CFA Level 1 | 2012-2013

CFA MnemonicsTM Level 1

Memory Trick Notes (NewandExpandedEdition)FreeSample
ProvenmnemonicmemorytechniquestohelpyoumemorizeCFAmaterialsinnotime.

Sold more than 5,000 copies worldwide since 2008

Widely used by sell-side analysts, investment bankers, fund managers from major financial institutions

Collection of easy acronyms to help you memorize key points, formulae and tables

Packed with visual aids, e.g. clip arts, graphs, storyline, to enhance your memory tracks

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CFA MnemonicsTM Level 1

CFA MnemonicsTM Level 1

Memory Trick Notes
Copyright2012byACAPInstitute
Lastupdated:July2012
Allrightsreserved.

These materials contained within this text are the copyrighted property of ACAP Institute and may not be copied without
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is believed to be accurate. However, the accuracy cannot be guaranteed nor is any warranty conveyed as to your ultimate
examsuccess.

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CFA MnemonicsTM Level 1|Contents

Contents
Preface

Useofthisbook...................................................................................................................................................................................6
WhatisMnemonicmemorytechnique?.............................................................................................................................................6
Symbolsinthetext..............................................................................................................................................................................7
Chapter1Ethics................................................................................................................................................................................8
1.1

ResearchRecordRetention...............................................................................................................................................8

1.2

GIPSComplianceResultsRetention................................................................................................................................8

1.3

GIPSDiscontinuedCompositesPresentation..................................................................................................................8

1.4

GIPSEightMajorSections...............................................................................................................................................9

1.5

GIPSVerificationProcedures........................................................................................................................................10

1.6

MinimumElementsofaCorporateFirewall....................................................................................................................10

1.7

DutiestoClientsandProspectiveClients........................................................................................................................10

Chapter2QuantitativeMethods....................................................................................................................................................11
2.1

Distributions&Skewness................................................................................................................................................11

2.2

Kurtosis............................................................................................................................................................................12

2.3

StatisticalBiases...............................................................................................................................................................12

2.4

ScaleofMeasurement.....................................................................................................................................................12

2.5

Rates/Yields.....................................................................................................................................................................13

2.6

Means..............................................................................................................................................................................13

Chapter3FinancialReportingandAnalysis(FR&A).......................................................................................................................14
Example:CapitalvsOpLease(Ratios)...............................................................................................................................................14
3.1

CapitalvsOpLease(Ratios).............................................................................................................................................15

3.2

CapitalizevsExpense(FinancialStatement)....................................................................................................................15

3.3

CapitalvsOpLease(FinancialStatement).......................................................................................................................15

3.4

FIFOvsLIFO(risingprice/stableinventory).....................................................................................................................16

3.5

DepreciationMethod......................................................................................................................................................16

3.6

RevenueRecognition.......................................................................................................................................................17

3.7

ImpairmentEffect............................................................................................................................................................17

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CFA MnemonicsTM Level 1|Contents

3.8

CFOIndirectMethod.......................................................................................................................................................19

3.9

FIFOandLIFOConversions..............................................................................................................................................19

3.10

CashConversionCycle.....................................................................................................................................................19

3.11

U.S.GAAPvsIFRS.............................................................................................................................................................20

3.12

IntangibleAssetsTreatments..........................................................................................................................................21

3.13

License,Trademarks,FranchiseandBrands:CapitalizeIfBought/Acquired...................................................................21

3.14

%ofCompletionCalculation............................................................................................................................................21

3.15

CapitalLeaseClassification..............................................................................................................................................22

3.16

ImpairmentCalculation...................................................................................................................................................22

3.17

AccountingDiversity........................................................................................................................................................22

3.18

SalestypeLeasevs.OperatingLease(LessorsPerspective)...........................................................................................23

3.19

RevenueRecognition.......................................................................................................................................................24

3.20

QuickRatio.......................................................................................................................................................................24

3.21

RatioCalculation..............................................................................................................................................................24

