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CFA® Level II Question of the Day

CFA® Level II Question of the Day

Kaplan Schweser's CFA® Question of the Day begins in October 2016 and runs through Exam Day. Below you will find the answers for our Level II Question of the Day emails.

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May 28

By Kaplan Schweser | Posted on May 28, 2017


Answer to Level II Question: C

Answer Explanation: Poison put provisions require that bonds be repaid by the company if a hostile takeover is successful.  This results in a steep cost to the acquirer.

Choice "a" is incorrect.  A poison put would be classified as a rights-based defense rather than shark-repellent charter amendment defense.

Choice "b" is incorrect.  Restricted voting rights are the removal of voting rights for shareholders exceeding a certain percentage…

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May 27

By Kaplan Schweser | Posted on May 27, 2017


Answer to Level II Question: A

Answer Explanation: Supermajority amendments are a common preventative step to block mergers.

Choice "b" is incorrect.  Poison puts are offered to bondholders, not shareholders.  Poison puts are an earlier stage amendment allowing bondholders the right to demand repayment in the event of a hostile takeover.  Poison pills are offered to shareholders.  Poison pills are put in place pre-offer to refuse control to the bidding company.  This is done by…

Read More


May 26

By Kaplan Schweser | Posted on May 26, 2017


Answer to Level II Question: A

Answer Explanation: Proxy fights generally occur after unsuccessful tender offers because existing management at the target firm is attempting to secure a higher offer from the acquirer.  Tender offers, by contrast, represent direct offers by the acquiring firm to purchase shares of the target at a specified price.  The price generally includes a premium over the market price, providing an incentive for upper management to promote shareholder…

Read More


May 25

By Kaplan Schweser | Posted on May 25, 2017


Answer to Level II Question: A

Answer Explanation: An offer made directly to the company shareholders can be used as effective takeover tactic without a negotiated merger.

Choice "b" is incorrect.  This represents a takeover defense that existing shareholders can use to avoid a takeover.

Choice "c" is incorrect.  A two-tier offer relates to how the consideration is structured and must be amicably negotiated.

Read More


May 24

By Kaplan Schweser | Posted on May 24, 2017


Answer to Level II Question: B

Answer Explanation: The industry saw a period of stabilization and market maturity.  This trend led to its current state of relatively few U.S. manufacturers.

Choice "a" is incorrect.  Pioneering development is an excellent reason for the proliferation of manufacturers in the early stages of the automobile industry in the U.S. market; however, this does not explain its consolidation.

Choice "c" is incorrect.  Even with increasing gas prices, demand…

Read More


May 23

By Kaplan Schweser | Posted on May 23, 2017


Answer to Level II Question: B

Answer Explanation: Capitalizing costs increases total assets and shareholders equity, with the costs depreciated on the income statement in subsequent periods.

Choice “a” is incorrect. The decision to capitalize or expense a cost item has no impact on a firm’s pretax cash flows.

Choice “c” is incorrect. This is an inaccurate statement as firms that capitalize costs have lower net income and profitability ratios in subsequent periods than expensing…

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May 22

By Kaplan Schweser | Posted on May 22, 2017


Answer to Level II Question: C

Answer Explanation: Management generally promotes this type of poison pill provision into the corporate charter to allow existing shareholders to purchase additional shares at discounted prices if a purchaser's stake rises above a certain threshold.

Choice "a" is incorrect.  Although poison pill purchases represent new equity, no restructuring occurs.  Restructuring in the context of mergers and acquisitions generally indicate that the firm either…

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May 21

By Kaplan Schweser | Posted on May 21, 2017


Answer to Level II Question: C

Answer Explanation: The anticipatory rise in the price of a target's stock allows for substantial gains when an unsuccessful suitor sells back the initial stake to the target at a profit.  This is often called "greenmail."

Choice "a" is incorrect.  Historic returns show a significantly greater portion of merger gains accrue to sellers.

Choice "b" is incorrect.  Although merger activity tends to occur in waves, it usually coincides with rising stock…

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May 20

By Kaplan Schweser | Posted on May 20, 2017


Answer to Level II Question: C

Answer Explanation: Poison put provisions require that bonds be repaid by the company if a hostile takeover is successful.  This results in a steep cost to the acquirer.

