2022 CFA Program Curriculum Level I Corporate Finance, Equity, And Fixed Income

✍ Scribed by CFA Institute

• Publisher: Wiley
• Year: 2021
• Tongue: English
• Leaves: 666
• Edition: 1
• Category: Library

✦ Synopsis

Prepare for success on the 2022 CFA Level I exam with the latest official CFA^® Program Curriculum.

The 2022 CFA Program Curriculum Level I Box Set contains all the material you need to succeed on the Level I CFA exam in 2022. This set includes the full official curriculum for Level I and is part of the larger CFA Candidate Body of Knowledge (CBOK).

Highly visual and intuitively organized, this box set allows you to:

• Learn from financial thought leaders.
• Access market-relevant instruction.
• Gain critical knowledge and skills.

The set also includes practice questions to assist with your recall of key terms, concepts, and formulas.

Perfect for anyone preparing for the 2022 Level I CFA exam, the 2022 CFA Program Curriculum Level I Box Set is a must-have resource for those seeking the foundational skills required to become a Chartered Financial Analyst^®.

✦ Table of Contents

How to Use the CFA Program Curriculum
Background on the CBOK
Organization of the Curriculum
Features of the Curriculum
Designing Your Personal Study Program
CFA Institute Learning Ecosystem (LES)
Prep Providers
Feedback
Corporate Issuers
10
Corporate Issuers (2)
30
Cost of Capital-­Foundational Topics
Introduction
Cost of Capital
2.1 Taxes and the Cost of Capital
Costs of the Various Sources of Capital
3.1 Cost of Debt
3.2 Cost of Preferred Stock
3.3 Cost of Common Equity
Estimating Beta
4.1 Estimating Beta for Public Companies
4.2 Estimating Beta for Thinly Traded and Nonpublic Companies
Flotation Costs
Methods in Use
Summary
Practice Problems
Solutions
31
Capital Structure
Introduction
Capital Structure and Company Life Cycle
2.1 Background
2.2 Start-­Ups
2.3 Growth Businesses
2.4 Mature Businesses
2.5 Unique Situations
Modigliani–Miller Propositions
3.1 MM Proposition I without Taxes: Capital Structure Irrelevance
3.2 MM Proposition II without Taxes: Higher Financial Leverage Raises the Cost of Equity
3.3 MM Propositions with Taxes: Taxes, Cost of Capital, and Value of the Company
3.4 Costs of Financial Distress
Optimal and Target Capital Structure
Factors Affecting Capital Structure Decisions
5.1 Capital Structure Policies and Target Capital Structures
5.2 Financing Capital Investments
5.3 Market Conditions
5.4 Information Asymmetries and Signaling
Agency Costs
Stakeholder Interests
7.1 Shareholder vs. Stakeholder Theory
7.2 Debt vs. Equity Conflict
7.3 Preferred Shareholders
7.4 Private Equity Investors/Controlling Shareholders
7.5 Bank and Private Lenders
7.6 Other Stakeholders
Summary
Practice Problems
Solutions
32
Measures of Leverage
Introduction
Leverage
Financial Risk, the Degree of Financial Leverage and the Leveraging Role of Debt
Breakeven Points and Operating Breakeven Points
The Risks of Creditors and Owners
Summary
Practice Problems
Solutions
Equity Investments
11
Equity Investments (1)
33
Market Organization and Structure
Introduction
The Functions of the Financial System
2.1 Helping People Achieve Their Purposes in Using the Financial System
2.2 Determining Rates of Return
2.3 Capital Allocation Efficiency
Assets and Contracts
3.1 Classifications of Assets and Markets
Securities
4.1 Fixed Income
4.2 Equities
4.3 Pooled Investments
Currencies, Commodities, and Real Assets
5.1 Commodities
5.2 Real Assets
Contracts
6.1 Forward Contracts
6.2 Futures Contracts
6.3 Swap Contracts
6.4 Option Contracts
6.5 Other Contracts
Financial Intermediaries
7.1 Brokers, Exchanges, and Alternative Trading Systems
7.2 Dealers
7.3 Arbitrageurs
Securitizers, Depository Institutions and Insurance Companies
8.1 Depository Institutions and Other Financial Corporations
8.2 Insurance Companies
Settlement and Custodial Services and Summary
9.1 Summary 
Positions and Short Positions
10.1 Short Positions
Leveraged Positions
Orders and Execution Instructions
12.1 Execution Instructions
Validity Instructions and Clearing Instructions
13.1 Stop Orders
13.2 Clearing Instructions
Primary Security Markets
14.1 Public Offerings
14.2 Private Placements and Other Primary Market Transactions
14.3 Importance of Secondary Markets to Primary Markets