3.22

Unusual&Infrequent(Abovetheline)............................................................................................................................25

3.23

BelowtheLineItems(Noeffectontax)..........................................................................................................................25

3.24

Earningsmanipulation.....................................................................................................................................................25

5.1

BondsIssuedataPremiumorDiscount..........................................................................................................................26

Chapter4Economics......................................................................................................................................................................27
4.1

EconomicRentvsOpportunityCost................................................................................................................................27

4.2

OptimalCapitalBudgetMCCvsIOSSchedules..............................................................................................................28

4.3

Attractiveinvestmentsforthefivestagesofthebusinesscycle.....................................................................................29

4.4

ProfitabilityIndex(PI)......................................................................................................................................................29

4.5

NPVvsIRR........................................................................................................................................................................29

4.6

TypesofCompany&Stock..............................................................................................................................................30

4.7

DividedPaymentChronology..........................................................................................................................................30

4.8

ROEDuPontAnalysisBasicCalculation:PTL(ProfitTurnoverLeverage).........................................................................31

4.9

ROEDuPontAnalysis5StepCalculation.........................................................................................................................31

4.10

PortersFiveCompetitiveForces.....................................................................................................................................31

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CFA MnemonicsTM Level 1|Contents

Chapter5FixedIncomeandPortfolioManagement.....................................................................................................................32
5.2

FixedIncomeRelationship...............................................................................................................................................32

5.3

BondSellingPrice............................................................................................................................................................32

5.4

CreditEnhancements.......................................................................................................................................................32

Chapter6Derivatives&AlternativeInvestments..........................................................................................................................33
6.1

PlainCall&PutOption.....................................................................................................................................................33

6.2

OptionsMaxGain/Loss.................................................................................................................................................34

6.3

RollYieldforContangoandBackwardationMarkets.....................................................................................................34

6.4

PutCallParity...................................................................................................................................................................34

6.5

HedgeFundUniqueRisks................................................................................................................................................35

6.6

TypesofRealEstateInvestments....................................................................................................................................35

6.7

RealEstateValuationApproaches...................................................................................................................................35

AppendixA........................................................................................................................................................................................36
Index

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37

CFA MnemonicsTM Level 1| Preface

Preface
Use of this book
AsformerCFAtakers,wesharedthesamefrustrationandchallengesinthestudyprocess.FortheLevel1curriculum,it
consistsofmorethan3,000pagesand450LearningOutcomeStatementsacrosseighttotenmajorsubjects.Further,
questionsintheexamareneverstraightforward,theyrequireafirmgraspoftheconcepts,formulaeanddefinitionsofthe
topicsinordertoanswerthequestionscorrectly.AsCFAisaclosebookexam,successinCFAexamrequiresasmuchmemory
powerasintellectual.Giventhesheeramountofstudymaterialandtimepressureintheexamday,manycandidatesexpress
thesamefeeling:Iunderstandthematerialsfairlywellthroughoutmyreadings,butIjustcantquiterememberthemexactly
whenIcomeacrossthemintheexam.Toaddressthis,wecameupwithabankofmemorytrickstohelpourfellowCFA
takers.Wehopethesememorytrickscanbeofgoodhelpforyoutomemorizesomeoftheconceptseasierandeasilyretain
themduringtheexams.
ThisnotedoesnotattempttocovertheexhaustivelistofLOSintheentireCFAcurriculumasNOTeveryconceptcanbe
transformedintoaccessiblememorytricks.Butwebelievethememorytricksthatcoveredwillhelpyouagreatdealtoknock
outsomeofthefrequentlyaskedconceptsandguaranteedtobeabletoretainandapplyintheactualexam.Thatwillfreeup
morecapacityandtimetotackleotherconcepts.
WehopethismemorynotewillbeavaluableadditiontoyourarsenalofCFAstudytoolstoenhanceyourmaterialstoring
process.Belowisthesuggestionofyourworkflowinthepreparationfortheexam.

