By Rohit Chipper

AIR 17 CA Final
air 18 ca inter
 NOTE FROM AUTHOR
Hey Folks,
Glad to share with you all the last day revision notes for Group 1. You can also access FREE
Version of other notes on our telegram channel: https://t.me/carohitchipper
Why last day revision notes are useful & What all it covers?
• ICAI MCQ summary categorised in ABC category.
(Save time by reading one liner summary)
• Time Limits
• Interest rate summary (carries 4-8 marks in every attempt)
• Monetary limits, penalties & appeals summary,
• Tax rate & TDS Summary
• ABC & Trend analysis etc.
Must refer these notes at least 3-4 hrs before the exam as ICAI is asking not only MCQ but
descriptive Qns too (around 10-15 marks) from these limits, penalties etc.

Refer link: https://rzp.io/l/mCioBRYx Join us here.

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(1) SFM Important Question List
Analysis of Exam Paper May - 23 Nov - 22 May - 22
90 84
80
70 60
54 56
60
50
38
40 32
26
30
20 14
8
10
0
From Our Important Qn list Other (Study Material) New Qns

Qns are categorised in 3 category as follow:

- Most Important
- Very Important
- Important

Study leave plan:

One in-depth reading (10-15 days)
First revision (5-7 days)
Second revision (4-6 days)
Third revision (3-5 days)
*two revision are sufficient to clear the exam but if you are planning for rank than third revision is must.

Instruction to use:
- I have refered all Qns of module in first in-depth reading of FR and mark the Qns that I have to refer in next reading/
revision.
- In first revision I have refered only marked Qns (all 3 category).
- In next revision I have referred only Qns marked as Very important & Most important
- In final revision & one day before exam I have reffered Most important Qns, concept notes & mistake register.
(For those chapters that have no most important Qns, I have reffered Very important Qns too in last day revision)

Module Qns + past year paper, RTP & MTP Qns are sufficient to clear the exam with good marks but in case you have
extra time and want to practice more then you can refer the additional Qns from Sanjay Saraf sir material too.

ABC Level of Sanjay Saraf Sir

Chapter Test your knowledge Illustration
Analysis difficulty Material

Chapter 1: Financial Policy

C Most Important 1,2
and Corporate Strategy

Chapter 2: Risk
C Very Important
Management 1
Chapter 3: Security Equity: 16,42,63,76
B Most Important
Analysis 1,2 Adv Problem
Important 5,16 9,11,14
Chapter 4: Security
A Very Important 24 Bond:11,16,20,30,3
Valuation
Most Important 7,10,12,14,25,27,29,31 7
Important 24(c ),38,40 5
Very Important 2,15(iii),26,32,39
Chapter 5: Portfolio
A 20,31,38
Management
Most Important Adv Problem:
8,14(ii),22,31,34,35 3,8,10
A Chapter 6: Securitization Important Refer all Qns from Bhavik Choksi sir theory question compiler
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Important 1,2
B Chapter 7: Mutual Funds Very Important 3
Most Important 13,17,20,21,23 7
Important 3,11,12 2
Chapter 8: Derivatives Very Important 5 12,18
A
Analysis and Valuation 36,40,56 Adv prob:
Most Important
4,8,14,22 3 4
Chapter 9: Foreign Important 10,24 51
A Exchange Exposure and Very Important 16,37,38,50 9
Risk Management Most Important 25,33,36,39,42,43,47,48,49 71,74,75
Chapter 10: International Very Important 3
B
Financial Management Most Important 1,4 1,2,3
Important 4,7
Chapter 11: Interest Rate Very Important 5,6
B
Risk Management 13,14,15 Adv Prob:
Most Important
3 2
Important 9,11 1,2,4
Chapter 12: Corporate
B Very Important 16 3,5
Valuation
Most Important 3,7
Chapter 13: Mergers, Important 28(iii)
A Acquisitions and Very Important 20 1 4,9,10,13
Corporate Restructuring Most Important 14,15,22,29,30 4
Chapter 14: Startup
A Most Important Refer all Qns from Bhavik Choksi sir theory question compiler
Finance

