CFA Level 2 with verified detailed ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
solutions
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)^1\2 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)
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
RSS = regression sum of squares; the amount of variation in Y explained by the model
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
SSE = sum of squared error from the regression model
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
k = the number of regressors in the model
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
n = the number of observations
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Portfolio standard deviation of return - correct answer✔✔Port var = var((1- p))/ n +p)
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
p=correlation
Post offer defeneses - correct answer✔✔Leveraged recapitalization, green mail
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Pre offer defenese - correct answer✔✔Supermajority voting provision, poison puts, fair
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
price amendments, restricted voting rights, poison pills , staggerd board elections
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Post merger value of firm - correct answer✔✔V= Va + Vt + Synergies - Cash
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Hhi merger index - correct answer✔✔(% x 100)^2+ (%x 100)^2
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Post merger between 1000 and 1800 moderately concentrated interests, change greater 100
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
challenge
Forward contract formula - correct answer✔✔Fpt- FP(contract size)/ (1+r(days/360)||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
solutions
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)^1\2 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)
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
RSS = regression sum of squares; the amount of variation in Y explained by the model
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
SSE = sum of squared error from the regression model
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
k = the number of regressors in the model
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
n = the number of observations
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Portfolio standard deviation of return - correct answer✔✔Port var = var((1- p))/ n +p)
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
p=correlation
Post offer defeneses - correct answer✔✔Leveraged recapitalization, green mail
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Pre offer defenese - correct answer✔✔Supermajority voting provision, poison puts, fair
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
price amendments, restricted voting rights, poison pills , staggerd board elections
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Post merger value of firm - correct answer✔✔V= Va + Vt + Synergies - Cash
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Hhi merger index - correct answer✔✔(% x 100)^2+ (%x 100)^2
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Post merger between 1000 and 1800 moderately concentrated interests, change greater 100
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
challenge
Forward contract formula - correct answer✔✔Fpt- FP(contract size)/ (1+r(days/360)||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
