaps in your understanding. For the great majority of you, there
is no shortcut to learning the very broad array of subjects covered by the Level I
curriculum, but this volume should be a very valuable tool for learning and reviewing
the material as you progress in your studies over the months leading up to exam day.
Pass rates have recently been between 35% and 45%, and returning Level I candidates
make comments such as, “I was surprised at how difficult the exam was.” You should
not despair because of this, but you should definitely not underestimate the task at hand.
Our study materials, practice exams, question bank, videos, seminars, and Secret Sauce
are all designed to help you study as efficiently as possible, help you to grasp and retain
the material, and apply it with confidence come exam day.
Best regards,
Doug Van Eaton Craig S. Prochaska
Dr. Doug Van Eaton, CFA SVP and Level Craig S. Prochaska, CFA Senior Content
I Manager Specialist
Kaplan Schweser Kaplan Schweser
, ETHICAL AND PROFESSIONAL
STANDARDS
Study Session 1
Weight on Exam 15%
SchweserNotes™ Reference
Book 1, Pages 1–63 .
Ethics is 15% of the Level I examination and is extremely important to your overall
success (remember, you can fail a topic area and still pass the exam, but we wouldn’t
recommend failing Ethics). Ethics can be tricky, and small details can be important on
some ethics questions. Be prepared.
In addition to starting early, study the ethics material more than once. Ethics is one of
the keys to passing the exam.
ETHICS AND TRUST IN THE INVESTMENT PROFESSION
Cross-Reference to CFA Institute Assigned Reading #1
Ethics can be described as a set of shared beliefs about what behavior is good or
acceptable.
Ethical conduct has been described as behavior that follows moral principles and is
consistent with society’s ethical expectations and also as conduct that improves
outcomes for stakeholders, those who are directly or indirectly affected by the conduct.
A code of ethics is a written set of moral principles that can guide behavior.
Having a code of ethics is a way to communicate an organization’s values,
principles, and expectations.
Some codes of ethics include a set of rules or standards that require some
minimum level of ethical behavior.
A profession refers to a group of people with specialized skills and knowledge
who serve others and agree to behave in accordance with a code of ethics.
One challenge to ethical behavior is that individuals tend to overrate the ethical quality
of their behavior and overemphasize the importance of their personal traits in
determining the ethical quality of their behavior.
It is claimed that external or situational influences, such as social pressure from others
or the prospect of acquiring more money or greater prestige, have a greater effect on the
ethical quality of behavior than personal traits.
Investment professionals have a special responsibility because they are entrusted with
their clients’ wealth. Because investment advice and management are intangible
1. Foreword
2. Ethical and Professional Standards: SS 1
3. Quantitative Methods: SS 2 & 3
4. Economics: SS 4 & 5
5. Financial Reporting and Analysis: SS 6, 7, 8, & 9
6. Corporate Finance: SS 10 & 11
7. Portfolio Management: SS 12 & 13
8. Equity Investments: SS 14 & 15
9. Fixed Income: SS 16 & 17
10. Derivatives: SS 18
11. Alternative Investments: SS 19
12. Essential Exam Strategies
13. Copyright
,FOREWORD
This book will be a valuable addition to the study tools of any CFA exam candidate. It
offers a very concise and very readable explanation of the major parts of the Level I
CFA curriculum. Here is the disclaimer: this book does not cover every Learning
Outcome Statement (LOS) and, as you are aware, any LOS is “fair game” for the exam.
We have tried to include those LOS that are key concepts in finance and accounting,
have application to other LOS, are complex and difficult for candidates, require
memorization of characteristics or relationships, or are a prelude to LOS at Levels II
and III.
We suggest you use this book as a companion to your other, more comprehensive study
materials. It is easier to carry with you and will allow you to study these key concepts,
definitions, and techniques over and over, which is an important part of mastering the
material. When you get to topics where the coverage here appears too brief or raises
questions in your mind, this is your clue to go back to your SchweserNotes™ or the
textbooks to fill in the gaps in your understanding. For the great majority of you, there
is no shortcut to learning the very broad array of subjects covered by the Level I
curriculum, but this volume should be a very valuable tool for learning and reviewing
the material as you progress in your studies over the months leading up to exam day.
Pass rates have recently been between 35% and 45%, and returning Level I candidates
make comments such as, “I was surprised at how difficult the exam was.” You should
not despair because of this, but you should definitely not underestimate the task at hand.
Our study materials, practice exams, question bank, videos, seminars, and Secret Sauce
are all designed to help you study as efficiently as possible, help you to grasp and retain
the material, and apply it with confidence come exam day.
Best regards,
Doug Van Eaton Craig S. Prochaska
Dr. Doug Van Eaton, CFA SVP and Level Craig S. Prochaska, CFA Senior Content
I Manager Specialist
Kaplan Schweser Kaplan Schweser
, ETHICAL AND PROFESSIONAL
STANDARDS
Study Session 1
Weight on Exam 15%
SchweserNotes™ Reference
Book 1, Pages 1–63 .
Ethics is 15% of the Level I examination and is extremely important to your overall
success (remember, you can fail a topic area and still pass the exam, but we wouldn’t
recommend failing Ethics). Ethics can be tricky, and small details can be important on
some ethics questions. Be prepared.
In addition to starting early, study the ethics material more than once. Ethics is one of
the keys to passing the exam.
ETHICS AND TRUST IN THE INVESTMENT PROFESSION
Cross-Reference to CFA Institute Assigned Reading #1
Ethics can be described as a set of shared beliefs about what behavior is good or
acceptable.
Ethical conduct has been described as behavior that follows moral principles and is
consistent with society’s ethical expectations and also as conduct that improves
outcomes for stakeholders, those who are directly or indirectly affected by the conduct.
A code of ethics is a written set of moral principles that can guide behavior.
Having a code of ethics is a way to communicate an organization’s values,
principles, and expectations.
Some codes of ethics include a set of rules or standards that require some
minimum level of ethical behavior.
A profession refers to a group of people with specialized skills and knowledge
who serve others and agree to behave in accordance with a code of ethics.
One challenge to ethical behavior is that individuals tend to overrate the ethical quality
of their behavior and overemphasize the importance of their personal traits in
determining the ethical quality of their behavior.
It is claimed that external or situational influences, such as social pressure from others
or the prospect of acquiring more money or greater prestige, have a greater effect on the
ethical quality of behavior than personal traits.
Investment professionals have a special responsibility because they are entrusted with
their clients’ wealth. Because investment advice and management are intangible
