雖然自2003年開始，CFAI每年六月及十二月均舉辦Level 1考試，但Level 2及Level 3考試仍然維持每年僅在6月舉辦一次。


在考試的型態方面，2004年的Level 2考試分為兩部份：

• 上午三小時的問答題(essay questions)：偏重測驗重要觀念，如CAPM、Porter Five Forces等，考古題在準備時十分具有參考作用，分數比重係依據每題指定的時間來分配，所有效掌握時間十分重要；
• 下午三小時的應用選擇題(item set)：60題單選題，題數僅Level 1 (120題) 的一半，所以相對地平均作答時間每題為180秒，是Level 1 (90秒/題)兩倍，難度自然倍增。每題分數相同，不需花太多的時間在看不懂的題目。而且CFAI 從未公佈過Level 2及Level 3的item set題目，僅能參考坊間的教材題目。

依據2004 CFA Level 2 Study Guide所載，各科目之題型並不再指定是Item Set 或 Essay。所以，各科目之題目均有可能是Item Set 及(或) Essay。

值得注意的是CFAI已公告：自2005年起Level 2將改為全部item set，僅Level 3保留essay questions。而CFAI特別申明item set難度並不低於essay questions。

◎2003年六月最新考情
Level 2全球及格率47%。接觸過參加Level 2的台灣考生，過關率偏低，分析原因如下:

• 輕敵: 以應付Level 1的方式準備
• 投入時間不足
• 缺乏essay作戰技巧使用太精簡的教材
• 孤軍作戰，抓不到重點
• 遇到學習上之困難，求救無門

◎2004及2003之差異
CFAI已於2003年九月上旬公佈2004 CFA Level 2 Study Guide，經與2003 CFA Level 2 Study Guide比較，其中較大之變化包括：

• 指定教科書由原來10本增加至13本
• 各科目之題型並不再指定是Item Set 或 Essay。所以，各科目之題目均有可能是Item Set 及(或) Essay。
• 將原只有在Level 1才有的Corporate Finance，再增加到Level 2，內容與2003 Level 1的Corporate Finance接近，但增加了 Warrants & Convertibles及Mergers & Acquisitions、Control, Governance, & Financial Architecture及What We Do & Do Not Know About Finance等。
• Financial Statement Analysis部份在2003年時僅有三大主題：Intercorporate Investments & Business Combinations、Global Issues及Earnings Quality Issues (含Retirement Benefit Accounting)；而2004年則將很多2003 Level 1的議題再搬到Level 2，包括Inventories、Depreciation & Impairment、Income Taxes、 Financing Liabilities、Leases & Off-Balance-Sheet Debt及Financial Ratio Analysis等
  

 

◎各科重點導覽
Ethical & Professional Standards

• Codes of Ethics
• Standards of Professional Conduct
• Standards of Practice
• Topical issues
  ‧ Prudence in Perspective
  ‧ Trade Allocation: Fair Dealing & Disclosure
  ‧ Case Study: Changing Investment Objectives
  ‧ Compensation for Trading Errors
  ‧ Case Study: Soft Dollars

 

◎需對下列議題有充分了解：

• Disclosure requirements (to employer & client)
• Plagiarism rules
• Supervisor responsibilities (supervisors must be extraordinarily diligent)
• What constitutes a “reasonable basis”
• The requirements for research reports
• The criteria for “independence and objectivity”
• The requirements and standards of a fiduciary responsibility
• The requirements for portfolio recommendations
• Fair dealing guidelines
• Priority of transaction rules
• Confidentiality requirements
• Insider trading rules
• Performance presentation standards
• Soft dollar standards
• Trading error standards
• Differences between the prudent man rule & the prudent investor rule

 

◎Investment Tools

• Quantitative Methods for Valuation
• Hypothesis Testing
• Correlation & Regression
• Multiple Regression & Issues in Regression Analysis

 

