CFA 2020 L2 wiley study guide V1

275 Pages·035.664 MB·English

by  Wiley

Wiley's CFA® Program Exam Review
Study Guide for 2020
Level 11 CFA Exam
Complete Set
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Wiley's CFA® Program Exam Review
Study Guide for 2020
Level II CFA Exam
W IL E Y
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ISBN 978-1-119-64490-3 (ePub)
ISBN 978-1-119-64489-7 (ePDF)
Contents
About the Authors xiii
Wiley's CFA® Program Exam Review Study Guide for 2020 Level IICFA Exam
Volume 1: Ethics & Quantitative Methods
Study Session 1: Ethical and Professional Standards
Reading 1: Code of Ethics and Standards of Professional Conduct 3
Lesson 1: Code of Ethics and Standards of Professional Conduct 3
Reading 2: Guidance for Standards l-VII 7
Lesson 1: Standard I: Professionalism 7
Lesson 2: Standard II: Integrity of Capital Markets 32
Lesson 3: Standard III: Duties to Clients 43
Lesson 4: Standard IV: Duties to Employers 67
Lesson 5: Standard V: Investment Analysis, Recommendations, and Actions 81
Lesson 6: Standard VI: Conflicts of Interest 94
Lesson 7: Standard VII: Responsibilities as a CFA Institute Member or CFA Candidate 104
Reading 3: Application of the Code and Standards 113
Lesson 1: Application of the Code and Standards 113
Study Session 2: Quantitative Methods (1)
Reading 4: Introduction to Linear Regression 133
Lesson 1: Linear Regression 133
Lesson 2: The Standard Error of Estimate, Coefficient of Determination, Hypothesis
Testing, and ANOVA 139
Lesson 3: Prediction Intervals and Limitations of Regression Analysis 148
Reading 5: Multiple Regression 151
Lesson 1: Multiple Linear Regression 151
Lesson 2: The F-stat,/?2, ANOVA, and Dummy Variables 157
Lesson 3: Violations of Regression Assumptions 163
Lesson 4: Errors in Specification and Qualitative Dependent Variables 173
Reading 6: Time-Series Analysis 177
Lesson 1: Trend Models 177
Lesson 2: Autoregressive (AR) Time Series Models 183
Lesson 3: Random Walks and Unit Roots 190
Lesson 4: Seasonality, ARCH Models, Regressions with More Than One Time Series 197
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©2020 Wiley
CONTENTS
Study Session 3: Quantitative Methods (2)
Reading 7: Machine Learning 207
Lesson 1: What is Machine Learning? 207
Lesson 2: Machine Learning Algorithms 213
Reading 8: Big Data Projects 229
Lesson 1: Big Data in Investment Management 229
Lesson 2: Data Preparation and Wrangling 230
Lesson 3: Data Exploration Objectives and Methods 234
Lesson 4: Model Training 236
Lesson 5: Classifying and Predicting Sentiment for Stocks 241
Reading 9: Excerpt from "Probabilistic Approaches: Scenario Analysis, Decision Trees and Simulations"
Lesson 1: Simulations 247
Lesson 2: An Overall Assessment of Probabilistic Risk Assessment Approaches 254
Appendix: Probability Tables 257
Wiley's CFA® Program Exam Review Study Guide for 2020 Level IICFA Exam
Volume 2: Economics & Financial Reporting and Analysis
Study Session 4: Economics
Reading 10: Currency Exchange Rates: Understanding Equilibrium Value 3
Lesson 1: Foreign Exchange Market Concepts 3
Lesson 2: Cross Rate Calculations with Bid-Ask Spreads 5
Lesson 3: Foreign Exchange Spreads and Aribtrage Constraints on Spot Exchange
Rate Quotes 8
Lesson 4: Forward Markets 12
Lesson 5: International Parity Relations Part I: Important Concepts, Covered
and Uncovered Interest Rate Parity 17
Lesson 6: International Parity Relations Part II: Purchasing Power Parity and the Real
Exchange Rate 23
Lesson 7: International Parity Relations Part III: The Fisher Effect and Bringing
All Parity Relations Together 25
Lesson 8: The Carry Trade 28
