5.2014年6月CFA2级Mock Exam AM（答案版）

June 2014 CFA Level II Mock ExaminationMorning Session Answers(Note: This session has 11 cases, given 198 minutes, while the actual exam has 10 cases, given 180 minutes)Study Session 1, 2 Ethical and Professional Standards (1-6) Q=61. Correct answer： Even if LeCompte discloses the cost of her attendance she may still not be permitted to take the trip depending upon her companys policies. In addition, the disclosure in this case is not enough to avoid a potential violation of Standard I(B) relating to independence and objectivity. By allowing the corporate issuer to pay for her travel expenses her judgment could be compromised. It is more appropriate for LeCompte to decline the invitation or have her company pay all costs for the trip in order to avoid any conflict or appearance of conflict.2014 CFA Level II“Guidance for Standards IVII,” CFA InstituteStandard I(B)2. Correct answer：LeCompte violated Requirement 6, Relationships with Subject Companies, by sharing the full research report with NanoMem. Sharing any section of a research report that might communicate the analysts proposed recommendation, rating, or price target is prohibited by the Research Objectivity Standards. Sharing historical factual information on the other hand is not a violation.2014 CFA Level II“CFA Institute Research Objectivity Standards,”CFA InstituteSection 43. Correct answer：Research Objectivity Requirement 5, Research Analyst Compensation, recommends analysts compensation be based on the accuracy of recommendations over time. In addition, compensation should not be directly linked to investment banking or other finance activities, which it is not in this case. LeComptes bonus is based on the groups overall performance and is not specific to the research support she provides to various divisions.2014 CFA Level II“CFA Institute Research Objectivity Standards,”CFA InstituteSection 44.Correct answer：LeCompte provided all the recommended disclosures relating to potential conflicts of interest with respect to UniFlash. She should have disclosed the benefit received from NanoMem concerning the trip she took, as well as her small equity position in NanoMem as required by Research Objectivity Requirement 2, Public Appearances.2014 CFA Level II“CFA Institute Research Objectivity Standards,”CFA InstituteSection 2.05.Correct answer：The recommended procedures for compliance with the Research Objectivity Requirement 11, Rating System, states that firms should prohibit covered employees from communicating a rating or recommendation different from the current published rating or recommendation.2014 CFA Level II“CFA Institute Research Objectivity Standards,”CFA InstituteSection 46.Correct answer：According to the CFA Institute Standards I(B), and V(A), members and candidates must exercise diligence, independence, objectivity, and thoroughness in analyzing investments, making investment recommendations, and taking investment actions. Changing a written recommendation to what a subject company desires is not acting diligently, independently, objectively, and/or thoroughly and the analyst should immediately revise her recommendation to express her stated opinion of the company.2014 CFA Level II“Guidance for Standards I-VII,”CFA InstituteStandard I(B), Standard V(A)Study Session 8 9 Corporate Finance (7-12) Q=67.Correct answer：Economic income = Change in market value plus the after-tax cash flow.Market value = Present value of future expected after-tax cash flowsBeginning market value, at beginning of Year 3 (assuming end-of-year cash flows):Ending market value at the end of Year 3:Economic profit = (292,939 382,712) + 147,180 = 57,4072014 CFA Level IICapital Budgeting, by John D. Stowe and Jacques R. GagneSection 8.28.Correct answer：Operating income before taxInterest = Taxable income:$102,750 ($300,000 0.12) = $66,750Accounting income or net income = Taxable income (1 Tax rate)$66,750 (1 0.40) = $40,0502014 CFA Level IICapital Budgeting, by John D. Stowe and Jacques R. GagneSection 8.29.Correct answer：Ludlows suggestion of considering alternate economic environments is an example of scenario analysis.2014 CFA Level IICapital Budgeting, by John D. Stowe and Jacques