◎常考之重要議題包括：

• Hypothesis Testing
  ‧Null hypothesis (what researcher wants to disprove) vs. Alternative hypothesis
  ‧One-tailed test vs. Two-tailed test
  ‧The calculated value of the test statistic computed from sample
  ‧Comparison of the computed value to the critical value from the tables (in many instances, CFAI will provide the regression output, including an ANOVA table, and expect candidates to use this data and perform hypothesis tests on the output) e make statistical decision
• Correlation and Simple Linear Regression
  ‧Calculating and interpreting correlation between variables
  ‧Independent variables e regression equation e dependable variables
  ‧Regression coefficients and testing
  ‧F-stat and R2 e evaluate the goodness of fit of a regression equation
• Multiple Linear Regression and Related Issues:
  ‧Model building and validity testing
  ‧Related issues: Heteroskedasticity, serial correlation (autocorrelation), & multicollinearity

Sample Concept	Forecast industry sales using regression analysis
Explanation	A regression analysis can be performed, using historical industry sales as the dependent variable, and GDP growth as the independent variable. Note that macroeconomic conditions such as GDP growth can affect industry sales in two ways - the level of sales and the composition of sales. Once a regression equation is derived, an estimate of industry sales can be calculated for differing levels of GDP growth by plugging the various values into the regression equation. It is often more informative to regress the change in one variable against the change in another, rather than just analyzing absolute levels of each variable.Two relationships must be considered - the effect of macroeconomic variables on the industry's sales and the effect of macroeconomic variables on the company's market share.
Source	http://www.excelreview.com/flash_cards_level_2.asp


◎Economics for Valuation

• Macroeconomics
  ‧Growth & Accumulation
  ‧Growth & Policy
• Private & Public Choices (2004新議題)
  ‧How Does Government Regulation Affect Your Life?
  ‧Nature Resources & the Future
  ‧Economics & Environment
• International Investments
  ‧Foreign Exchange Parity Relations
  ‧International Asset Pricing
• Analyzing the Firm’s Environment

 

◎常考之重要議題包括：

• Wealth accumulation & social choice
• Growth accounting equation
• International currency markets
• Foreign exchange relationships
• Parity relationships: international parity, interest rate parity, PPP, arbitrage, covered interest arbitrage
• Forward premiums and discounts & their relationship to nominal interest differential between two countries
• Change in real exchange rate: expected exchange rate
• Fisher effect & international Fisher effect
• Stages in product’s life cycle

Sample Concept	Identify the four stages of product life cycle.
Explanation	‧ Development - low sales levels, profits dependent on start up costs, little competition. ‧ Expansion - rapid sales growth, high profits for firms that were initial producers, high margins attract competition. ‧Maturity - increasing competition reduces profits, sales growth slows ‧ Decline - market saturated with product, sales could either stabilize or decline, profits fall, and frequently industry consolidates.
Source	http://www.excelreview.com/flash_cards_level_2.asp




Sample Concept	Forecast economic growth using the growth accounting equation
Explanation	The growth accounting equation calculates output growth as:(labor share x labor growth) + (capital share x capital growth) + technical progress or ΔY/Y = [(1 - Θ) x ΔN/N] + (Θ x ΔK/K) + ΔA/AIn the growth accounting equation, the growth rates of capital and labor are each weighted by their respective income shares. If, for example, labor's share were higher than capital's share, a 1-percentage point increase in labor would result in a greater increase in output than an equal increase in capital. The weighting of growth in inputs is critical in determining how much extra growth would be the result of raising the rate of growth of the capital supply (i.e. fiscal policy).
Source	http://www.excelreview.com/flash_cards_level_2.asp




Sample Concept	Differentiate between endogenous growth theory and neoclassical growth theory
Explanation	Endogenous growth theory attributes growth rates to a series of societal decisions, savings rates in particular. Technological progress is dependent upon the savings rate, especially the amount of saving directed toward human capital. Neoclassical growth theory attributes long-run growth to technological progress, but does not account for the economic factors contributing to that technological progress. Also, neoclassical growth theory states that economic growth and the savings rate are uncorrelated in the steady state, but evidence suggests that savings rates and growth rates are indeed positively correlated across countries.
Source	http://www.excelreview.com/flash_cards_level_2.asp




Sample Concept	Discuss the factors that are likely to promote economic growth
Explanation	High savings rate — savings must be directed towards investments in human capital Low population growth — per-capita income and therefore per-capita investment in human capital will be higher in those countries with low population growth Outward-looking orientation — must encourage industries to export, compete and survive in the world market Predictable economic environment — economies in turmoil or transition will experience declines in economic growth
Source	http://www.excelreview.com/flash_cards_level_2.asp




