CFA Level 2 questions with correct answers

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