Anybody else find it weird that there are no derivatives EOCs in the CFAI texts? I try to do Kaplan Qbank questions and pair it with the blue box questions and EOC from CFAI but I was surprised to see there are none.
↧
Derivatives EOCs
↧
co-investment
What is co-investment? It is a corporate government term of private equity fund. Could anyone please provide an example?
↧
↧
Intuition behind Benchmark P/E > Company P/E, Co stock is overvalued
Isn’t it the other way around or i am missing something here.
↧
Running short on time. Can I still make it?
Hi everyone.
I just finished my 2nd reading of all topics now. (but how tragic to look back and forget a lot of things.)
Now for the last 2 months, I am planning to work only on questions by ;
1. blue boxes in the Schewser, Curriculum for FRA, Corporate Finance, Fixed income, Derivatives and Equity.
2. end of chapter questions in the curriculum for FRA, Corporate Finance, Fixed income, Derivatives and Equity.
3. Schewser book problem set for other subjects (Quant, Ethics, Alternative, Portfolio, Economics)
4. practice problems in the CFIA website for all 10 subjects and do 2 years of mock exam.
Does this seem enough? Or can anybody advise me on some parts that I should also focus?
The tricky thing is that I am really bad with Quant and my plan is to just memorize how to solve the problems.
Any help would be highly appreciated. Thank you all in advance.
↧
Equity method vs. proportionate consolidation method vs. acquisition method vs. held-to-maturity/held-for-trading/av.-for-sale
Hi,
reading 16. is very confusing. I am not sure, if I had understood everything well. I prepared a table, which compares equity method, proportionate consolidation method, acquisition method and methods used in the current standards: held-to-maturity, held-for-trading, available-for-sale.
I am not sure whether it is correct. Do you see any mistakes here?
Is the rest of shareholder’s of equity (apart of net income) unaffected by held-to-maturity, held-for-trading and equity method? Am I right here?
I post it also, because maybe someone else will find it useful. If there is a mistake I will post corrected version.
↧
↧
LBO return components
I don’t understand the 3 components of returns on a LBO investment:
1)return of pref shares
2)increase in price multiple on exit
3) reduction in debt claims
**I guess my real question is on #3- I understand my return is made up of income and appreciation (like with a normal stock)…so I’m guessing ‘return of pref shares’ is the income piece and #2 is the appreciation piece…but what is #3? Why does a reduction in debt claims help return? What is meant by ‘reduction in debt claims’?
↧
Hyperinflation
Schweser says that under IFRS and hyperinflation, we should adjust financial statements and then translate using the current METHOD
CFAI says we should adjust and then translate using the current EXCHANGE RATE.
In CFAI reading 18, question 1: “If Ukraine’s economy becomes highly inflationary, Eurexim will most likely translate inventory by:”
The answer is “restating for inflation and using the current exchange rate”. Since inventory is non-monetary, shouldnt we restate and then use the historical exchange rate under the current method?
↧
Justified P/E vs Forward P/E
Can someone explain the difference between justified P/E and forward P/E. The IFT notes I have say that if the forward P/E is higher than the justified P/E, then the stock is overvalued. But to me, when I read the notes regarding these ratios, it looks like a forward P/E is a type of justified P/E… the presentation of the notes is confusing.
↧
Conexity of a straight bond
Statement:
Straight bonds have positive effective convexity: the increase in the value of an option-free bond is higher when rates fall than the decrease in value when rates increase by an equal amount.
Is this simply because when rates rise the price of a straight cannot go below 0?
↧
↧
Corp Finance: Scott Topic Test from CFAI - Interest Expense
Hi All, having trouble understanding the calculation of interest expense when working towards accounting income in the Corp Finance realm. According to Schweser, interest expense in a given year is calculated as the beginning MV of the project (PV of remaining cash flows) x the loan interest rate. In the Topic Test “Scott,” question 2 asked for accounting income in year 2. “The equipment is to be financed entirely with a loan at 12%…” The answer did not use the above method of calculating interest expense for the year, but instead multiplied 12% times $300K, the initial capital investment…. Can anybody walk me through this? Thanks very much!
↧
Equity - Free cash flow valuation, EOC # 1
What would be the effect of $100 increase in cash operating expenses, depreciation, interest expense and EBIT on FCFF and FCFE.
I am not getting these adjustments
↧
Depressed returns. Effect on Equity Risk Premium.
Hi,
I am struggeling to understand the effect of periods with depressed returns will have on Equity RIsk Premiums.
My thought process is that during bad times an investor demands a higher risk premium to be invested in equity. So I would have believed that if we include periods of depressed returns, the equity risk premium would be biased upwards?