What is Mnemonic memory technique?

Basicmnemonicmemorytechniquesareemployedinthisnotetohelpyouassociateeasytoremembertricks(suchasspatial,
images,color,structure,orothermeaningfulinformation)tothestudycontents.Thetechniquesarenothingnew.Theyhave
beentaughtinmanymemorybooks,seminars,etc.worldwideandpracticedbymanymemorychampions.Thesetechniquesin
factworkparticularlywellforCFAexamforitsstructureofmultiplechoicetests,whichdonotrequirespecialwritingprowess,
superiorphoneticability,orlengthymemorization.Beforejumpingintothecontent,youneedtohaveabasicunderstandingof
howtheyworkwithourbrains.Belowarethecommontechniquesthatyouwillseealotthroughoutthisguide:
1.

2.

Associationthisisthefundamentalmemoryrule.Allmemory,whethertrainedoruntrained,isbasedonassociation.
Therefore,topurposelyrememberanewpieceofinformation,thebestwayistoassociateittosomethingyou
alreadyknoworremember.
Meaningfulnessconceptsandprinciplesalikeareabstractionsthataredifficulttoremember.Therespracticallyno
wayformostpeopletopictureaconceptoraprinciplewithoutassociatewithotherconcreteobjects.Therefore,the
keyistomakeanintangibleconceptintotangible,meaningful,definiteandconcreteobject.Oncethatsaccomplished
youllbeabletopicturetheitemanditcanbeassociatedtotheconcept.

Concept/principle/formula
Tangibleandconcreteobject
Pictureandmemorize

3.

Absurdimagesastheoldsayinggoesapictureisworthathousandwords.Butnotmanypeopleareawareofthe
factthatthemoreabsurd/strikingtheimages,themorestimulatingtheyaretoourmemorytracks.Thinkaboutthe
lasttimeyoucomeoutacinema,thescenesmostvividlyleftwithyouinyourmindarealwaysthosesceneswith

ACAP Institute

CFA MnemonicsTM Level 1| Preface

4.

illogical/strikingimagines.Toevenfurthermaximizethememorytracks,enlargetheimagesinyourmindwithrapid
animatedactionsandcolors.
AcronymintheCFAcurriculum,alotofmaterialscoveralistofitems.Alinkingtechniquethatcomesinveryuseful
istheacronymformemorizingalistofitems.Forexample,torememberthenamesofthefivegreatlakes,picture
(imagine)manyHOMESonalake.HOMESwillremindyouofHuron,Ontario,Michigan,Erie,Superior.

FiveGreatLakes
H Huron
O Ontario
M Michigan
E

Erie

Superior

HOMES

PrisonBreakMnemonicTattoos
IfyouhavewatchedAmericanTVserialdramaPrisonBreak,youmayhavenoticedthatthefamoustattooonthe
maincharacterMichaelScofieldcontainsnumerousmemorytoolsandmnemonics.Forexample,CUtePOisonhelps
Scofieldtorememberachemicalformulaofacorrosivesubstancetodestroytheinfirmarysdrainageaspartofhis
escapeplan.
Cu CuSO4:Copper(II)sulfate
PO H3PO4:phosphoricacid

CutePOison
Mnemonics for CuSO4: Copper (II) sulfate and H3PO4:
phosphoricacid.

Symbols in the text

1.
2.
3.
4.

SmartHeadlogossymbolizemnemonicmemorytricksorhelpfultipstohelpyoumemorizethetopics.
Colorfontsrepresentkeywordsoracronymsthatyouneedtopayattentionsandmakesureyouwillbeableto
associateandrecitethemintheexam.
LOSrepresentsCFALearningOutcomeStatementsthatyoucanreferbacktothetopicsinofficialstudyguideor
otherdetailedstudymaterialformoreindepthunderstanding.
Shortformsandabbreviationsareusedthroughoutthetexttoensurethatthenotesareclearandconcise.