Choice "a" is incorrect.  A poison put would be classified as a rights-based defense rather than shark-repellent charter amendment defense.

Choice "b" is incorrect.  Restricted voting rights are the removal of voting rights for shareholders exceeding a certain percentage…

Read More


May 19

By Kaplan Schweser | Posted on May 19, 2017


Answer to Level II Question: A

Answer Explanation: Supermajority amendments are a common preventative step to block mergers.

Choice "b" is incorrect.  Poison puts are offered to bondholders, not shareholders.  Poison puts are an earlier stage amendment allowing bondholders the right to demand repayment in the event of a hostile takeover.  Poison pills are offered to shareholders.  Poison pills are put in place pre-offer to refuse control to the bidding company.  This is done by…

Read More


May 18

By Kaplan Schweser | Posted on May 18, 2017


Answer to Level II Question: A

Answer Explanation: Proxy fights generally occur after unsuccessful tender offers because existing management at the target firm is attempting to secure a higher offer from the acquirer.  Tender offers, by contrast, represent direct offers by the acquiring firm to purchase shares of the target at a specified price.  The price generally includes a premium over the market price, providing an incentive for upper management to promote shareholder…

Read More


May 17

By Kaplan Schweser | Posted on May 17, 2017


Answer to Level II Question: A

Answer Explanation: An offer made directly to the company shareholders can be used as effective takeover tactic without a negotiated merger.

Choice "b" is incorrect.  This represents a takeover defense that existing shareholders can use to avoid a takeover.

Choice "c" is incorrect.  A two-tier offer relates to how the consideration is structured and must be amicably negotiated.

Read More


May 16

By Kaplan Schweser | Posted on May 16, 2017


Answer to Level II Question: B

Answer Explanation: The industry saw a period of stabilization and market maturity.  This trend led to its current state of relatively few U.S. manufacturers.

Choice "a" is incorrect.  Pioneering development is an excellent reason for the proliferation of manufacturers in the early stages of the automobile industry in the U.S. market; however, this does not explain its consolidation.

Choice "c" is incorrect.  Even with increasing gas prices, demand…

Read More


May 15

By Kaplan Schweser | Posted on May 15, 2017


Answer to Level II Question: B

Answer Explanation: Industries such as coffee shops based on organically grown coffee were once largely pioneering.  Hill O' Beans saw an opportunity to expand their success via the acquisitions of competing organic coffee shops.  The type of merger based on their industry lifecycle is most descriptive of horizontal mergers.

Choice "a" is incorrect.  Organic growth was how Hill O' Beans began their road to success.  Promoting the business and gaining…