Sample Concept	Explain the theory of interest rate parity
Explanation	According to the interest rate parity theory, when comparing the currencies of two countries, the currency of the country with the lower interest rate should be at a forward premium versus the currency of the country with the higher rate. In efficient markets with no transaction costs, the forward premium / discount equals the interest differential of the two currencies. High interest rates on one currency are offset by forward discounts, and low rates on the other are offset by forward premiums. Interest rate parity must hold due to arbitrage opportunities. where rh = home country interest rate   rf = foreign country interest rate   e0 = spot rate (home currency value of one unit of foreign currency)   f1 = forward rate
Source	http://www.excelreview.com/flash_cards_level_2.asp




Sample Concept	Describe purchasing power parity
Explanation	Purchasing power parity states that for currencies, the foreign exchange rate must change by the difference between the domestic and foreign rates of inflation and can be stated by: where et the home currency value of the foreign currency at time t   e0 = the home currency value of the foreign currency at time 0   ih = the periodic domestic inflation rate   if = the periodic foreign inflation rate The relative version of purchasing power parity states that the exchange rate between two countries will adjust to offset differences in inflation rates. The value of higher-inflation currencies will be depressed relative to the value of lower-inflation currencies, all other things equal.
Source	http://www.excelreview.com/flash_cards_level_2.asp


 

◎Financial Statement Analysis
Financial Statement Analysis部份在2003年時僅有三大主題：Intercorporate Investments & Business Combinations、Global Issues及Earnings Quality Issues (含Retirement Benefit Accounting)；而2004年則將很多2003 Level 1的議題再搬到Level 2，包括Inventories、Depreciation & Impairment、Income Taxes、Financing Liabilities、Leases & Off-Balance-Sheet Debt及Financial Ratio Analysis等。故再復習Level 1的部份對參加2004 Level 2十分有幫助!

 

Financial Statement Analysis為Level 1及Level 2的最重點科目，同學務必特別注意，並投入可觀的努力。Level 2 Financial Statement Analysis較常考之重點如下：

- Intercorporate investments

• Cost vs. Equity vs. Consolidation
• Mark to market
• Cost or market method
• Proportionate consolidation
• Business combinations
  ‧Testing of pooling & purchase methods
  ‧Purchase/pooling problem
  ‧Different treatment of goodwill between IASB and US GAAP
  

- Accounting for foreign operations

• Foreign Currency Translation: All-current & temporal methods (and their impact on ratios)
  

- Accounting for pension plan

• How changes in assumptions affect pension obligation & pension expense
Balance sheet adjustment necessary to make the accounts reflect economic reality


- Other potential topics

• Commonly found ratios: interest coverage, debt-to-equity, current ratio, and ROE
• Basic accounting: LIFO/FIFO, leasing, off-balance-sheet financing, statement of cash flows, & depreciation
• Earnings quality: indicators of high quality earnings
  

Sample concept
	Snapshot
Method	Balance Sheet	Income Statement
Cost	Report investment at cost plus (minus) unamortized premium (discount)	Investment income = interest payment minus (plus) amortization of premium (discount)
Equity	Report investment at cost less dividend received ± proportionate share of investee profits (losses)	Investment income = proportionate share of investee income
Consolidation	Replace investment account with assets & liabilities (including minority interest) of investee company	Same as equity method Full sales & expenses of investee company reported together with reduction for minority interest expense
Proportionate Consolidation	Replace investment account with percentage owned of assets & liabilities (no minority interest recorded) of investee company	Same as equity methodProportionate sales & expenses of investee company recorded (no minority expense)
Source: http://www.shulmanreview.com/Study%20Session%2005-Level%20II-2003%20Notes.pdf

 

◎Corporate Finance
Corporate Finance在2003年的考試中僅在Level 1出現，但依據2004年的Study Guide，Corporate Finance將會在Level 2中出現，其內容與2003 Level 1的Corporate Finance接近，但增加了Warrants & Convertibles、Mergers & Acquisitions、Control, Governance & Financial Architecture及What We Do & Do Not Know About Finance等。依據2004年的Study Guide，Level 2的Corporate Finance議題包括：

