CFA Level 2 Question Fully Solved.

FCFF (using EBITDA) - correct answer FCFF = EBIDTA(1-T) + DEP(T) - Finv - Winv Converting FIFO to LIFO COGS - correct answer FIFO COGS = LIFO COGS - (End LIFO Reserve - Beg LIFO reserve) Engle- Granger Test - correct answer Test whether 2 variables are cointegrated. Regress 1 data series against the other and check residuals for unit root. Steady State of Growth Formula - correct answer growth = Growth Rate TFP/1-(Labor cost in total factor cost) + labor force growth Labor productivity growth accounting Equation (Growth Rate in Potential GDP) - correct answer Growth rate in potential GDP = Long-Term growth rate of labor force + Long-term growth rate in labor productivity Neoclassical Model - correct answer Because of diminishing marginal returns to capital, the only way to sustain growth in potential GDP per capita is through technological change or growth in total factor productivity. a steady state rate of growth and diminishing marginal returns, which are tenets of neoclassical growth theory. Real Interest Rate - correct answer real = Nominal - Expected inflation rate Period Pension Cost (formula) US GAAP - correct answer Current Service Cost + Interest cost obligation - Expected Return on Assets + Plus amortization of past service cost + amortization actuarial gain/losses Total Periodic Pension Cost - correct answer Net Change in Liability of the plan - Employer Contributions or Interest Cost + Service Cost - Actual return on investments. Total value to paid (TVPI) - correct answer DPI + RVPI / Paid in Capital H-Model - correct answer V0= Do(1+GL) + DoH(gs-gL)/ r- GL FCFE using FCFF - correct answer FCFE = FCFF -Interest(1-T) + Net Borrowing Value of Long position in a forward contract - correct answer V = St - Forward Price (1+r)^(T-t) Synthetic Share (Put-Call Pariy) - correct answer Co=Po + So- X/(1+rf) Payout ratio - correct answer Payout ratio = 1- b (b= retention ratio) Justified leading P/E - correct answer 1-b/ r-g Justified trailing P/E - correct answer 1- b (1 + g)/ r-g Where (1-b) = Dividend payout ratio, G is LT Growth in Dividends Standard error of estimate - correct answer (Sse/n-2)^12 where Sse = Sum of squares residual F statistic - correct answer Msr/mse = RSS/k /SSE/n-(k+1) MSR = mean regression sum of squares MSE = mean squared error, SSE/(n - k + 1)