Read More


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April 14

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April 13

By Kaplan Schweser | Posted on April 13, 2017 | Read Article


April 12

By Kaplan Schweser | Posted on April 12, 2017 | Read Article


April 11

By Kaplan Schweser | Posted on April 11, 2017 | Read Article


April 10

By Kaplan Schweser | Posted on April 10, 2017 | Read Article


April 9

By Kaplan Schweser | Posted on April 09, 2017 | Read Article


April 8

By Kaplan Schweser | Posted on April 08, 2017 | Read Article


April 7

By Kaplan Schweser | Posted on April 07, 2017 | Read Article


April 6

By Kaplan Schweser | Posted on April 06, 2017 | Read Article


April 5

By Kaplan Schweser | Posted on April 05, 2017 | Read Article


April 4

By Kaplan Schweser | Posted on April 04, 2017 | Read Article


April 3

By Kaplan Schweser | Posted on April 03, 2017 | Read Article


April 2

By Kaplan Schweser | Posted on April 02, 2017 | Read Article


April 1

By Kaplan Schweser | Posted on April 01, 2017 | Read Article


March 31

By Kaplan Schweser | Posted on March 31, 2017 | Read Article


March 30

By Kaplan Schweser | Posted on March 30, 2017 | Read Article


March 29

By Kaplan Schweser | Posted on March 29, 2017 | Read Article


March 28

By Kaplan Schweser | Posted on March 28, 2017 | Read Article


March 27

By Kaplan Schweser | Posted on March 27, 2017 | Read Article


March 26

By Kaplan Schweser | Posted on March 26, 2017 | Read Article


March 25

By Kaplan Schweser | Posted on March 25, 2017 | Read Article


March 24

By Kaplan Schweser | Posted on March 24, 2017 | Read Article


March 23

By Kaplan Schweser | Posted on March 23, 2017 | Read Article


March 22

By Kaplan Schweser | Posted on March 22, 2017 | Read Article


March 21

By Kaplan Schweser | Posted on March 21, 2017 | Read Article


March 20

By Kaplan Schweser | Posted on March 20, 2017 | Read Article


March 19

By Kaplan Schweser | Posted on March 19, 2017 | Read Article


March 18

By Kaplan Schweser | Posted on March 18, 2017 | Read Article


March 17

By Kaplan Schweser | Posted on March 17, 2017 | Read Article


March 16

By Kaplan Schweser | Posted on March 16, 2017 | Read Article


March 15

By Kaplan Schweser | Posted on March 15, 2017 | Read Article


March 14

By Kaplan Schweser | Posted on March 14, 2017 | Read Article


March 13

By Kaplan Schweser | Posted on March 13, 2017 | Read Article


March 12

By Kaplan Schweser | Posted on March 12, 2017 | Read Article


March 11

By Kaplan Schweser | Posted on March 11, 2017 | Read Article


March 10

By Kaplan Schweser | Posted on March 10, 2017 | Read Article


March 9

By Kaplan Schweser | Posted on March 09, 2017 | Read Article


March 8

By Kaplan Schweser | Posted on March 08, 2017 | Read Article


March 7

By Kaplan Schweser | Posted on March 07, 2017 | Read Article


March 6

By Kaplan Schweser | Posted on March 06, 2017 | Read Article


March 5

By Kaplan Schweser | Posted on March 05, 2017 | Read Article


March 4

By Kaplan Schweser | Posted on March 04, 2017 | Read Article


March 3

By Kaplan Schweser | Posted on March 03, 2017 | Read Article


March 2

By Kaplan Schweser | Posted on March 02, 2017 | Read Article


March 1

By Kaplan Schweser | Posted on March 01, 2017 | Read Article


February 28

By Kaplan Schweser | Posted on February 28, 2017 | Read Article


February 27

By Kaplan Schweser | Posted on February 27, 2017 | Read Article


February 26

By Kaplan Schweser | Posted on February 26, 2017 | Read Article


February 25

By Kaplan Schweser | Posted on February 25, 2017 | Read Article


February 24

By Kaplan Schweser | Posted on February 24, 2017 | Read Article


February 23

By Kaplan Schweser | Posted on February 23, 2017 | Read Article


February 22

By Kaplan Schweser | Posted on February 22, 2017 | Read Article


February 21

By Kaplan Schweser | Posted on February 21, 2017 | Read Article


February 20

By Kaplan Schweser | Posted on February 20, 2017 | Read Article


February 19

By Kaplan Schweser | Posted on February 19, 2017 | Read Article


February 18

By Kaplan Schweser | Posted on February 18, 2017 | Read Article


February 17

By Kaplan Schweser | Posted on February 17, 2017 | Read Article


February 16

By Kaplan Schweser | Posted on February 16, 2017 | Read Article


February 15

By Kaplan Schweser | Posted on February 15, 2017 | Read Article


February 14

By Kaplan Schweser | Posted on February 14, 2017 | Read Article


February 13

By Kaplan Schweser | Posted on February 13, 2017 | Read Article


February 12

By Kaplan Schweser | Posted on February 12, 2017 | Read Article


February 11

By Kaplan Schweser | Posted on February 11, 2017 | Read Article


February 10

By Kaplan Schweser | Posted on February 10, 2017 | Read Article


February 9

By Kaplan Schweser | Posted on February 09, 2017 | Read Article


February 8

By Kaplan Schweser | Posted on February 08, 2017 | Read Article


February 7

By Kaplan Schweser | Posted on February 07, 2017 | Read Article


February 6

By Kaplan Schweser | Posted on February 06, 2017 | Read Article


February 5

By Kaplan Schweser | Posted on February 05, 2017 | Read Article


February 4

By Kaplan Schweser | Posted on February 04, 2017 | Read Article