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CFA MnemonicsTM Level 1| Chapter 2 Quantitative Methods

1.5 GIPSVerificationProcedures
D

Definitionofthefirm

Compositeconstruction

Accountreview

Performancemeasurement

Maintenanceofrecord

Disclosures

Nondiscretionary

Sampleaccountselection

DCAPMNDS:PlayDCAPMonNDS
ImagineyoucanplayDCAPM(DynamicCapitalAssetPricing
Model)onyourNDS(NintendoDS).

LOS:ExplaintherequirementsforverificationofcompliancewithGIPSstandard.

1.6 MinimumElementsofaCorporateFirewall
M

Monitoringofemployeetrading

Confinementofmaterialnonpublicinformation

Controlofinterdepartmentalcommunications

Heightenedrestrictionsundercertainconditions

Segregationofpersonnel

Restrictedlist

MNCCSR:MNCmusthaveCSR
Think about MNC (MultiNational Company) should have
properCSR(CorporateSocialResponsibility).

LOS:ConflictsofInterestsRecommendedProceduresforCompliance.

1.7

DutiestoClientsandProspectiveClients

Clients>Employers>Employees

Rememberthatthecompanyalwaysputyou(asan
employee)behindemployersandclients.

LOS:DutiestoClientsandProspectiveClientsLoyalty,PrudenceandCare.Membersmustalwaysactforthebenefitofclientsandplace
clientsinterestsbeforetheiremployersortheirowninterests.

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CFA MnemonicsTM Level 1| Chapter 2 Quantitative Methods

2.2Kurtosis
LNP:LondonNParis(AlphabeticalOrderKurtosis)
Kurtosisdistributionsaretypicallyclassifiedasthreetypes:
Leptokurtic, Normal and Platykurtic. A higher kurtosis
distributionhasasharperpeakandlonger/fattertails.

Picture the shape of the three overlapping kurtosis as the

Eiffel Tower to associate it with LNP: London N Paris.
Thenremembertheorderofmagnitudeisthesameasthe
alphabeticalorderfromtoptobottom(i.e.LNP).The
top has the highest kurtosis and the bottom has the

lowest.Theyaredifferentiatedbyameasureof3 which
isshowninthecentreofthetowerinthepicture.

LOS:Defineandinterpretkurtosis,andmeasuresofpopulationandsampleskewandkurtosis.

2.3 StatisticalBiases

Survivorshipbias

Sampleselectionbias

Timeperiodbias

Dataminingbias

Lookaheadbias

SSTDL:SmallSTanDardLarge
There are five major statistical biases. To memorize the
acronym, think about clothes are usually sold by three
sizes:Small>STD(Standard)>Large.

LOS:Discusstheissuesregardingselectionoftheappropriatesamplesize,dataminingbias,sampleselectionbias,survivorshipbias,look
aheadbias,andtimeperiodbias.

2.4 ScaleofMeasurement

Nominal

Ordinal

Interval

Ratio

NOIR:NOIRChocolate
Theorderofmagnitudeforthefourscalesofmeasurement
are always asked in the exam. To memorize the order,
associatethescaleswithNOIR(NOIRmeansdarkinFrench)
chocolate from lowest scale (Nominal) to the highest
(Ratio)

LOS:Differentiatebetweendescriptivestatisticsandinferentialstatistics,andbetweenapopulationandasample,andexplainthe
differencesamongthetypesofmeasurementscales.

ACAP Institute

CFA MnemonicsTM Level 1| Chapter 2 Quantitative Methods

2.5 Rates/Yields

M
B

MMY(MoneyMarketYield):Moreorlessversionso
justdoasimpleprorotausing360days
BEY(BondEquivalentYield):2xSemiannual(think
Bisemiannual)bondyield

EAY(EffectiveAnnualYield):Exactversionsodo
compoundinterestusing365days

MBEMMY<BEY<EAY

Therearethreetypesofrates/yieldsthatarealwaysasked
to compare the order of magnitude in the exam. To
memorize the order, associate it with the acronym MBE
that abbreviates Members of the Order of the British
Empire,suchasBeatlesareeachappointedMBEin1965.