R. GagneSection 7.3.210.Correct answer：Because the schedule for the first year is equivalent to straight-line depreciation (1/5 = 20%), the after-tax operating cash flow does not change under straight line or MACRS accelerated depreciation.2014 CFA Level IICapital Budgeting, by John D. Stowe and Jacques R. GagneSection 6.111.Correct answer：Ludlows suggestion is an example of economic profit: EBIT (1 tax rate) $WACC. EBIT is earnings before interest and taxes.2014 CFA Level IICapital Budgeting, by John D. Stowe and Jacques R. GagneSection 8.3.112.Correct answer：The competing projects are mutually exclusive, which means that only one of the two positive NPV projects can be accepted. The choice of which project to accept is based on choosing the project with either (1) the highest equivalent annual annuity (EAA) or (2) the highest value based on the least common multiple of lives (LCML) approach. The three-year project should be chosen using either approach as shown in the following.EAA for three-year project:NPV Present Value Annuity Factor (three years at 15%)EAA = 128,146/2.2832 = 56,126EAA for five-year project:NPV Present Value Annuity Factor (five years at 15%)EAA = 183,109/3.3522=54,624The three-year project is preferred because it has a higher EAA.LCML: The least common multiple, given 3 and 5, is 15. Compare the NPV of each project, assuming each project is repeated for 15 years.NPV (three-year project, 15 years):NPV (five-year project, 15 years):The three-year project is preferred because the NPV over 15 years is higher.2014 CFA Level IICapital Budgeting, by John D. Stowe and Jacques R. GagneSections 7.1.1 7.1.2Study Session 4 Economics (13-24) Q=1213.Correct answer：The components of growth can be determined using Solows growth accounting equation: Y/Y= A/A+ K/K+ (1 )L/Lwhere:Y/Y= GDP percentage growthA/A= percentage growth from total factor productivity (TFP)K/K= percentage growth in capitalL/L= percentage growth in labor = share of income paid to capital factor1 = share of income paid to labor factor, also the elasticity of output with respect to laborTFP = Labor productivity growth Growth in capital deepening = 1.7 2.3 = 0.6, which is given in Exhibit 1. Also given, 1 = 0.65 and = 0.35GDP growth = Y/Y=3.75Arising from the total of components below:A/A=growth due to TFP0.6K/K=growth due to capital+ 2.13 = (0.35) 6.1(1 )L/L= growth due to labor+ 2.21 = (0.65) 3.43.75 GDP growthGrowth due to labor of 2.21% is greater than the growth due to capital or TFP.2014 CFA Level II“Economic Growth and the Investment Decision,” by Paul KutasovicSections 4.2-4.314.Correct answer：Pamuks conclusion is consistent with the endogenous growth model. In the endogenous growth model, the economy does not reach a steady growth rate equal to the growth of labor plus an exogenous rate of labor productivity growth. Instead, saving and investment decisions can generate self-sustaining growth at a permanently higher rate. This situation is in sharp contrast to the neoclassical model, in which only a transitory increase in growth above the steady state is possible. The reason for this difference is because of the externalities on R&D, diminishing marginal returns to capital do not set in.2014 CFA Level II“Economic Growth and the Investment Decision,” by Paul KutasovicSection 5.315.Correct answer：Birols statement based on MundellFleming model is inaccurate because restrictive (notexpansionary) fiscal policy, along with expansionary monetary policy, would lead to capital outflows and cause the currency to depreciate assuming high capital mobility.2014 CFA Level II“Currency Exchange Rates: Determination and Forecasting,” by Michael R. Rosenberg and William A. BarkerSections 6.1, 6.2.2, 6.316.Correct answer：Suggestion 1 is an accurate description of a sterilized currency intervention. If the currency is overvalued and inflation is a concern, a sterilized intervention is necessary. Emerging market authorities would sell domestic securities to the private sector to mop up any excess liquidity created by its foreign exchange intervention activities. The end result would be that the monetary base and the level of short-term interest rates would not be altered by the intervention operation.2014 