Particular Attempt Question

May-18 NA
Nov-18 1(a), 5(a)
May-19 2(a), 6(b)
Nov-19 1(b)
Nov-20 1(c ),2(a),4(a),6(a),6(b)
Past year paper (Sugg. ans.)
Jan-21 1(a),1(b),2(b),6(a)
May-21 NA
Dec-21 NA
May-22 1(c ), 6(c )
Nov-22 5(A), 6(A) (ii) & (iii)
May-18 NA
Nov-18 NA
May-19 7,10,11,14(c ),15(c )
Nov-19 1,2
May-20 5
RTPs Nov-20 6,10,12
May-21 5,14,15
Dec-21 2,10,11
May-22 1,14
Nov-22 All Qns are repeated
May-23 All Qns are repeated
Oct-18 2 (c )
Aug-18 1(c ), 4(d)
May-20 3(a)
MTPs Oct-20 1(c ),2(c ),4(c ),5(a),6(a),6(b)
Apr-21 1(a),1(c ),2(b),3(c ),6(a)
Nov-21 3(a)
Apr 23 - II 2(a)
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(2) SFM ABC & Trend Analysis

ABC Topic May-18 Nov-18 May-19 Nov-19 Nov-20 Jan-21 Jul-21 Dec-21 May-22 Nov-22 Total
Chapter 1: Financial
C Policy and Corporate 4 4 4 4 4 8 28
Strategy
Chapter 2: Risk
C 4 4 4 4 4 4 4 4 4 4 40
Management
Chapter 3: Security
B 8 8 4 8 4 8 40
Analysis
Chapter 4: Security
A 10 28 16 23 4 24 8 8 16 137
Valuation
Chapter 5: Portfolio
A 14 8 8 16 8 10 16 20 16 24 140
Management
Chapter 6:
A 4 4 4 8 4 8 4 4 4 4 48
Securitization
Chapter 7: Mutual
B 10 8 8 10 14 8 12 8 16 8 102
Funds
Chapter 8: Derivatives
A Analysis and 9 8 16 14 8 12 8 16 8 8 107
Valuation
Chapter 9: Foreign
B Exchange Exposure 8 4 8 8 12 4 8 12 64
and Risk Management

Chapter 10:
B International Financial 8 24 16 8 20 16 8 16 12 8 136
Management
Chapter 11: Interest
B Rate Risk 8 8 12 8 22 8 16 12 8 102
Management
Chapter 12: Corporate
B 13 12 8 8 4 8 8 8 8 8 85
Valuation
Chapter 13: Mergers,
Acquisitions and
A 8 12 16 16 12 12 8 8 8 8 108
Corporate
Restructuring
Chapter 14: Startup
A 4 4 4 8 7 8 8 8 4 8 63
Finance
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(3) SFM Important Formula List

Sr. No. Chapter Page

1 Financial Policy and Corporate Strategy NA
2 Risk Management 1
3 Security Analysis 2
4 Security Valuation 3
5 Portfolio Management 10
6 Securitization NA
7 Mutual Funds 15
8 Derivatives Analysis and Valuation 15
9 Foreign Exchange Exposure and Risk Management 17
10 International Financial Management NA
11 Interest Rate Risk Management NA
12 Corporate Valuation 18
13 Mergers, Acquisitions and Corporate Restructuring NA
14 Start-up Finance NA

Chapter 2: Risk Management

Value of Risk
VAR is a measure of risk. It tries to measure that in a normal market condition, how much is
the maximum amount that an investment might lose. The components of VAR are:
(a) Loss amount (Standard Deviation in ₹)
(b) Confidence Interval (Generally 99%)
(c) Time Period (if nothing is given, then 1 day)

VAR = Daily Standard Deviation × Confidence Interval Value × √Number of days where,
Daily Standard Deviation = Portfolio Value (₹) × Portfolio Standard Deviation (%)
Confidence Interval (Z) Value
• 2.33 for a 99% confidence,
• 1.65 for a 95% confidence,
• 1.29 for a 90% confidence.
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Chapter 3: Security Analysis
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Chapter 4: Security Valuation
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g = Growth = Return on equity * retention ratio

𝑫𝟏 = 𝐷0 × (1 + 𝑔)
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Change in Bond Price = % Change in Interest × (-) Modified Duration

Enterprise Value
EV = Market Value of Equity + Market Value of Preferred Equity + Market Value of Debt
+ Minority Interest - Cash and Investments.
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Other Formulas

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
Current Yield = × 100
𝑃𝑟𝑖𝑐𝑒

𝑛 ∑(𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡+𝑟𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝑣𝑎𝑙𝑢𝑒)
Realised Yield = √ –1
𝑃𝑟𝑖𝑐𝑒

Yield to Maturity (YTM)

(𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝑣𝑎𝑙𝑢𝑒−𝑃𝑟𝑖𝑐𝑒)
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡+ 𝑛
(Approximate) YTM = (𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝑣𝑎𝑙𝑢𝑒+𝑃𝑟𝑖𝑐𝑒)
2
(Accurate Method) YTM: Trial & Error Method (IRR Technique)

Forward Rates
(1 + 𝑌𝑇𝑀)2 = (1 + r1) (1 + r2)
(1 + 𝑌𝑇𝑀)3 = (1 + r1) (1 + r2) (1 + r3)

Economic Value Added (EVA)

EVA = NOPAT - Capital Employed × WACC
NOPAT = EBIT (1 - t) = PAT + Interest (1 - t)
Capital Employed = D + E + P (Book values)
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Convertible Bonds
Conversion Ratio:
The number of shares each convertible bond converts into. It may be expressed per bond.

Conversion Value
CV = Market price per common share x Conversion ratio

Conversion Premium:
The amount by which the price of a convertible security exceeds the current market value of
the common stock into which it may be converted.
CP = Market price of Convertible Bond−Conversion Value
CP = MP – CV

Conversion Premium Ratio:

Ratio which shows at what premium the convertible bond is trading in the market. Conversion
𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒
Premium Ratio= -1
𝐶𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑉𝑎𝑙𝑢𝑒

Straight Value of the Bond:

It is the price where the bond would trade if it were not convertible to stock. Its then is
equivalent to non-convertible bond.

Minimum Value of the Convertible Bond:

A convertible bond should at the lowest trade at the higher of either the conversion value or
straight value.

Downside Risk:
Downside risk is the % premium over the straight value of the bond.
𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒
DR (%) = ( − 1) × 100
𝑆𝑡𝑟𝑎𝑖𝑔ℎ𝑡 𝑉𝑎𝑙𝑢𝑒

Conversion Parity Price or Market Conversion Price:

Price at which the investor will neither gain nor lose on buying the bond and exercising it.
𝑀𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒
CPP = ×100
𝑁𝑜.𝑜𝑓 𝑠ℎ𝑎𝑟𝑒

Favourable Income Differential Per Share

It represents extra income earned in Bond over dividend income in shares.
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑓𝑟𝑜𝑚 𝐵𝑜𝑛𝑑—(𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑓𝑟𝑜𝑚 𝐸𝑞𝑢𝑖𝑡𝑦 𝑥 𝐶𝑅)
FID =
Conversion Ratio

Premium Payback Period:

It represents the time in which we recover premium paid (to purchase the Convertible Bond)
Conversion Premium
using extra income of interest. PPP=
Favourable Income Differential
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Chapter 5: Portfolio Management

̅̅̅
∑(𝑋−𝑥)
Risk for single security = 𝜎 = √
𝑁
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𝐶𝑜𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒𝑥𝑦
Corelation = 𝑟𝑥𝑦 =
𝜎𝑥 𝜎𝑦

(𝑥−𝑥̅ )(𝑦−𝑦̅)
Covariance = ∑ = 𝑟𝑥𝑦 𝜎𝑥 𝜎𝑦 =𝛽𝑥 𝛽𝑦 𝜎𝑀 2
𝑁
𝜎𝑥 𝐶𝑜𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒𝑥𝑚
Beta = 𝛽= 𝑟𝑥𝑚 × = 2
𝜎𝑚 𝜎𝑀

Systematic risk = 𝑟 2 × 𝜎𝑥2 = 𝛽 2 × 𝜎𝑚

2

Unsystematic risk = 𝜎𝑥2 − 𝑆𝑦𝑠𝑡𝑒𝑚𝑎𝑡𝑖𝑐 𝑟𝑖𝑠𝑘

Characteristic line: X = 𝛼 + 𝛽𝑚
Security Market line: CAPM 𝐾𝑒 = 𝑅𝑓 + (𝑅𝑚 − 𝑅𝑓 ) × 𝛽
𝜎𝑥
Capital Market line: 𝐾𝑒 = 𝑅𝑓 + (𝑅𝑚 − 𝑅𝑓 ) ×
𝜎𝑚

𝜎𝑦2 − 𝐶𝑜𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒𝑥𝑦
Minimum Variance portfolio: Wx =
𝜎𝑥2 + 𝜎𝑦2 −2 𝐶𝑜𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒𝑥𝑦

Sharpe’s Optimal Portfolio

(𝑅𝑥 − 𝑅𝑓)
1. Calculate
𝛽𝑥

2. Rank Securities in Descending Order of the above ratio

(𝑅𝑥 − 𝑅𝑓)
2 ×𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒 {
𝜎𝑚 × 𝛽}
𝐸2𝑥
3. Cut-Off Point = 2
2 ×𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒 𝛽
1+ 𝜎𝑚
𝐸2
𝑥

4. Select Securities up to the Highest Cut-Off

5. Optimal Portfolio

𝑍𝑥
Wx = [For Selected Securities]
𝑍𝑥 + 𝑍𝑦 + 𝑍𝑧 …..