LOS:Calculateandinterpretthebankdiscountyield,holdingperiodyield,effectiveannualyield,andmoneymarketyieldforaU.S.Treasury
bill;andinterpretandconvertamongholdingperiodyields,moneymarketyields,effectiveannualyieldsandthebondequivalentyields.

2.6 Means

ArithmeticMean

GeometricMean

HarmonicMean

AGH:AGiftHorseAM>GM>HM
Therearethreetypesofmeansthatarealwaysbeingasked
to compare the order of magnitude in the exam. To
memorizethem,firstremembertheacromynAGHasAGift
Horse.ThinkabouttheidiomDontbemean.Dontlookat
AGiftHorseintheMouth.

Secondly, they are in alphabetical order: A, G, H. The

largest is arithmetic mean and the smallest is harmonic
mean.

LOS:Define,calculate,andinterpretmeasuresofcentraltendency,includingthepopulationmean,samplemean,arithmeticmean,weighted
averageormean,geometricmean,harmonicmean,median,andmode,quartiles,quintiles,deciles,andpercentiles.

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CFA MnemonicsTM Level 1| Chapter 4 Economics

3.12 IntangibleAssetsTreatments
Items

Treatments

License,Trademarks,FranchiseandBrands(LTFB)
Patents&copyrights
Advertisingcosts
Goodwill
Research&developments(R&D)
Softwaredevelopment(forinternaluse)
Softwaredevelopment(asproducts)

Capitalizeifbought/acquired
Expenseifdeveloped,capitalizeifbought/acquired
Expenseifdeveloped,capitalizeifdirectresponse(i.e.orderedexternally)
Capitalizeduringacquisition;impairmentexerciseisperformedeachyrtoexpenseit.
GAAP:Expensewhenincurred;IAS:Optional
Expensebeforetechnologicalfeasibilityestablishment
ExpenselikeR&D

LOS:Explainthecircumstancesinwhichintangibleassets,includingsoftwaredevelopmentcostsandresearchanddevelopmentcostsare
capitalized.

3.14%ofCompletionCalculation
CurrentPeriod(NotAccum)

%ofCompletion

CompletedContract

Revenue(A)
Exp(B)
NetIncome
CashFlow
NetCIP(Asset)orNetAdvBill(Liab)
AcctReceivable
CurrentPeriod(NotAccum)

%ofExpXTotalRev
ActualExp
AB
ActualCashFlow
TotalAdvBill CIP*
TotalExpPaidExp
%ofCompletion

$0
$0
$0
ActualCashFlow
ActualCashFlow
TotalExpPaidExp
CompletedContract

*CIP=AccumulatedRevenue

Boldedarecommonlyaskeditemsintheexamquestions.

LOS:Comparethepercentageofcompletionmethodwiththecompletedcontractmethodandcontrasttheeffectsofthetwomethodson
theincomestatement,balancesheet,statementofcashflowsandselectedfinancialratios.

3.15CapitalLeaseClassification

OWNS

Ownershiptransfersattheendoflease

Writtenoptionforbargainpurchase

Ninetypercent(90%)ofleasedproperty

Seventyfivepercent(75%)ofasseteconomiclifeis
beingcommittedinleaseterm

Therearefourcriteriaforcapitalleaseclassification.The
memoryacronymisaneasyOWNS.Justdonotforgetthe
SatthebackNandSrepresentninety%and
seventyfive%respectively.
We use a key to represent ownership. Captial lease has a
senseofownershipattheneed.

LOS:Discussthemotivationsforleasingassetsinsteadofpurchasingthemandtheincentivesforreportingtheleasesasoperatingleases
ratherthancapitalleases.

