Module Videos

Workbook
2024 Level II CFA®

00_CFAXXXX_OnDemand_WB_L2V2_FM.indd 1 11/12/23 11:17 AM

 2024 LEVEL II CFA® MODULE VIDEOS WORKBOOK
©2023 Kaplan, Inc. All rights reserved.

Published in 2023 by Kaplan, Inc.

These materials may not be copied without written permission from the author. The unauthorized duplication of these
notes is a violation of global copyright laws and the CFA Institute Code of Ethics. Your assistance in pursuing potential
violators of this law is greatly appreciated.

Required CFA Institute Disclaimer: “Kaplan Schweser is a CFA Institute Prep Provider. Only CFA Institute Prep Provid-
ers are permitted to make use of CFA Institute copyrighted materials which are the building blocks of the exam. We are
also required to create/use updated materials every year and this is validated by CFA Institute. Our products and services
substantially cover the relevant curriculum and exam and this is validated by CFA Institute. In our advertising, any state-
ment about the numbers of questions in our products and services relates to unique, original, proprietary questions. CFA
Institute Prep Providers are forbidden from including CFA Institute official mock exam questions or any questions other
than the end of reading questions within their products and services.
CFA Institute does not endorse, promote, review or warrant the accuracy or quality of the product and services offered by
Kaplan Schweser. CFA Institute®, CFA® and “Chartered Financial Analyst®” are trademarks owned by CFA Institute.”
Certain materials contained within this text are the copyrighted property of CFA Institute. The following is the copyright
disclosure for these materials: “© Copyright CFA Institute”.
Disclaimer: The Schweser study tools should be used in conjunction with the original readings as set forth by CFA Insti-
tute. The information contained in these study tools covers topics contained in the readings referenced by CFA Institute
and is believed to be accurate. However, their accuracy cannot be guaranteed nor is any warranty conveyed as to your
ultimate exam success. The authors of the referenced readings have not endorsed or sponsored these study tools.

00_CFAXXXX_OnDemand_WB_L2V2_FM.indd 2 11/11/23 11:05 AM

 Contents
Quantitative Methods (Readings 1–4)..............................................................1
Economics (Readings 5–7).............................................................................93
Financial Statement Analysis (Readings 8–14)..............................................141
Corporate Issuers (Readings 15–18).............................................................351
Equity Valuation (Readings 19–24)..............................................................425
Fixed Income (Readings 25–29)...................................................................565
Derivatives (Readings 30–31)......................................................................659
Alternative Investments (Readings 32–34)...................................................733
Portfolio Management (Readings 35–40).....................................................791
Ethical and Professional Standards (Readings 41–43)..................................885

iii

00_CFAXXXX_OnDemand_WB_L2V2_FM.indd 3 11/11/23 11:05 AM

00_CFAXXXX_OnDemand_WB_L2V2_FM.indd 4 11/11/23 11:05 AM
 Quantitative Methods

01_CFAXXXX_OnDemand_WB_L2V2_R01-R04.indd 1 10/11/23 12:43 PM

 2 Quantitative Methods

Fixed Income Quantitative

Investments Methods

Quantitative Methods

Multiple Regression
Basics of Multiple Regression
and Underlying Assumptions

LOS 8.a Formulate/Determine

Multiple Regression

Multiple Regression
 Basic idea: Linear relationship with more than one independent
variable

Dependent variable Independent variables

Yi = b 0 + b 1 X 1 i + b 2 X 2 i + … + b k X k i + ε i

Slope coefficients
Intercept
© Kaplan, Inc. Error term 2

01_CFAXXXX_OnDemand_WB_L2V2_R01-R04.indd 2 10/11/23 12:43 PM

 Quantitative Methods 3

LOS 8.b Interpret

Multiple Regression

Interpreting p-Values
 Another way to test H0 (always agrees with t-test)
 If p-value < α, then reject H0
 Example: If α = 5% (i.e., a 95% confidence level) and the
calculated p-value = 0.07, we fail to reject H0
 p-value can be viewed as smallest significance level (α
α) at which
we can reject H0