The CFAI books tells me differently: ”The events of 2004 to 2006 depressed share returns but 1) are not a persistent feature of the stock market environment, 2) were not offset by other positive events within the historical record, and 3) have led to relatively low valuation levels, which are expected to rebound.” The inclusion of this period will bias the historical equity risk premium estimate downwards.
How come the period from 2004-2006 with depressed returns bias the equity risk premium downwards? Where am I going wrong in my thought process?
Thanks for the help, much appreciated.
↧
Wiley 11th Hour Guide
Hi all,
Is the 11th Hour Guide worth it and also is the 2017 version available?
Their website said it’ll be available in March but I couldn’t proceed to purchasing it.
https://www.efficientlearning.com/cfa/coming-soon/11th-hour-2017/
Can anyone let me know if it’s available and where/how to buy a copy?
Thanks!!
↧
↧
CFA Level 2: Review advice
Strategy for review for Level 2 Exam?
Current status: Completed CFAI books Deriv, FRA, Corp Fin, and PM. Finished Kaplan FI and Equity. Did all blue examples and EOC questions. I’m a retaker (Band 8), but I have not studied Ethics, Quant, AI, or Econ since last exam.
I haven’t reviewed anything yet. I’d like a suggestion on how to proceed. Should I do a Practice Exam now? Should I do EOCs from the topics I already hit now? Or, should I continue to complete the 4 topics I haven’t covered since last year?
↧
Portfolio Management - Reading 51- EOC 14 and 15. Correlation Calculation.
Hello,
My question relates to Portfolio Management, Reading 51 - Analysis of Active Portfolio Management ; EOC 14 and 15.
Basically, looking a the correction of those 2 question, we have to calculate IC in question 14 and TC in question 15.
IC = COR(R/σi,u/σi)
TC = ρ(μi / σi, Δwiσi)
OK fine I get the idea. Now, how do you actually calculate the correlation? The examples dont give the detail. They just show 2 tables with values for R/SD,u/SD and u/SD,Active weight x SD.
Now what do I do with that please? How do I actually get the COR?
Thanks a lot for your help.
↧
no need to read further
I got the answer, no need to read further
Formulae given in the curriculum
1) FCFE = NI - (FCInv - Dep) - WCInv + DR(FCInv - Dep) + DR(WCInv)
2) FCFE = NI - (1-DR)(FCInv - Dep) - (1-DR)(WCInv)
I did EOC # 6 in Free cash flow valuation reading and when i was applying net borrowing = DR(FCInv - Dep) + DR(WCInv) and getting direct FCFE number.
Also if the question states that 20% of net investment in assets will be financed with debt, shouldn’t we get the FCFE number using first formula, but it isn’t the case instead the solution applies second formula for equity financing.
I am confused regarding these two formulae, where do we apply them given the information in the question and how does net borrowing equation is giving me direct FCFE number.
↧
outperform
When we say 1 stock or group of stocks outperforms an other, what parameter of the outperforming stock will be better? It’s market price?
As in: during economic expansion credit risk premiums tighten, hence lower rated corporate bonds outperform higher rated corporate bonds.
↧
↧
ROE. Average Assets or just Assets for the year?
Hey,
I see both versions of these formulas being used in the curriculum.
Is the formula:
1) ROE = NI/EBT x EBT/EBIT x EBIT/Revenue x Revenue/Assets x Assets/Equity.
or
2) 1) ROE = NI/EBT x EBT/EBIT x EBIT/Revenue x Revenue/Avg. Assets x Avg. Assets/Avg.Equity.
Which formula is the correct one? Or is there different situation to which each formula is applicable?
Thanks for the help!
↧
Exam Structure
Hey,
Is the Exam for level 2 structured by chapters? I.e. Will it say on the top of the item sets which chapter you are being tested in?
E.g. Item set 1 ( Ethics)…… Item Set 4 ( Equity)
Or do you get item sets with questions from various chapters mixed in?
Reason I am asking is due to the different way to approach CFs in Corp.Finance and Equity section.
Thanks for clarifying.
↧
discounting
So- I THINK I understand the concept that the LIBOR curve is quoted as annualized rates so if given like a 180 day libor rate quoted at 5% we simply divide by 2 to get the discount factor to use in discounting cash flow in the future. But why then in the fixed income section - if we are discounting a bond with a coupon payment in say 180 days, the discounting factor would be calculated differently right?
To discount a payment using LIBOR: looks something like 1/(1 + 5%/2)
But with bonds - it’s 1/(1 + 5%)0.5
I’m super confused about when and why to use the various conventions…don’t we use the 1st for derivatives and the second for regular bonds? I assume I’m missing something with regards to weather or not the rate given is a LIBOR rate or just a non-annualized rate?
thnx
↧