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CFA MnemonicsTM Level 1| Chapter 5 Fixed Income and Portfolio Management

3.16 ImpairmentCalculation

Costofthemachinery

Accumulateddepreciation

PVoftheremainingcashflow

ImpairmentCost

CAPI

Thetableshowstheformulaofimpairmentcost.The
acronymisC+A+P=I.Tomemorizetheformula,
rememberacapwithabigIasthelogo(i.e.CAPI).

LOS:Defineimpairmentoflonglivedassetsandexplainwhateffectsuchimpairmenthasonacompanysfinancialstatementsandratios.

3.17 AccountingDiversity

Sourceoffinancing

Political

Law

Inflation

Tax

SPLIT
Therearefiveelementsthatcauseaccountingdiversity.To
memorizetheacronym,thinkaboutdiversityhasasimilar
meaningasSPLIT.

LOS:Discussthegeneralprinciplesofthefinancialreportingsystemandexplaintheobjectivesoffinancialreportingaccountingtothe
FinancialAccountingStandardsBoard(FASB)conceptualframework.

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CFA MnemonicsTM Level 1| Chapter 5 Fixed Income and Portfolio Management

4.3Attractiveinvestmentsforthefivestagesofthebusinesscycle
(1)Recovery:CyclicalandCommodities
(2)EarlyExpansion:StocksandRealEstate
(3)LateExpansion:BondsandinterestsensitiveStocks
(4) Slowing, Entering Recession: Bonds and interest
sensitiveStocks
(5)Recession:CommoditiesandStocks

Tomemorizethesefivestages,picturetheradarchart
ontheleftsidethatclustersdifferentattractiveinvestment
assettypesindifferentstagesofthebusinesscycle.
Inaddition,itisworthtonotethatallfivestagesare
recommendedtoinvestincertaintypeofstocks.
LOS:Classifybusinesscyclestagesandidentify,foreachstage,attractiveinvestmentopportunities.

4.4 ProfitabilityIndex(PI)
ProfitabilityIndex PI

PVofFutureCashFlow
InitialInvestment

NPV

CF

NPV

AcceptProject

IfPI>1

NPVispositive(+)

Yes

IfPI<1

NPVisnegative()

No

The key to profitability index is to remember the

formula as in 1 + NPV/CF0. That means, if the project
generates positive return, NPV/CF0 will be positive. Then
profitabilityindexwillbebiggerthan1.

LOS:Calculateandinterprettheresultsproducedfromeachofthefollowingmethodswhenevaluatingasinglecapitalproject:netpresent
value(NPV),internalrateofreturn(IRR),paybackperiod,discountedpaybackperiod,averageaccountingrateofreturn(AAR),and
profitabilityIndex.

4.6TypesofCompany&Stock

Company

Stock

Valuations

Defensive
Cyclical
Speculative
Growth
Value

Insensitivetodownturn(utility,grocery)
BusinessCycle
Risky,highupside
Mmgability>highNPVprojects

Beta<1
Beta>1
Low/ive return,overpriced
Earnhigherreturnthanotherstockswithsamerisk

HighP/E,P/B
LowP/E,P/B

LOS:Differentiatebetween1)agrowthcompanyandagrowthstock,2)adefensivecompanyandadefensivestock,3)acyclicalcompany
andacyclicalstock,4)aspeculativecompanyandaspeculativestockand5)avaluestockandagrowthstock.

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CFA MnemonicsTM Level 1| Chapter 5 Fixed Income and Portfolio Management

4.7DividedPaymentChronology
Tablebelowshowsthetimely+neofthedividendpaymentchronology.

DEHP
RememberDELLiscompetingfiercelywithHPinthePC
segment.

LOS:Reviewdividendpaymentchronologyincludingdeclaration,holderofrecord,exdividend,andpaymentdatesandindicatewhenthe
sharepricewillmostlylikelyreflectthedividend.