CFA Level II“Currency Exchange Rates: Determination and Forecasting,” Michael R. Rosenberg and William A. BarkerSection 717.Correct answer：Calculate the interbank implied cross rate for (DRN/EUR).Invert the (EUR/USD) quotes. The 0.8045 bid becomes 1/0.8045 = 1.243 offer for (USD/EUR). The 0.8065 offer becomes 1/0.8065 = 1.240 bid for (USD/EUR).Determine the interbank implied cross currency quotes for (DRN/EUR) as follows:Bid: 1.205(DRN/USD) 1.24 (USD/EUR) = 1.4942 (DRN/EUR)Offer: 1.210 (DRN/USD) 1.243 (USD/EUR) = 1.504 (DNR/EUR).2014 CFA Level II“Currency Exchange Rates: Determination and Forecasting,” by Michael R. Rosenberg and William A. BarkerSection 2.118.Correct answer：To initiate a carry trade, a European investor will borrow in the lowest interest rate currency, the euro (EUR). The cost will be 0.8%. He will invest in the highest LIBOR rate currency, the DRN at 2.1%.SellSellInvest at 2.1% DRN LIBOR:Convert to EUR at projected spot:Minus borrowing cost: 100,0000.8%=EUR800Ending balance = EUR101,065Minus 100,000 beginning value = EUR1,065 profit2014 CFA Level II“Currency Exchange Rates: Determination and Forecasting,” by Michael R. Rosenberg and William A. BarkerSection 4.119.Correct answer：The mid-market for CAD/USD is (1.2138 + 1.2259)/2 = 1.21985. The mid-market forward premium (discount) is calculated as:In this problem, we have:2014 CFA Level IICurrency Exchange Rates: Determination and Forecasting, by Michael R. Rosenberg and William A. BarkerSection 2.220.Correct answer：The relative version of PPP states that the percentage change in the spot exchange rate will be completely determined by the difference between the foreign and domestic inflation rates. In this case, the difference in the inflation rates is 1.90%2.30% =0.4%. Subtracting 0.4% from the current bid gives the answer 1.2089. The calculation is 1.2138 (0.004 1.2138) = 1.2089.2014 CFA Level IICurrency Exchange Rates: Determination and Forecasting, by Michael R. Rosenberg and William A. BarkerSection 3.1.421.Correct answer：It is cheaper to buy Canadian dollars indirectly through Brazilian reals than directly with U.S. dollars. This creates a triangular arbitrage opportunity:US$1,000,000 2.3844 = BRL2,384,4002,384,400 0.5250 = C$1,251,810C$1,251,810/1.2259 = US$1,021,135US$1,021,135 US$1,000,000 = US$21,135 profit2014 CFA Level IICurrency Exchange Rates: Determination and Forecasting, by Michael R. Rosenberg and William A. BarkerSection 2.122.Correct answer：Baroques comments describe the international Fisher effect. The international Fisher effect states that the foreign-domestic nominal yield spread will be solely determined by the foreign-domestic expected inflation differential.2014 CFA Level IICurrency Exchange Rates: Determination and Forecasting, by Michael R. Rosenberg and William A. BarkerSection 3.1.523.Correct answer：Tremblays first justification describes club convergence. Her second justification describes a second source of convergenceimitating or adopting technology already widely used in the advanced countries. Convergence is consistent with the neoclassical growth model.2014 CFA Level IIEconomic Growth and the Investment Decision, by Paul KutasovicSections 5, 5.2.2, 5.424.Correct answer：The possibility for permanent higher growth in per capita output exists within endogenous growth theories but not in neoclassical growth theory nor in classical growth theory.2014 CFA Level IIEconomic Growth and the Investment Decision, by Paul KutasovicSections 5, 5.3Study Session 5 6 7 Financial Statement Analysis (25-48) Q=2425.Correct answer：The change in revenue recognition to an earlier point, before the product has been produced or delivered, is an aggressive accounting policy that would lower the companys quality of earnings.2014 CFA Level IIEvaluating Financial Reporting Quality, by Scott Richardson and Irem TunaSections 2.2, 4.1.2, 4.526.Correct answer：Actual experience has shown that the amount expensed in prior years was too large. The adjustment would be a reversal of the reserve in 2013: a decrease in the warrant provision and an increase in net income in 2013. The decrease in the provision (lower current liabilities) would result in increase in the current ratio.2014 CFA