Secondary Security Market and Contract Market Structures
15.1 Trading Sessions
15.2 Execution Mechanisms
15.3 Market Information Systems
Well-­functioning Financial Systems
Market Regulation
Summary
Practice Problems
Solutions
34
Security Market Indexes
Introduction
Index Definition and Calculations of Value and Returns
2.1 Calculation of Single-­Period Returns
2.2 Calculation of Index Values over Multiple Time Periods
Index Construction
3.1 Target Market and Security Selection
3.2 Index Weighting
Index Management: Rebalancing and Reconstitution
4.1 Rebalancing
4.2 Reconstitution
Uses of Market Indexes
5.1 Gauges of Market Sentiment
5.2 Proxies for Measuring and Modeling Returns, Systematic Risk, and Risk-­Adjusted Performance
5.3 Proxies for Asset Classes in Asset Allocation Models
5.4 Benchmarks for Actively Managed Portfolios
5.5 Model Portfolios for Investment Products
Equity indexes
6.1 Broad Market Indexes
6.2 Multi-­Market Indexes
6.3 Sector Indexes
6.4 Style Indexes
Fixed-­income indexes
7.1 Construction
7.2 Types of Fixed-­Income Indexes
Indexes for Alternative Investments
8.1 Commodity Indexes
8.2 Real Estate Investment Trust Indexes
8.3 Hedge Fund Indexes
Summary
Practice Problems
Solutions
35
Market Efficiency
Introduction
The Concept of Market Efficiency
2.1 The Description of Efficient Markets
2.2 Market Value versus Intrinsic Value
Factors Affecting Market Efficiency Including Trading Costs
3.1 Market Participants
3.2 Information Availability and Financial Disclosure
3.3 Limits to Trading
3.4 Transaction Costs and Information-­Acquisition Costs
Forms of Market Efficiency
4.1 Weak Form
4.2 Semi-­Strong Form
4.3 Strong Form
Implications of the Efficient Market Hypothesis
5.1 Fundamental Analysis
5.2 Technical Analysis
5.3 Portfolio Management
Market Pricing Anomalies - Time Series and Cross-­Sectional
6.1 Time-­Series Anomalies
6.2 Cross-­Sectional Anomalies
Other Anomalies, Implications of Market Pricing Anomalies
7.1 Closed-­End Investment Fund Discounts
7.2 Earnings Surprise
7.3 Initial Public Offerings (IPOs)
7.4 Predictability of Returns Based on Prior Information
7.5 Implications for Investment Strategies
Behavioral Finance
8.1 Loss Aversion
8.2 Herding
8.3 Overconfidence
8.4 Information Cascades
8.5 Other Behavioral Biases
8.6 Behavioral Finance and Investors
8.7 Behavioral Finance and Efficient Markets
Summary
Practice Problems
Solutions
12
Equity Investments (2)
36
Overview of Equity Securities
Importance of Equity Securities
1.1 Equity Securities in Global Financial Markets
Characteristics of Equity Securities
2.1 Common Shares
2.2 Preference Shares
Private Versus Public Equity Securities
Non-­Domestic Equity Securities
4.1 Direct Investing
4.2 Depository Receipts
Risk and Return Characteristics
5.1 Return Characteristics of Equity Securities
5.2 Risk of Equity Securities
Equity and Company Value
6.1 Accounting Return on Equity
6.2 The Cost of Equity and Investors’ Required Rates of Return
Summary
Practice Problems
Solutions
37
Introduction to Industry and Company Analysis
Introduction
Uses of Industry Analysis
Approaches to Identifying Similar Companies
3.1 Products and/or Services Supplied
3.2 Business-­Cycle Sensitivities
3.3 Statistical Similarities
Industry Classification Systems
4.1 Commercial Industry Classification Systems
4.2 Constructing a Peer Group
Describing and Analyzing an Industry and Principles of Strategic Analysis
5.1 Principles of Strategic Analysis
5.2 Barriers to Entry
5.3 Industry Concentration
5.4 Industry Capacity
5.5 Market Share Stability
5.6 Price Competition
5.7 Industry Life Cycle
External Influences on Industry
6.1 Macroeconomic Influences
6.2 Technological Influences
6.3 Demographic Influences
6.4 Governmental Influences
6.5 Social Influences
6.6 Environmental Influences
6.7 Industry Comparison
Company Analysis
7.1 Elements That Should Be Covered in a Company Analysis
7.2 Spreadsheet Modeling
Summary
Practice Problems
Solutions
38
Equity Valuation: Concepts and Basic Tools
Introduction
Estimated Value and Market Price
Categories of Equity Valuation Models
Background for the Dividend Discount Model
4.1 Dividends: Background for the Dividend Discount Model
Dividend Discount Model (DDM) and Free-­Cash-­Flow-­to-­Equity Model (FCFE)
Preferred Stock Valuation