Lesson 9: The Impact of Balance of Payments Flows 30
Lesson 10: Monetary and Fiscal Policies 33
Lesson 11: Exchange Rate Management: Intervention and Controls, Currency Crises, and
Shorter-Term Forecasting Tools 37
Reading 11: Economic Growth and the Investment Decision 41
Lesson 1: Growth in the Global Economy: Developed versus Developing Countries 41
Lesson 2: Determinants of Economic Growth 45
Lesson 3: Classical Growth Theory and Neoclassical Growth Theory (Part I) 52
Lesson 4: Neoclassical Growth Theory (Part II) and Endogenous Growth Theory 56
Lesson 5: The Convergence Debate and Growth in an Open Economy 61
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©2020 Wiley
CONTENTS
Reading 12: Economics of Regulation 65
Lesson 1: Economics of Regulation 65
Study Session 5: Financial Reporting and Analysis (1)
Reading 13: Intercorporate Investments 75
Lesson 1: Investments in Financial Assets 75
Lesson 2: Investments in Associates and Joint Ventures 85
Lesson 3: Investments in Business Combinations 91
Lesson 4: Investments in SPEs/VIEs 99
Reading 14: Employee Compensation: Post-Employment and Shared-Based 107
Lesson 1: Types of Post-Employment Benefit Plans and Measuring a Defined
Benefit Pension Plan's Obligations 107
Lesson 2: Components of Periodic Pension Cost: IFRS versus U.S. GAAP 116
Lesson 3: Effects of Changes in Key Assumptions 124
Lesson 4: Disclosures of Pension and Other Post-Employment Benefits,
and Cash Flow Related Information 127
Lesson 5: Share-Based Compensation 134
Reading 15: Multinational Operations 139
Lesson 1: Defining the Presentation Currency, Functional Currency,
Local Currency, and Foreign Currency Transaction Exposure 139
Lesson 2: Translation of Foreign Currency Financial Statements:
The Current Rate and Temporal Methods 144
Lesson 3: Translation of Foreign Currency Financial Statements:
Hyperinflationary Economics 158
Lesson 4: Multinational Operations and the Company's Effective Tax
Rate and Foreign Currency-Related Disclosures 166
Reading 16: Analysis of Financial Institutions 171
Lesson 1: Introduction to Analysis of Financial Institutions 171
Lesson 2: Analyzing a Bank 172
Lesson 3: Analyzing an Insurance Company 183
Study Session 6: Financial Reporting and Analysis (2)
Reading 17: Evaluating Quality of Financial Reports 193
Lesson 1: Quality of FinancialR eports 193
Lesson 2: Evaluating the Quality of Financial Reports 201
Lesson 3: Earnings Quality 205
Lesson 4: Cash Flow Quality 217
Lesson 5: Balance Sheet Quality 221
Lesson 6: Sources of Information About Risk 225
Reading 18: Integration of Financial Statement Analysis Techniques 227
Lesson 1: Case Study: Long-Term Equity Investment 227
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Wiley's CFA® Program Exam Review Study Guide for 2020 Level II CFA Exam
Volume 3: Corporate Finance & Equity
Study Session 7: Corporate Finance (1)
Reading 19: Capital Budgeting 3
Lesson 1: Introduction and Level I Recap 3
Lesson 2: Cash Flow Projections 6
Lesson 3: Project Analysis and Evaluation 14
Lesson 4: Other Income Measures and Valuation Models 25
Reading 20: Capital Structure 31
Lesson 1: The Capital Structure Decision Part I: Capital Structure and the MM
Propositions with No Taxes 31
Lesson 2: The Capital Structure Decision Part II: MM Propositions with Taxes, the Costs
of Financial Distress, Agency Costs, Asymmetric Information and the Statis
Trade-OffTheory 35
Lesson 3: The Target Capital Structure and Practical Issues in Capital Structure Policy 41
Reading 21: Analysis of Dividends and Share Repurchases 45
Lesson 1: Dividends: Forms and Effects on Shareholder Wealth and Issuing
Company's Financial Ratios 45
