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CFA Level 2 one Pagers
FRA for CFA
L2: 1-Pager
3 readings:
Long lived assets
Inter Comp Inv, Post
Emp C, SBC, Multi Nat
Op
Quality
Ref core readings
Inter Corporate Investments
Equity Method - placed at cost
purchased keeping goodwill
adjusting dividends
Book market goodwill
Depreciation of purchased part at
same rate as it is done at book
Pooling of interest vs. Purchase
method
Full and partial Goodwill
Comparing both Consolidation vs.
Equity BS IS
Corp Fin for
CFA L2: 1-
Pager
2 readings:
Corporate Governance
Merger & Acquisition
Ref core readings
Merger & Acquisition
Motivation
EPS Bootstrapping Assuming
price remains same?
Industry cycle
Defense
HH Index
Carve out, spin offs, split offs and
liquidation
DCF
Comparables
Corp Fin for
CFA L2: 1-
Pager
2 readings:
Corporate Governance
Merger & Acquisition
Ref core readings
Corporate Governance
Attributes
Conflict of Interest
Corp Fin for
CFA L2: 1-
Pager
3 readings:
Budgeting
MM
ROC
Ref core readings
Budgeting
Question types cannot be many -
limitation can be set - end values
require WC-change to replenish
WC-Change incorporate all other things
so don't double count
Cash - - many things might not be cash
If something reduces your expenses it
might also give u some cash benefit
from 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)
Corp Fin for
CFA L2: 1-
Pager
3 readings:
Budgeting
MM
ROC
Ref core readings
Capital Structure
MM Proposition
Corp Fin for
CFA L2: 1-
Pager
3 readings:
Ref core readings
Portfolio
Active management value add
Corp Fin for
CFA L2: 1-
Pager
3 readings:
Budgeting
MM
ROC
Ref core readings
Dividends and Share Repurchase
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.freegreg
matclass.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 in
Current)
Net exposure (BS in current, realistic?)
vs. Net monetary exposure (in Trans,
less volatile)
NI Current Avg, Tran Plug(mix) +
Hist
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.freegreg
matclass.com
Qcfinance.in
Summary of all readings (3*3)
10 min on each
Examples of real companies
Real Fun Questions
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 designated
at fair value (through P/L)
20%-50% (Investment in
associates)
Significant influence Equity method
More than 50%
(Business combinations)
Control Acquisition Method
50%/50%
(Joint Venture)
Shared Control IFRS: Proportionate
consolidated preferred; US
GAAP: Equity Method
Classification of Financial Assets
Held-to-
Maturity
Held-for-
Trading
Available-for-
sale
Balance Sheet Amortized cost Fair value Fair Value with
unrealized G/L
recognized in
equity
Income Statement Interest
(including
amortization)
Realized G/L
Interest
Dividends
Realized G/L
Unrealized G/L
Interest
Dividends
Realized G/L
Corp Fin for
CFA 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 get
the values
Corp Fin for
CFA L2: 1-
Pager
3 readings:
Ref core readings
Fixed Income MBS Market
Pass-through securities
Pre payment risk
Ginnie Mae, Freddie Mae, Fannie
Mae
SMM - CPR
Corp Fin for
CFA 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
Corp Fin for
CFA L2: 1-
Pager
Readings:
Intro
Term Structure
MBS / CDO
Ref core readings
Fixed Income
Term Structure and Volatilities of
Interest 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%
Asset Backed
Sector of the
Bond Market
Fixed Income
Sector
Valuing MBS and ABS
Prepayment and Credit Trenching
of an ABS
External Credit Enhancement
Different loan backed securities
CDO cash flow analysis

Corp Fin for

CFA L2: 1-
Pager
3 readings:
Swap Contract and
Contracts
Interest Rate Derivative
Instruments
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 rate
swaption
Fixed rate at conversion then
discounting it back alternative
approaches
FRA Pricing today