• Cost of Capital
• Basic of Capital Budgeting
• Cash Flow Estimation & Other Topics in Capital Budgeting
• Risk Analysis & Optimal Capital Budget
• Capital Structure & Leverage
• Dividend Policy
• Warrants & Convertibles
• Mergers & Acquisitions
• Control, Governance, & Financial Architecture
• What We Do & Do Not Know About Finance
  

 

◎Equity Investments
Equity Investments與Financial Statement Analysis為Level 2中最重點的兩個科目，同學務必特別注意，並投入可觀的努力。依據2004年的Study Guide，Level 2的Equity Investments議題包括：

• Basic Valuation Concepts
  ‧ Equity Valuation Process
  ‧ Equity: Markets & Instruments
  ‧ Equity: Concepts & Techniques
  ‧Valuation Outside of the US
  ‧ Valuation in Emerging Markets Industry & Company Analysis
  ‧ Competitive Strategy: The Core Concepts
  ‧ Industry Analysis
  ‧ ROE is the Key
• Valuation Models & Measures of Value Added
  ‧ Discounted Dividend Valuation
  ‧ Free Cash Flow Valuation
  ‧ Market-Based Valuation: Price Multiples
  ‧ Residual Income Valuation
  ‧ Company Performance & Measures of Value Added
  ‧ EVA
  

 

◎常考之重要議題包括：

• Porter’s competitive analysis
  ‧Five basic competitive forces
  ‧Three generic strategies EVA/MVA analysis Capital asset pricing model (CAPM) Gordon growth model Dividend discount model (DDM)
  ‧Constant growth DDM
  ‧Two-stage DDMSustainable growth rate equation Dupont system Free cash flow valuation
  ‧Free cash flow to the firm (FCFF)
  ‧Two-stage FCFF valuation
  ‧Free cash flow to the equity (FCFE) Two-stage FCFF valuation Residual income flow valuation
  ‧Basic model, advantages, disadvantages & applicability
• P/E, P/S, and P/B ratios

Sample Concept	Describe the extension of the domestic capital asset pricing model (CAPM) to an international context (the extended CAPM)
Explanation	Extending the domestic CAPM for use in an international context involves using two unreasonable assumptions: one, that investors worldwide have identical consumption baskets, and two, purchasing power parity holds exactly at all times. In reality, consumption preferences differ among countries, and deviations from PPP can be a major source of exchange rate variation. An international CAPM can be developed using the assumption that investors in each country care about returns and risks measured in their own domestic currency. Investors can trade freely in any currency and can hedge currency risk. All other assumptions of CAPM still hold.
Source	http://www.excelreview.com/flash_cards_level_2.asp




Sample Concept	Identify and discuss factors that may contribute to changes in a company's market share.
Explanation	The primary factors affecting changes in market share are: ‧Changes in consumer tastes ‧Entry or exit of other firms ‧Relative strengths and weaknesses of firms in the industry ‧Changes in demand arising from macroeconomic conditions ‧Marketing strategies of firms within the industry In mature industries, market shares are relatively stable - the sales growth of firms will be closely tied to industry sales growth. A company's market share can be related to (1) its marketing efforts - more marketing effort should boost market share, and to (2) changes in competition - new competitors will take market share away. A firm's sales growth will be a function of industry sales growth, the firm's current market share, and projected changes in the firm's market share.
Source	http://www.excelreview.com/flash_cards_level_2.asp

 

◎Debt Investments

• Credit Analysis Measurement of Interest Rate Risk Term Structure & Volatility of Interest Rates Macroeconomics Valuing Bonds with Embedded Options Mortgage-Backed Securities (MBS) Asset-Backed Securities (ABS) Valuing MBS and ABS
• Commercial MBS

 

◎常考之重要議題包括：

• Credit Analysis Duration & convexity; expected price change for a bond Term structure of interest rates
  ‧ Expectations (including pure expectations, liquidity, & preferred habitat theories)
  ‧ Market segmentation
  ‧ Spot & forward rates Key rate durations Binomial interest rate tress
  ‧ Forward rates, coupons and nodal value
  ‧ Embedded option’s value Convertible bonds Mortgage-backed (mortgage passthroughs and CMOs) & other asset-backed securities
  ‧Prepayment risk Spread analysis
• Structured bonds & notes

