CFA LEVEL 1 NEW EXAM REVIEW FOR 2022 LATEST UPDATE

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Addition Rule of Probability - ADDITION: P(A or B) = P(A) + P(B) - P(AB) Roy's Safety First Criterion - Safety First Ratio = (E(R) - Rₜ) / σ Larger ratio is better If (Rₜ) is risk free rate, t... hen it becomes Sharpe Ratio 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... [Show More]

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