Level IIEvaluating Financial Reporting Quality, by Scott Richardson and Irem TunaSection 4.127.Correct answer：Deposits received$3 millionDeposit as percentage of order25%Revenue recognized on receipt of order$3 million/0.25 = $12 millionGross profit marginIncrement to gross profit from early recognitionpolicy53% $12 million = $6.36 million2014 CFA Level II“The Lessons We Learn,” by Pamela Peterson Drake and Frank J. FabozziLesson 1“Evaluating Financial Reporting Quality,” by Scott Richardson and Irem TunaSections 4.2.3 and 4.3“Integration of Financial Statement Analysis Techniques,” by Jack T. Ciesielski, Jr.Section 128.Correct answer：BCorrect.2013($ thousands)2012($ thousands)Total assets131,122127,000Cash and investments21,12225,000Operating assets (A)110,000102,000Total liabilities57,00064,000Long-term debt35,00040,000Current portion of long-term debt5,0005,000Operating liabilities (B)17,00019,000Net operating assets (A B)93,00083,000Balance sheetbased aggregate accruals: change in net operating assets$10,0002014 CFA Level II“Evaluating Financial Reporting Quality,” by Scott Richardson and Irem TunaSections 3.2 and 3.3“Integration of Financial Statement Analysis Techniques,” by Jack T. Ciesielski, Jr.Section 229.Correct answer：The compensation expense for restricted stock grants is the fair market value of the shares on the grant date, and this amount is allocated over the service period: $4.2 million/3 = $1.4 million2014 CFA Level II“Employee Compensation: Post-Employment and Share-Based,” by Elaine Henry and Elizabeth A. GordonSection 3.130.Correct answer：Only the executive stock option plan is affected by volatility of the companys stock. The volatility affects the initial valuation of the stock options granted (e.g., through use of the BlackScholes model to determine the fair value of the options). The initial valuation of the options determines the expense recognized. Compensation expense for stock grants is based on the fair market value of the stock on the day of the grant and is not affected by the stocks volatility.2014 CFA Level II“Employee Compensation: Post-Employment and Share-Based,” by Elaine Henry and Elizabeth A. GordonSections 3.1 and 3.231.Correct answer：Days of inventory on hand= 365/Inventory turnover ratioInventory turnover ratio= COGS/InventoryPiezo uses LIFO under U.S. GAAP, whereas the European firms use FIFO under IFRS. With rising prices, under LIFO, cost of goods sold (COGS) will be higher and the inventory carrying amount will be lower. The result is that the inventory turnover ratio will be higher under LIFO than FIFO.The higher inventory turnover will lead to fewer daysof inventory on hand under LIFO.2014 CFA Level II“Inventories: Implications for Financial Statements and Ratios,” by Michael A. Broihahn Section 332.Correct answer：To be comparable with the European firms, it is necessary to adjust the net income and total asset from LIFO to FIFO. Under FIFO, total assets increase by the LIFO reserve but decrease by the cash paid for the cumulative amount of additional income taxes that would arise. Net income will be higher under FIFO because of lower COGS (i.e., the increase in the LIFO reserve, but it will be reduced by the taxes paid on the increase in operating profit).(US$ thousands)Net Income (LIFO)$178+ Reduction in COGS+ 320Increase in LIFO reserve: 867 547 Tax on increased operating profit 106.633.3% 320 (use 2013 tax rate)Net Income (FIFO)$391.4Total assets (LIFO)$5,570+Increase in inventory (FIFO)+ 867Add LIFO reserve: 867 Tax paid on higher cumulative profits 281.633.3% 320 + 32% 547aTotal assets (FIFO)$6,155.4aCumulative tax savings: 2013 tax rate for the increase in LIFO reserve; 32% on remainder2014 CFA Level II“Inventories: Implications for Financial Statements and Ratios,” by Michael A. BroihahnSection 3.133.Correct answer：Gross profit under LIFO in 2013 = 11,159 9,898 = $1,261But this arose in part because of the LIFO liquidation, which decreased cost of goods sold by 263 (Exhibit 2, Note 5)Adjusted gross profit = $1,261 263 = $998Adjusted gross profit margin in 2013 = 998 / 1,159 x 100 = 8.9%Gross profit margin in 2012 = (8,895 7,901)/8,895 x 100 = 11.2%After adjusting for the LIFO liquidation, gross profit