Sample Concept	Differentiate between capital market integration and capital market segmentation
Explanation	Capital market integration means that real interest rates are determined by global supply and demand for funds. Capital market segmentation suggests that real interest rates are determined by local credit conditions. Capital market integration demonstrates that domestic real interest rates are dependent upon activities both inside and outside the home country. Capital market integration erodes almost all real interest rate differentials between comparable domestic and foreign securities. International market integration ensures that capital flowing across markets would instantaneously take advantage of any new information throughout the world. In an efficient, integrated international market, prices of assets would reflect their relative investment values. International market segmentation contends that although individual national markets may be efficient, many factors prevent international capital mobility.
Source	http://www.excelreview.com/flash_cards_level_2.asp




Sample Concept LEVEL IISelected Past Questions
2000 LEVEL II: QUESTION 19QUESTION 19 HAS TWO PARTS FOR A TOTAL OF 15 MINUTES
Martin Bowman is preparing a report distinguishing traditional debt securities from structured note securities. A. Discuss how the following structured note securities differ from a traditional debt security with respect to coupon and principal payments: i. Equity Index-Linked Notes ii. Commodity-Linked Bear Bond (6 minutes) Bowman is also analyzing a dual currency bond (USD/CHF) as a possible addition to his bond portfolio. Bowman is a USD-based investor and believes the CHF will appreciate Against the USD over the life of the bond. B. i.Describe the principal and coupon components of a dual currency bond. ii.State one reason why a dual currency bond might trade at a premium over an otherwise identical single currency bond. iii. Discuss whether there is an impact on a dual currency bond's interest payments and principal payments if the CHF appreciates against the USD over the life of the bond. (9 minutes)
Guideline Answer: A. i. Equity index- linked note Unlike traditional debt securities that pay a scheduled rate of coupon interest on a periodic basis and the par amount of principal at maturity, the equity index- linked note typically pays no or little coupon interest; at maturity, however, a unit holder receives the original issue price plus a supplemental redemption amount, the value of which depends on where the equity index settled relative to a predetermined initial level. ii. Commodity- linked bear bond Unlike traditional debt securities that pay a scheduled rate of coupon interest on a periodic basis and the par amount of principal at maturity, the commodity- linked bear bond allows for an investor to participate in a decline in a commodity's price. In exchange for a lower than market coupon, buyers of a bear tranche will receive a redemption value that exceeds the purchase price if the commodity price has declined by the maturity date. B. i. A dual currency bond is a debt instrument that has coupons denominated in a different currency than its principal amount. These bonds can be viewed as a combination of two simpler financial instruments: (1) a single- currency fixed- coupon bond in the home currency, and (2) a forward contract to exchange the bond's principal into a predetermined amount of a foreign currency. Dual currency bonds are generally sold to investors who are willing to "take a view" over the longer term in the foreign exchange market. ii. First, the effective forward exchange rate could be valued appropriately through the price premium, so the bond is properly priced. For the dual currency bond to be properly priced, the nominal forward exchange rate implied by the promised exchange of principal at maturity is actually favorable, and the price premium brings the effective forward exchange rate to a fairly priced level. Alternatively, the investor might be "paying up" for the convenience and the desirable foreign currency exposure that cannot be acquired in any other way. That is, the USD fixed income investor is willing to pay a premium to acquire a forward exposure in CHF, taking a longer term view that the CHF will appreciate against the USD. iii. If the bond's coupon pays in USD and principal pays in CHF, then the annual coupon payment will remain unchanged over the life of the bond. The principal payment due at maturity (in CHF) would have been fixed by the forward contract rate at the time the dual currency bond was purchased, but the principal payment revalued in USD terms will be higher to the USD investor because of the strengthening of the CHF against the USD. In other words, the CHF principal payment due at maturity, expressed in USD, will be higher because of the CHF appreciation.
Source	http://www.excelreview.com/flash_cards_level_2.asp




