Cut a piece of the vinyl 6" x 3". Measure 3/4" from one edge, and draw a line across. Then mark 1/8" increments along the line. This is where you will cut the fringe.

You can adjust the measurements and cuts however you want, this is just how I did mine.

Cut a small piece (mine is 2 1/2" x 3/8") for the tag (is that the right word?) Glue the ends of the tag together, and then spread glue along the top edge above the line.

Start folding the tassel over, starting with the tag edge. At first it's very rectangular, but it will round itself out.

Materials:
Sport weight yarn in main color
Size 6 double pointed needles. You could also use circular needles and switch to dpns at the end.

Hat:
CO 60
K2, P2 to end, repeat for 6 rows
Knit. Continue knitting in stockinette until the whole hat measures 5 inches long.
Row 1: (k3, k2tog) to end (48 sts)
Row 2 and all even rows: Knit
Row 3: (k2, k2tog) to end (36 sts)
Row 5: (k1, k2tog) to end (24 sts)
Row 7: (k2tog) to end (12 sts)
Row 9: (k2tog) to end (6 sts)

After Row 9, cut yarn and thread through 6 remaining stitches. Weave in ends.

Materials:
Sport weight yarn in main color (MC) and contrast color (CC)
Size 6 double pointed needles

Hat:
In MC, CO 60
K2, P2 to end, repeat for 6 rows
K 3 rows
Change to CC, Knit 4 rows
Change back to MC. From this point, it is the same as the basic hat pattern. Continue knitting in stockinette until the whole hat measures 5 inches long.
Row 1: (k3, k2tog) to end (48 sts)
Row 2 and all even rows: Knit
Row 3: (k2, k2tog) to end (36 sts)
Row 5: (k1, k2tog) to end (24 sts)
Row 7: (k2tog) to end (12 sts)
Row 9: (k2tog) to end (6 sts)

After Row 9, cut yarn and thread through 6 remaining stitches. Weave in ends.

Bow:
With CC, CO 6 sts.
Knit flat in stockinette until piece measures 5" long, then cast off.
Stitch short ends of rectangle together. You should now have a circle. Fold in half so that the seamed part is at the center back of the circle.
Take a long piece of yarn and start winding it around the middle of the circle. Do this until you are happy with how it looks, then tie both ends in a knot at the back of the bow. Use those ends to seam the bow to the hat on the white stripe.