The Gordon Growth Model
Multistage Dividend Discount Models
Multipler Models and Relationship Among Price Multiples, Present Value Models, and Fundamentals
9.1 Relationships among Price Multiples, Present Value Models, and Fundamentals
Method of Comparables and Valuation Based on Price Multiples
10.1 Illustration of a Valuation Based on Price Multiples
Enterprise Value
Asset-­Based Valuation
Summary
Practice Problems
Solutions
Fixed Income
13
Fixed Income (1)
39
Fixed-­Income Securities: Defining Elements
Introduction and Overview of a Fixed-­Income Security
1.1 Overview of a Fixed-­Income Security
Bond Indenture
2.1 Bond Indenture
Legal, Regulatory, and Tax Considerations
3.1 Tax Considerations
Principal Repayment Structures
4.1 Principal Repayment Structures
Coupon Payment Structures
5.1 Floating-­Rate Notes
5.2 Step-­Up Coupon Bonds
5.3 Credit-­Linked Coupon Bonds
5.4 Payment-­in-­Kind Coupon Bonds
5.5 Deferred Coupon Bonds
5.6 Index-­Linked Bonds
Callable and Putable Bonds
6.1 Callable Bonds
6.2 Putable Bonds
Convertible Bonds
Summary
Practice Problems
Solutions
40
Fixed-­Income Markets: Issuance, Trading, and Funding
Introduction
Classification of Fixed-­Income Markets
2.1 Classification of Fixed-­Income Markets
2.2 Fixed-­Income Indexes
2.3 Investors in Fixed-­Income Securities
Primary Bond Markets
3.1 Primary Bond Markets
Secondary Bond Markets
Sovereign Bonds
5.1 Characteristics of Sovereign Bonds
5.2 Credit Quality of Sovereign Bonds
5.3 Types of Sovereign Bonds
Non-­Sovereign, Quasi-­Government, and Supranational Bonds
6.1 Non-­Sovereign Bonds
6.2 Quasi-­Government Bonds
6.3 Supranational Bonds
Corporate Debt: Bank Loans, Syndicated Loans, and Commercial Paper
7.1 Bank Loans and Syndicated Loans
7.2 Commercial Paper
Corporate Debt: Notes and Bonds
8.1 Maturities
8.2 Coupon Payment Structures
8.3 Principal Repayment Structures
8.4 Asset or Collateral Backing
8.5 Contingency Provisions
8.6 Issuance, Trading, and Settlement
Structured Financial Instruments
9.1 Capital Protected Instruments
9.2 Yield Enhancement Instruments
9.3 Participation Instruments
9.4 Leveraged Instruments
Short-­Term Bank Funding Alternatives
10.1 Retail Deposits
10.2 Short-­Term Wholesale Funds
Repurchase and Reverse Repurchase Agreements
11.1 Structure of Repurchase and Reverse Repurchase Agreements
11.2 Credit Risk Associated with Repurchase Agreements
Summary
Practice Problems
Solutions
41
Introduction to Fixed-­Income Valuation
Introduction
Bond Prices and the Time Value of Money
2.1 Bond Pricing with a Market Discount Rate
2.2 Yield-­to-­Maturity
2.3 Relationships between the Bond Price and Bond Characteristics
2.4 Pricing Bonds Using Spot Rates
Prices and Yields: Conventions For Quotes and Calculations
3.1 Flat Price, Accrued Interest, and the Full Price
3.2 Matrix Pricing
3.3 Annual Yields for Varying Compounding Periods in the Year
3.4 Yield Measures for Fixed-­Rate Bonds
3.5 Yield Measures for Floating-­Rate Notes
3.6 Yield Measures for Money Market Instruments
The Maturity Structure of Interest Rates
Yield Spreads
5.1 Yield Spreads over Benchmark Rates
5.2 Yield Spreads over the Benchmark Yield Curve
Summary
Practice Problems
Solutions
42
Introduction to Asset-­Backed Securities
Introduction: Benefits of Securitization
1.1 Benefits of Securitization for Economies and Financial Markets
How Securitization Works
2.1 An Example of a Securitization
Structure of a Securitization
3.1 Key Role of the Special Purpose Entity
Residential Mortgage Loans
4.1 Maturity
4.2 Interest Rate Determination
4.3 Amortization Schedule
4.4 Prepayment Options and Prepayment Penalties
4.5 Rights of the Lender in a Foreclosure
Mortgage Pass-­Through Securities
5.1 Mortgage Pass-­Through Securities
Collateralized Mortgage Obligations and Non-­Agency RMBS
6.1 Sequential-­Pay CMO Structures
6.2 CMO Structures Including Planned Amortization Class and Support Tranches
6.3 Other CMO Structures
6.4 Non-­Agency Residential Mortgage-­Backed Securities
Commercial Mortgage-­Backed Securities
7.1 Credit Risk
7.2 CMBS Structure
Non-­Mortgage Asset-­Backed Securities
8.1 Auto Loan ABS
8.2 Credit Card Receivable ABS
Collateralized Debt Obligations
9.1 CDO Structure
9.2 An Example of a CDO Transaction
Covered Bonds
Summary
Practice Problems
Solutions