Lesson 2: Dividend Policy and Company Value: Theory 50
Lesson 3: Factors Affecting Dividend Policy in Practice 55
Lesson 4: Payout Policies 58
Lesson 5: Share Repurchases 61
Lesson 6: Global Trends in Payout Policy and Analysis of Dividend Safety 68
Study Session 8: Corporate Finance (2)
Reading 22: Corporate Governance and Other ESG Considerations in Investment Analysis 73
Lesson 1: Global Variations in Ownership Structures 73
Lesson 2: Evaluating Corporate Governance Policies and Procedures 77
Lesson 3: Identifying ESG-Related Risks and Opportunities 79
Lesson 4: Evaluating ESG-Related Risks and Opportunities 81
Reading 23: Mergers and Acquisitions 89
Lesson 1: Mergers and Acquisitions: Definitions, Classifications, Motives, Transaction
Characteristics, and Regulation 89
Lesson 2: Target Company Valuation 102
Lesson 3: Bid Evaluation and Corporate Restructuring 112
Study Session 9: Equity Valuation (1)
Reading 24: Equity Valuation: Applications and Processes 119
Lesson 1: Value Definitions and Valuation Applications 119
Lesson 2: The Valuation Process and Communicating Valuation Results 122
Reading 25: Return Concepts 131
Lesson 1: Return Concepts and the Equity Risk Premium 131
Lesson 2: The Required Return on Equity, the Weighted Average Cost of Capital,
and Discount Rate Selection 137
©2019 Wiley
CONTENTS
Study Session 10: Equity Valuation (2)
Reading 26: Industry and Company Analysis 151
Lesson 1: Financial Modeling: Approaches to Projecting Revenue 151
Lesson 2: Financial Modeling: Income Statement Modeling and Balance Sheet Modeling 153
Lesson 3: Competitive Factors, Inflation, and Technological Developments 160
Reading 27: Discounted Dividend Valuation 169
Lesson 1: Present Value Models 169
Lesson 2: The Dividend Discount Model 172
Lesson 3: The Gordon Growth Model, Present Value of Growth Opportunities (PVGO),
and P/E Ratios 175
Lesson 4: Multistage Dividend Discount Models and Terminal Value 182
Lesson 5: The Financial Determinants of Growth Rates 192
Study Session 11: Equity Valuation (3)
Reading 28: Free Cash Flow Valuation 197
Lesson 1: FCFF and FCFE Valuation Approaches 197
Lesson 2: Forecasting Free Cash Flow 211
Lesson 3: Free Cash Flow Model Variations 213
Reading 29: Market-Based Valuation: Price and Enterprise Value Multiples 225
Lesson 1: Introduction: The Method of Comparables versus the Method of Forecasted
Fundamentals 225
Lesson 2: Price Multiples Based on the Method of Comparables 227
Lesson 3: Normalized Earnings and the Earnings Yield 234
Lesson 4: Price Multiples Based on the Method of Forecasted Fundamentals
(Justified Multiples) 237
Lesson 5: The P/E-Growth Ratio and Using Multiples to Determine Terminal Value 249
Lesson 6: Enterprise Value Multiples 252
Lesson 7: International Considerations, Momentum Valuation Indicators and Issues
in Practice with Valuation Indicators 256
Reading 30: Residual Income Valuation 259
Lesson 1: The Residual Income Model 259
Lesson 2: Residual Income Valuation in Relation to Other Approaches 273
Lesson 3: Accounting and International Considerations 274
Reading 31: Private Company Valuation 277
Lesson 1: The Scope of Private Company Valuation and Definitions (Standards of Value) 277
Lesson 2: Private Company Valuation: Earnings Normalization and Cash Flow
Estimation Issues 281
Lesson 3: Private Company Valuation Approaches: (1) Income Approach 286
Lesson 4: Private Company Valuation Approaches: (2) Market Approach and
(3) Asset-Based Approach 293
Lesson 5: Valuation Discounts and Premiums, and Business Valuation Standards
and Practices 298
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©2019 Wiley