8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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FRA for CFA

L2: 1-Pager

3 readings:

Long lived assets

Inter Comp Inv, Post

Emp C, SBC, Multi NatOp

Quality

Ref core readings

Inter Corporate Investments

Equity Method - placed at costpurchased keeping goodwill adjusting dividends

Book market goodwill

Depreciation of purchased part atsame rate as it is done at book

Pooling of interest vs. Purchasemethod

Full and partial Goodwill Comparing both Consolidation vs.

Equity BS IS

8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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Corp Fin forCFA L2: 1-

Pager

2 readings:

Corporate Governance

Merger & Acquisition

Ref core readings

Merger & Acquisition

Motivation

EPS Bootstrapping Assumingprice remains same?

Industry cycle

Defense HH Index

Carve out, spin offs, split offs andliquidation

DCF

Comparables

8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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Corp Fin forCFA L2: 1-

Pager

2 readings:

Corporate Governance

Merger & Acquisition

Ref core readings

Corporate Governance

Attributes Conflict of Interest

8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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Corp Fin forCFA L2: 1-

Pager

3 readings:

Budgeting

MM

ROC

Ref core readings

Budgeting

Question types cannot be many -

limitation can be set - end valuesrequire WC-change to replenish

WC-Change incorporate all other thingsso don't double count

Cash - - many things might not be cash

If something reduces your expenses itmight also give u some cash benefitfrom the dep (offsetting things)

EVA - Economic value add - remove the

cost of equity and find out things Comparing two projects - multiple non

natural number like 2.5 to either ones(common multiple)

8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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Corp Fin forCFA L2: 1-

Pager

3 readings:

Ref core readings

Portfolio

Active management value add

8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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Corp Fin forCFA L2: 1-

Pager

3 readings:

Budgeting

MM

ROC

Ref core readings

Dividends and Share Repurchase

8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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Revision -FRA

for CFA L2

FRA has 3 readings:

Long lived assets

Inter Comp Inv,

Post Emp C, SBC,Multi Nat Op

Quality

15 Min video

CFApreponline.freegregmatclass.com

Qcfinance.in

Multi National Operations

Currency: Presentation, functional,Local

Translation: current (all) vs. temporal(just monetary)

Determine functional currency:Independent vs. dependent subsidiary

NI (plus in trans) vs. BS (plug inCurrent)

Net exposure (BS in current, realistic?)

vs. Net monetary exposure (in Trans,less volatile)

NI Current Avg, Tran Plug(mix) +Hist

8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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FRA for CFA

L2: 1-Pager

3 readings:

Long lived assets

Inter Comp Inv,

Post Emp C, SBC,Multi Nat Op

Quality

15 Min video

CFApreponline.freegregmatclass.com

Qcfinance.in

Summary of all readings (3*3)

10 min on each

Examples of real companies

Real Fun Questions

8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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Accounting for Investments

Ownership Degree of Influence Accounting Treatment

Less than 20%(Investments in financial

assets)

No Significant Influence Held-to-maturity,available-for-sale, held-

for-trading, or designatedat fair value (through P/L)

20%-50% (Investment inassociates)

Significant influence Equity method

More than 50%(Business combinations)

Control Acquisition Method

50%/50%(Joint Venture)

Shared Control IFRS: Proportionateconsolidated preferred; USGAAP: Equity Method

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Classification of Financial Assets

Held-to-Maturity

Held-for-Trading

Available-for-sale

Balance Sheet Amortized cost Fair value Fair Value withunrealized G/Lrecognized inequity

Income Statement Interest(includingamortization)Realized G/L

InterestDividendsRealized G/LUnrealized G/L

InterestDividendsRealized G/L

8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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Corp Fin forCFA L2: 1-

Pager

3 readings:

Ref core readings

Quant Methods Tough Areas

Unit Root - Covariance Stationary test the slope for 1 - Time Stationary

Co integrated both have unit root

DW test T- Stat derivation from SE

ARCH 1

Random Walk

Residual Income - Persistence level

Looking at one tailed t table to getthe values

8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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Corp Fin forCFA L2: 1-

Pager

3 readings:

Ref core readings

Fixed Income MBS Market

Pass-through securities Pre payment risk

Ginnie Mae, Freddie Mae, FannieMae

SMM - CPR

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Corp Fin forCFA L2: 1-

Pager

Readings:

Intro

Term Structure

MBS / CDO

Ref core readings

Bonds with Embedded Options

Binomial Models Spread Measure

Callable bonds

OAS over valued and under

valued

8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC

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Corp Fin forCFA L2: 1-

Pager

Readings:

Intro

Term Structure

MBS / CDO

Ref core readings

Fixed Income

Term Structure and Volatilities ofInterest Rates

Spot Curve & Boot strapping

Key Rate Duration Barbell,

Laddar, and Bullet Forecast Yield Volatility

Volatility Scaling

220 PSA implies CPR = 17 0.2% 2.20 = 7.48%

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Asset BackedSector of the

Bond Market

Fixed Income

Sector

Valuing MBS and ABS

Prepayment and Credit Trenchingof an ABS

External Credit Enhancement

Different loan backed securities

CDO cash flow analysis

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Corp Fin forCFA L2: 1-

Pager

3 readings:

Swap Contract andContracts

Interest Rate DerivativeInstruments

Credit Derivatives

Ref core readings

Derivatives

Swap Market and Contracts Fixed vs floating

Deriving the formula

1000 = C/(1+R1) + C/(1+R2) + C /(1+ R3) + 1000/(1+R4)

Swaption - Valuing interest rateswaption

Fixed rate at conversion then

discounting it back

alternativeapproaches

FRA Pricing today