𝛽2 (𝑅𝑥 − 𝑅𝑓)
Where: Zx = ×[ - Final Cut-Off Point]
𝐸𝑥2 𝛽𝑥

Constant Proportion Portfolio Insurance Policy

Equity Value = Multiplier x [Portfolio Value - Floor Value]
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Chapter 7: Mutual Funds
𝐼𝑃𝑂 𝑃𝑟𝑖𝑐𝑒−𝑁𝐴𝑉
Front end load =
𝑁𝐴𝑉
𝑅𝑒𝑑𝑒𝑚𝑝𝑡𝑖𝑜𝑛 𝑃𝑟𝑖𝑐𝑒−𝑁𝐴𝑉
Back-end load =
𝑁𝐴𝑉
𝐼𝑛𝑐𝑜𝑚𝑒
Return required = + 𝑅𝑒𝑐𝑢𝑟𝑟𝑖𝑛𝑔 𝑒𝑥𝑝𝑒𝑛𝑠𝑒
(1−𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑒𝑥𝑝𝑒𝑛𝑠𝑒)

Chapter 8: Derivatives

Theoretical Futures Price [Cost of Carry]

Annual compounding: F = S + Cost of Carry – PV Of Dividend
Continuous Compounding: F = S × 𝑒 (𝑟−𝑑)
Commodity Derivatives: F = S + Cost of Carry + PV of Storage Cost – PV of Convenience Yield

Index Futures Hedging (Nifty Futures)

𝑈𝑛𝑑𝑒𝑟𝑙𝑦𝑖𝑛𝑔 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜 × 𝛽
Number of Contracts =
𝐶𝑜𝑛𝑡𝑟𝑎𝑐𝑡 𝑠𝑖𝑧𝑒
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Chapter 9: Foreign Exchange Exposure and Risk Management
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Chapter 12: Corporate Valuation

Valuation of a Private Company

1) Find the equity beta (levered beta) for a comparable listed company.

2) Find unlevered beta for the comparable company.

Unlevered Beta = 𝛽𝐴𝑠𝑠𝑒𝑡
Levered Beta = 𝛽𝐸𝑞𝑢𝑖𝑡𝑦
𝐷𝑒𝑏𝑡 (1−𝑡𝑎𝑥) 𝐸𝑞𝑢𝑖𝑡𝑦
(𝛽𝐴𝑠𝑠𝑒𝑡 ) = 𝛽𝑑𝑒𝑏𝑡 × ( ) + 𝛽𝐸𝑞𝑢𝑖𝑡𝑦 × ( )
𝐷𝑒𝑏𝑡 (1−𝑡𝑎𝑥)+𝐸𝑞𝑢𝑖𝑡𝑦 𝐷𝑒𝑏𝑡 (1−𝑡𝑎𝑥)+𝐸𝑞𝑢𝑖𝑡𝑦

In absence of information, 𝛽𝑑𝑒𝑏𝑡 would be taken as NIL.

3) The comparable company (listed) and our private company operate in the same business
and hence they should have the same business risk. Therefore, the unlevered beta can be
assumed to remain the same.

Valuation Using Yield Method

Value per equity share can be calculated as:

𝐴𝑐𝑡𝑢𝑎𝑙 𝑌𝑖𝑒𝑙𝑑
× Paid-up value per share
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑌𝑖𝑒𝑙𝑑

𝑌𝑖𝑒𝑙𝑑 (𝑃𝑟𝑜𝑓𝑖𝑡)𝑜𝑛 𝑒𝑞𝑢𝑖𝑡𝑦 𝑠ℎ𝑎𝑟𝑒𝑠

Actual Yield = × 100
𝑃𝑎𝑖𝑑−𝑢𝑝 𝐸𝑞𝑢𝑖𝑡𝑦 𝑆ℎ𝑎𝑟𝑒 𝐶𝑎𝑝𝑖𝑡𝑎𝑙