4.10PortersFiveCompetitiveForces

Rivalryamongtheexistingcompetitors

Newentrantsthreat

Buyersbargainingpower

Suppliersbargainingpower

Substituteproductsthreat

RNBSS

ToeasilymemorizePortersfiveforces,thinkabout
BeyoncehasdistinctivecompetitiveadvantageasanRNB
(R&B)SuperStar.

LOS:Discuss,withrespecttoglobalindustryanalysis,theelementsrelatedtorisk,anddescribethebasicforcesthatdetermineindustry
competition.

ACAP Institute

CFA MnemonicsTM Level 1| Chapter 6 Derivatives & Alternative Investments

6.2 OptionsMaxGain/Loss

MaxGain

MaxLoss

Call

(Buyer)Long

Unlimited

Premium

(Seller)Short

Premium

Unlimited

Breakeven

X+Premium

X+Premium

Put

(Buyer)Long

XPremium

Premium

(Seller)Short

Premium

X Premium

Breakeven

XPremium

X Premium

CallUP,PutXP
Tomemorizethetable,remembercallUPthe
techsupporttoputXP(asinWindowsXP)in
yourcomputer.ThismnemonicsisforBuyers
andjustreverseitforSeller.Forbreakeven,both
memorizebyXP,butcallispositiveandputis
negative.

LOS:Determinethevalueatexpiration,profit,maximumprofit,maximumloss,breakevenunderlyingpriceatexpiration.

6.4 PutCallParity
SPCK:SiPaCoKe
1

Rfr

S=thevalueoftheshare
P=thevalueoftheput
C=thevalueofthecall
K=thestrikeprice(discountedbytheriskfreeratefortimeT)
RFR=riskfreerate

SiPaCoKecanbeusedtoremindyouofoption
putcallparity:ThepricesofaStock+thePut=those
oftheCall+thepresentvalueofthestriKeprice.

LOS:ExplainputcallparityforEuropeanoptions,giventhepayoffsonafiduciarycallandaprotectiveput.

ACAP Institute

CFA MnemonicsTM Level 1| Index

Index
%

Absurdimages....................................................................4
Accountpayable...............................................................26
AccountPayable...............................................................19
AccountReceivable..........................................................19
Accountingchanges..........................................................27
AccountingDiversity.........................................................24
Acronym.............................................................................5
Advertisingcosts...............................................................22
Arithmeticmean...............................................................12
Assetturnover..................................................................13
Association.........................................................................4

DebtEquityratio...............................................................13
Defensive..........................................................................31
DepreciationMethod.......................................................16
Derivatives&AlternativeInvestments.............................36
Developmentcost.............................................................20
DISC...................................................................................39
Disclosure...........................................................................7
DiscontinuedCompositesPresentation.............................6
Discount......................................................................34,35
Disposal/Restructuring(Separation)................................27
Distributions&Skewness.................................................10
DividedPaymentChronology...........................................32
DividendPaid....................................................................20
DividendReceived............................................................20
DutiestoClientsandProspectiveClients...........................9

Beatles..............................................................................12
BondEquivalentYield.......................................................12
BondIssues.......................................................................35
BondSellingPrice.............................................................34
Brandsandtrademarks....................................................22
Businesscycle...................................................................30

Earningsmanipulation......................................................27
EconomicRentvs.OpportunityCost................................28
Economics.........................................................................28
EffectiveAnnualYield.......................................................12
EiffelTower.......................................................................11
EightMajorSections...........................................................7
Environment.....................................................................27
Ethics...................................................................................6

%ofCompletion...............................................................22
A

C
CalculationMethodology...................................................7
CapitalLeaseClassification...............................................23
Capitalvs.OpLease(FinancialStatement).......................15
Capitalvs.OpLease(Ratios)........................................13,15
Capitalizevs.Expense(FinancialStatement)...................15
CashConversionCycle......................................................20
CFOIndirectMethod........................................................19
CompletedContract.........................................................22
ComplianceResultsRetention............................................6
CompositeConstruction.....................................................7
CorporateFirewall..............................................................9
CreditEnhancements.......................................................34
Currentratio.....................................................................13
CutePoison.........................................................................5
Cyclical..............................................................................31
D
Dataminingbias...............................................................11