Sample Practice Exam Question
QUESTION 1 HAS ONE PART FOR A TOTAL OF 14 MINUTES
Bob Sterling is evaluating a 10 year mortgage backed security that has been split into interest only (IO) and principal only (PO) strips. Bob expects interest rates to fall by at least 200 basis points over the next three years, after which rates will enter an upward trend marked by significant volatility. Describe the expected price behavior of both the IO and PO strip over the next ten years, assuming Bob's interest rate forecast is correct. Recommend and justify either the IO strip or the PO strip as an investment for Bob.(14 minutes)
ANSWER - QUESTION 1 Source: Fabozzi Chapter 3 First three years: 2 points - as rates fall, the IO strip will decrease in value 2 points - IO strip decreases because as rates fall, prepayments will increase, reducing interest income. 2 points - as rates fall, the PO strip will increase in value 2 points - PO strip increases because duration is shortening and expected cash flows are being discounted back at lower interest rates. Next seven years: 1 point - as rates rise, the IO strip will increase in value 1 point - IO strip increases because as rates rise, prepayments will decrease, increasing interest income. Note that volatility may, however, allow for ongoing prepayments on rate drops that offset the effects of the rising trend 1 point - as rates rise, the PO strip will decrease in value 1 point - PO strip decreases because duration is lengthening and expected cash flows are being discounted back at higher interest rates. Again, volatility may allow prepayment opportunities that offset extension of duration. 1 point - recommend the PO strip1 point - because its better performance in the early years will most likely more than offset the IO performance in the later years.no points for argument that Bob should buy both pieces - this was not an alternative offered in the question.
Source	http://www.excelreview.com/review_material/tour_exam_level_2.asp

 

◎Derivative Investments

• Forward Markets & Contracts Futures Markets & Contracts Interest Rate Derivative Instruments Option Markets & Contracts Swap Markets & Contracts
• Swap Contracts, Convertible Securities, & Other Embedded Derivatives
  

 

◎常考之重要議題包括：

• Valuing various kinds of futures contracts, options, & swaps
  ‧Value a futures contract using cost-of-carry relationship
  ‧ Cash-and-carry & reverse cash-and-carry arbitrage
  …‧Arbitrage profit
  …‧mispricing Backwardation, normal backwardation & contango Hedging problem
  ‧Hedging with futures
  …‧Risk minimizing hedge
  …‧Calculation of cash flows from hedged vs. unhedged portfolios Cash flows for plain vanilla interest rate, currency, or equity swap Economic analysis of swaps
  ‧ Alternative test solution Option “Greeks”Valuing call and/or put option using the single or two-stage binomial, Black-Scholes, or Merton modelsCalculating annualized volatility based on daily, weekly, or monthly volatility Payoff diagram for option strategy
  ‧Option combinations & protective puts Put-call parity
  ‧ Synthetic positions (especially price puts) Valuing bond option using binomial interest rate tree Interest rate caps & floors
  ‧Expectations (including pure expectations, liquidity, & preferred habitat theories)
  ‧ Analyze cash flows & interpret these instruments in combination with other positions
• Swaps
  ‧ Overlay positions
  ‧Cash flow diagrams
  ‧Extendable/cancelable swaps

Sample Concept	Determine whether the real exchange rate changes in a period.
Explanation	Real exchange rate movements are defined as movements in the exchange rates that are not explained by differences in inflation rates between two countries. For example, assume there is a one-month inflation rate of 1 percent in Mexico and 0 percent in the U.S. For the real exchange rate to stay constant over the month, the Mexican peso must depreciate by 1 percent vs. the U.S. dollar. If the peso depreciates by any other amount (or appreciates vs. the dollar), then there would be a change in the real exchange rate.
Source	http://www.excelreview.com/flash_cards_level_2.asp

 

◎Portfolio Management：

• Introduction to Portfolio Management Introduction to Asset Pricing Models
• Extensions & Testing of Asset Pricing Theories

 

◎常考之重要議題包括：

• Use of CAPM/SML to evaluate securities Use of correlation to assess potential diversification benefitsUse of indifference curves to choose the optimal portfolioMarkowitz efficient frontier & capital market line (CML) Difference between CAPM and APT
• Roll’s critique of CAPM & its impact on the usefulness of CAPM as a performance measurement tool

Sample essay question

Part AFormulate the following elements of Stephenson’s policy statement and justify your response for each element with two arguments:- Return Requirement- Risk Tolerance(12 minutes)Part BFormulate the following elements of Stephenson’s investment policy statement and justify your response for each element with two arguments:- Liquidity- Time Horizon(8 minutes)

Source: http://aimr.org/pdf/cfaprogram/sample_essay_question.pdf