© Kaplan, Inc. 3

LOS 8.b Interpret

Multiple Regression

Example: Interpreting p-Values

Variable bi Sbi t-stat p-value

b0 –11.6% 1.657% –7.0 <0.0001

PR 0.25 0.032 7.8 <0.0001

YCS 0.14 0.28 0.5 0.62

 b0 and PR are significant (high t-stat, low p-value) while YCS is

insignificant (low t-stat and high p-value)
© Kaplan, Inc. 4

01_CFAXXXX_OnDemand_WB_L2V2_R01-R04.indd 3 10/11/23 12:43 PM

 4 Quantitative Methods

LOS 8.a Formulate/Determine

Multiple Regression

Formulate Regression Equation

 Suppose we think S&P 500 10-year real earnings growth (EG10) is
explained by:*
 Trailing dividend payout ratio of index (PR)
 Yield curve slope (YCS)
 Example: Formulate a multiple regression equation to describe this
relationship
*Adapted from Arnott and Asness (2003)

© Kaplan, Inc. 5

LOS 8.a Formulate/Determine

Multiple Regression

Formulate Regression Equation

EG10 = b0 + b1×PR + b2×YCS + ε

where:
EG10 = 10-year real earnings growth in S&P 500
PR = trailing dividend payout ratio of index
YCS = yield difference between 10-year T-bond and 3-month T-bill

© Kaplan, Inc. 6

01_CFAXXXX_OnDemand_WB_L2V2_R01-R04.indd 4 10/11/23 12:43 PM

Hi,

Hope you are doing well and safe. If you or your friends are preparing any exam shown on the
following list, please take time to read this email. We offer all kinds of study materials for most
of the financial, accounting, auditing, IT, language exams and tests. Rich experience gives us
insight how to choose right study materials with the lowest cost. Especially, our comprehensive
review packages will help you to prepare the exam more effectively and efficiently!

A. Financial Exams contact email johnway168@yahoo.com

1. CFA (the latest CFA notes, practice exams, mock exams, sample exams, topics &
check-points exams, question-bank, lecture video & workbook, audio, secret-sauce,
curriculum, flashcard, mind-map, study guide, final review workshop, testbank,
framework, smart-summaries, core-video series, official reading books and more….)

2. FRM (the latest FRM notes, practice exams, mock exams, topics assessment & check-
points exams, question-bank, lecture video & workbook, audio, secret-sauce, core-
reading books, flashcard, mind-map, study guide, final review workshop, testbank, final
review guidebook & exam, spreadsheet & formula-sheet, handbook & test strategies,
official reading books and more…)

3. CAIA (Chartered Alternative Investment Analyst)

4. CFP (Certified Financial Planner) contact email johnway168@yahoo.com
5. CFE (Certified Fraud Examiner)
6. CIIA (Certified International Investment Analyst)
7. ERP (GARP- Energy Risk Professional)
8. FFR (GARP- Foundations of Financial Risk)
9. SCR (GARP- Sustainability & Climate Risk)
10. CFA / Claritas® Investment Certificate CFA/ ESG Certificate
11. PRM (Professional Risk Manager)
12. CMT (Chartered Market Technician)
13. MBA (Master of Business Administration)
14. ACAMS (Certified Anti-Money Laundering Specialist)
15. Dip IFR (diploma in IFRS)
16. Securities Investment
17. FDP (Financial Data Professional)

B. Accounting & Auditing Exams contact email johnway168@yahoo.com

1. CPA (Certified Public Accountant)

2. CMA (Certified Management Accountant)
3. CIA (Certified Internal Auditor)
4. ACCA (Association of Chartered Certified Accountants)
5. CAT (Certified Accounting Technician)
 6. CIMA (Certified Investment Management Analyst)
7. CGA (Certified General Accountant)
8. ICAEW
9. IFRS contact email johnway168@yahoo.com

C. IT Exams
1. CISA / CISM / CRISC / CGEIT / CSX-P / CDPSE /
2. CISSP / SSCP / CCSP / CAP / CSSLP / HCISPP / ISSAP / ISSEP / ISSMP
3. PMP
4. CEH / CHFI contact email johnway168@yahoo.com
5. COBIT / Security+