ACAP Institute

F
FIFOandLIFOConversions...............................................19
FIFOvs.LIFO......................................................................16
FinancialReportingandAnalysis......................................13
FiveGreatLakes..................................................................5
FixedAsset........................................................................19
FixedIncomeandPortfolioManagement........................34
FixedIncomeRelationship................................................34
Fundamentalsofcompliance..............................................7
G
GeometricMean...............................................................12
GIPS.................................................................................7,9
goingconcernassumptions..............................................20
Goodwill............................................................................22
Growth..............................................................................31

CFA MnemonicsTM Level 1| Chapter 6 Derivatives & Alternative Investments

H

Harmonicmean................................................................12
HedgeFundUniqueRisks.................................................37

Par...............................................................................34,35
Patents&copyrights.........................................................22
PlainCall&PutOption.....................................................36
Platykurtic.........................................................................11
PortersFiveCompetitiveForces......................................33
Premium...........................................................................34
PresentationandReports...................................................7
PrivateEquity......................................................................7
ProfitabilityIndex.............................................................30
PutCallParity....................................................................38

I
Impairment.......................................................................27
ImpairmentCalculation....................................................23
ImpairmentEffect.............................................................17
InputData...........................................................................7
IntangibleAssets...............................................................20
IntangibleAssetsTreatments...........................................22
Integration(M&A)............................................................27
InterestPaid.....................................................................20
InterestReceived..............................................................20
Interval.............................................................................11
Inventory..........................................................................19
K
Kurtosis.............................................................................11
L
LeftSkewedDistribution..................................................10
Leptokurtic.......................................................................11
License,Trademarks,FranchiseandBrands.....................22
LognormalDistribution...................................................10
Lookaheadbias................................................................11
Lowerofcostormarket(LCM).........................................20
M
MCCvsIOSSchedules.......................................................29
Meaningfulness..................................................................4
Means...............................................................................12
MOLA................................................................................39
MoneyMarketYield.........................................................12
N
Nominal............................................................................11
Normal..............................................................................11
NPV...................................................................................30
NPVvsIRR.........................................................................30
O
OptimalCapitalBudget....................................................29
OptionsMaxGain/Loss..................................................37
Ordinal..............................................................................11

Q
QuantitativeMethods......................................................10
QuickRatio........................................................................26
R
Rates/Yields......................................................................12
Ratio..................................................................................11
RatioCalculation...............................................................26
RealEstate..........................................................................7
RealEstateValuation........................................................39
RecordRetention................................................................6
Research&developments(R&D).....................................22
ResearchRecordRetention................................................6
RevenueRecognition..................................................17,26
RightSkewedDistribution................................................10
ROA...................................................................................13
ROE...................................................................................13
ROEDuPont......................................................................32
RollYieldvsPriceReturn..................................................37
S
Salesofassets/investments..............................................27
SalestypeLeasevs.OperatingLease...............................25
Sampleselectionbias.......................................................11
ScaleofMeasurement......................................................11
SiPaCoKe.........................................................................38
Softwaredevelopment(asproducts)...............................22
Softwaredevelopment(forinternaluse).........................22
Speculative........................................................................31
StatisticalBiases................................................................11
Survivorshipbias...............................................................11
T
TheMagnificentSeven.....................................................17

ACAP Institute

CFA MnemonicsTM Level 1| Chapter 6 Derivatives & Alternative Investments

Timeperiodbias...............................................................11
TypesofCompany&Stock...............................................31
TypesofRealEstateInvestments.....................................39
U
U.S.GAAPvs.IFRS............................................................20
V
Value.................................................................................31

ACAP Institute

VerificationProcedures......................................................9
W
Workingcapital.................................................................13
Y
Yieldtomaturity..............................................................34

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