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CFA Level I Updated
How do I study FSA without turning it into a giant memorization list?
Use a repeatable tracing method instead of trying to memorize every sentence from the reading. For each scenario, ask: 1. What was recognized now versus deferred? 2. Which statement changed first? 3. What happened to earnings? 4. What happened to cas
When should I worry that a strong margin is just revenue being pulled forward?
A strong margin deserves more skepticism when the supporting balance-sheet and cash-flow signals are moving in the wrong direction. Red flags include: - receivables growing much faster than revenue - contract assets or unbilled receivables rising wit
How can cash come in before revenue shows up in earnings?
Cash arrival and revenue recognition answer different questions. - Cash flow asks: did money move? - Revenue recognition asks: has the company substantially delivered what it promised? Suppose fictional firm **Cobalt Ledger Training** collects `18,00
Why does capitalizing a cost usually make current profit look better?
Capitalizing a cost means you do **not** run the full amount through the income statement immediately. Instead, you put the cost on the balance sheet as an asset and recognize only part of it as expense in the current period. Suppose fictional compan
Why does question scope matter for duration answers?
Scope matters because the math changes with the object being measured.
How do I separate maturity from duration in fixed-income questions?
Use this split:
When can a longer-maturity bond have lower duration than expected?
The shortcut breaks down when coupon structure or discounting changes the present-value weights enough that maturity no longer tells the whole story.
Why does adding a shorter-duration bond lower portfolio duration?
Yes, if the question is talking about the fixed-income sleeve and the added bond truly has lower duration than the existing holdings, the sleeve's duration usually falls because duration is a market-value-weighted average.
Can an investment report be material and public at the same time?
Yes. `Material` and `public` describe different things. - `Material` asks whether a reasonable investor would consider the information important. - `Public` asks whether the information has been broadly disseminated and is available through proper ch
How should I analyze a soft-dollar package that includes both research tools and obvious perks?
Separate the items. That is the cleanest exam habit. Suppose **High Orchard Asset Management** routes trades to a broker and receives: - credit research reports - screening software for analyst models - a luxury conference package for the lead PM The
Why is sharing material nonpublic information still a violation if I never trade on it myself?
Yes. Under the CFA ethics framework, the problem is not limited to your own personal trade. Passing along material nonpublic information can cause others to act on it, and that is enough to create the breach. Imagine research associate **Mila Chen**
How can mosaic theory be allowed if the final conclusion is strong enough to make money?
The strength of the conclusion is not what decides legality. What matters is the nature of the inputs and whether the analyst respected confidentiality and market rules while building the view. Suppose analyst **Jordan Wells** covers **Atlantic Valve
When is paid research still considered public information?
Yes, it can still be public if it is broadly available on equal and legitimate terms. The fact that a data feed is expensive does not automatically make it nonpublic. Think about **Blue Mesa Analytics**, a subscription platform that sells shipping an
How should I think about the test statistic instead of just memorizing the formula?
The test statistic tells you how far the sample result sits from the null-hypothesis value after adjusting for normal sampling noise. In plain language, it answers: "How surprising is this sample if the null world is the one we live in?" Suppose fict
Why does a large p-value not mean the null hypothesis is true?
Because the test is designed to evaluate whether the evidence is strong enough to go against the null, not to prove the null is correct. A high p-value means the observed sample would not be unusual if the null hypothesis were true. That is much weak
How do you remember Type I versus Type II error without second-guessing yourself?
Start with the action, not the Roman numeral. - Type I error: you rejected the null hypothesis, but the null was actually true. - Type II error: you failed to reject the null hypothesis, but the null was actually false. A practical way to anchor it i
When exactly am I supposed to reject the null hypothesis on CFA Level I?
The cleanest way to think about rejection is that you are testing whether the sample evidence looks too extreme to be consistent with the null hypothesis. Use one of these equivalent rules: - Critical-value method: reject the null if the test statist
When should I use key rate duration instead of the regular duration number?
Use key rate duration when the risk is tied to one part of the yield curve rather than a uniform shift across maturities. Example: - **Eastbank Pension Fund** owns a bond portfolio with large exposure around the 10-year maturity point. - The manager
Why does a higher-coupon bond usually have lower duration even when maturity is the same?
Duration falls when more of the bond's economic value arrives earlier. Compare two 5-year bonds from **Norcrest Logistics**: - Bond A coupon: `2%` - Bond B coupon: `8%` Both mature in 5 years, but Bond B pays larger coupons along the way. Those earli
Why is modified duration a bad choice for a callable bond when rates move?
Modified duration assumes the bond's expected cash flows stay fixed when yields change. A callable bond breaks that assumption. Suppose **Red Harbor Telecom** has a callable 9-year bond. If market yields drop, the issuer becomes more likely to refina
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