D. Language Tests
1. GMAT / GRE / TOEFL / SAT / IELTS / ACT

E. Financial Materials:
1. Breaking Into Wall Street (BIWS)
2. Wall Street Prep (WSP)
3. Wall Street Oasis (WSO) contact email johnway168@yahoo.com
4. Corporate Finance Institute (CFI)
5. Training the Street
6. Kubicle
7. PPT/ Infographic templates from Infographia (1500+ templates)
8. PPT/ Infographic templates from SimpleSlides (10K+ templates)
9. Vault Guide Books
10. Statistics with Excel
F. Other Materials: contact email johnway168@yahoo.com

11. Best Forex/Trading Mastery Courses

12. Bitcoin/ Crypto Mastery
13. Social Media Marketing Mastery
14. Online retail Mastery
15. Google AdWords Mastery
16. Attention-deficit hyperactivity disorder (ADHD) Mastery Training
17. Amazing Selling Machine
18. Private level MBA 2018 contact email johnway168@yahoo.com
19. How to Invest Your Money
20. The Power of Negotiation by Vanessa Van Edwards

Please let me know if you are interested in any of them, then I will send you more details
and samples. Please contact me via email at johnway168@yahoo.com if you have any
questions or if you did not find the study materials you are looking for, We will help you to get
them!

Have a good day!

 Quantitative Methods 5

LOS 8.a Formulate/Determine

Multiple Regression

Formulate Regression Equation

 Regress EG10 on independent variables
 46 annual observations (n = 46)
 Two independent “X” variables (k = 2)

© Kaplan, Inc. 7

LOS 8.a Formulate/Determine

Multiple Regression

Regression Output:
Frequent Starting Point for Exam Questions

Variable bi Sbi

b0 –11.6% 1.657%

PR 0.25 0.032

YCS 0.14 0.28

© Kaplan, Inc. 8

01_CFAXXXX_OnDemand_WB_L2V2_R01-R04.indd 5 10/11/23 12:43 PM

 6 Quantitative Methods

LOS 8.b Interpret/Determine

Multiple Regression

Interpreting Coefficients
 EG10 will equal –11.6% if the two independent variables are both
zero.
 All else constant:
 1% increase in PR = 0.25% increase in EG10.
 1% increase in YCS = 0.14% increase in EG10.

© Kaplan, Inc. 9

LOS 8.f Explain

Multiple Regression

Assumptions of Multiple Regression

 Linear relationship between Y and X
 No exact linear relationship among X’s
 Expected value of error term = 0
 Variance of error term is constant
 Errors not serially correlated
 Error term normally distributed

These are related to violations (see later)

© Kaplan, Inc. 10

01_CFAXXXX_OnDemand_WB_L2V2_R01-R04.indd 6 10/11/23 12:43 PM

 Quantitative Methods 7

LOS 8.f Explain

Multiple Regression

Normal Q-Q Plot

 A normal Q-Q plot (usually called a Q-Q plot) compares a variable’s
distribution to a normal distribution.
 This helps us to visualize the distribution.
 The Q-Q plot is useful for exploring whether the residuals are
normally distributed.
 This is a key assumption of linear regression.

© Kaplan, Inc. 11

LOS 8.f Explain

Multiple Regression

Normal Q-Q Plot Example

 In this example, the
regression model error
term is close to being
normally distributed
 Though a handful of
outliers lie above or
below the theoretical
range

CFA® Program Curriculum 2023 Level 2, Volume 1, page 17 12

© Kaplan, Inc.

01_CFAXXXX_OnDemand_WB_L2V2_R01-R04.indd 7 10/11/23 12:43 PM

 8 Quantitative Methods

Fixed Income Quantitative

Investments Methods

Quantitative Methods

Multiple Regression
Evaluating Regression Model Fit
and Interpreting Model Results

LOS 8.i Evaluate

Multiple Regression

ANOVA Table

Source of Variation Df Sum of Squares Mean Square

Regression
k RSS MSR
(explained)

Error (unexplained) n – k – 1 SSE MSE

Total n–1 SST

These columns vertically sum 2

© Kaplan, Inc.

01_CFAXXXX_OnDemand_WB_L2V2_R01-R04.indd 8 10/11/23 12:43 PM