@mm12
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Up5
“I’m sure you’ll pass” was uttered to me by a lot of colleagues – including those that did the CFA themselves. As I was more visibly studying than my colleagues (I scheduled weekly meetings after work to study and those were rarely visited except by myself), I was rapidly becoming the ‘benchmark’ of CFA studying. This put me in an awkward position, as I couldn’t fail while those who expected me to pass didn’t. Luckily I passed, but still… I’ll be getting some revenge on them in the coming years for sure!
Up5Hi @student808‌ I believe FV should be the opposite sign of PV (since PV is generally what you pay and FV is what you receive at the end). I don’t know how you arrive at ‘it should be 7.999M’. To be honest when I enter the numbers you provide above I get PV = -5.185…M. Like @vincentt‌ says, can you post the full question please?
Up5I voted Alternative Investments as it was the one topic on which I scored < 50% I think Derivatives is more complex, but I found it more fun to study and maybe that’s why I did better than on AI.
Up4@RaviVooda‌ If this is the literal phrasing of the question and answer, then they made a mistake somewhere, because their reason given for choosing A would be correct for C – which is the answer I think is correct. Where did you find this question?
VAR – Value at Risk is a metric that defines what your upper bound for losses are “within a certain confidence level”. The way I interpret VAR of $50,000 at 95% probability level is in only 5% of the situations would you love $50,000 or more. As @jwa mentioned though, it could be that they have their probabilities reversed and this could mean that in 95% of the cases would you lose $50,000 or more, in which case answer A is correct.
By the way, this is highly unlikely – I can’t even think of any normal situation in which you would hold a portfolio where you EXPECT TO LOSE $50,000 OR MORE IN ALMOST ALL SITUATIONS. This hypothetical portfolio should have a huge upside if you’d be willing to have such a downside loss. I can only think of a portfolio of way-out-of-the-money options expiring in the near future. There is a huge probability of them being worth nothing, so value will go down to zero, but in the rare case that they become in the money, you can make a lot of profit.
Up4Hey guys, I don’t agree entirely. In this case, I definitely agree that it should be $20 in this case, but the price taken in general is the ‘decision price’ which is the price at the moment the decision was made. So if the PM decided to buy the security in the middle of the day, the previous closing price is not relevant anymore.
Quote from page 24 of book 6 of the CFA Curriculum:
“Implementation shortfall is defined as the difference between the money return on a notional or paper portfolio in which positions are established at the prevailing price when the decision to trade is made (known as the decision price, the arrival price, or the strike price) and the actual portfolio’s return.”
(Institute 24)Institute, CFA. CFA Institute Level III 2014 Volume 6 Portfolio: Execution, Evaluation and Attribution, and Global Investment Performance Standards. John Wiley & Sons P&T, 2013-07-12. VitalBook file.
Up4I felt super prepared last year when I had 4 pencils and didn’t mind lending one to a colleague who had only brought one. This seems excessive 😀
Up4One more consideration – CFAI comes for free with exam registration, third-party tools may cost a lot more (anywhere from a couple of hundred $ to thousands). In my case my employer paid for the Schweser study materials – I might not have used them if I’d had to pay for them myself!
Up4@Zee‌ I know what you mean and I wasn’t really serious in my comment. I was referring to the more general situation in any level of school, where you look back at last year’s books and think “did I really find this stuff difficult? It’s so easy now”. Obviously this doesn’t quite hold true for the CFA 😉
Up4@Lollypolly‌ I believe it’s possible to pass level 1 in December if you start now, but like others have already said, it will take a major commitment time-wise and a lot of focus. I believe the opinion of your bosses may not be fair as they did the CFA exams such a long time ago. Maybe it was more doable back then, but today I’d say you need a lot of luck in addition to skill to pass CFA (any level) with that little preparation. There is a reason 300 hours is recommended…
Also, I had no background in finance whatsoever when I started the CFA so from personal experience I know that it’s possible 🙂
Up4Hi @Steven_Elseroad‌ I believe you didn’t give us a complete picture of the time you will be spending from end of January to the potential CFA level 2 exam. To properly estimate whether you have enough time, please let us know:
1 do you have a girlfriend/boyfriend?
2 if yes, do you intend to see him/her over the period February – June?
3 do you have family?
4 if yes, see 2)
5 do you have friends?
6 if yes, see 2)
7 do you have hobbies?
8 if yes, do you intend to spend any time on them?
9 how many hours of sleep do you need each night?
10 how much time do you intend to spend on studying for your college course and CPA exams combined?taking the inputs from the questions 1-10, remember that there is a maximum of 168 hours in a week, of which you’ll be spending much time not-studying. Then it’s a simple matter of solving for the amount of hours left to study for the CFA. If that’s still greater than 300, you’re probably good 😉
Up4@hairyfairy‌ I know, I assume Zee just omitted my name by accident. I just like to think that I’m a super-stealthy ninja member! 🙂
Up3Hey guys, I know I’m a bit late to the party, but I believe there is a reason for using the higher duration (I’m talking about the original question here). In this case, we are talking about spread widening, which is relative. Of course, we don’t know whether the yield for Japan decreases or the yield for the US increases or a combination of the two. So there isn’t a single answer, as a spread widening of 10 basis points can have be by any combination of US yields and Japan yields changing. In the WORST CASE though, the yield change will be in the bond with the higher duration, and in that case it will wipe away your ‘yield advantage’ the quickest.
The point here is that they are asking for a single number, although the problem is in a sense ‘two-dimensional’ as it depends on two inputs. Mathematically, the answer would be 0.7375% (the quarterly spread) = 9.12 * (increase in Japan yield) – 7.79 * (increase in US yield), so that given a change in one yield you can calculate the required change in the other to wipe away your advantage, and this will give you the spread. This is too complicated, so the answer simplifies this by (implicitly) asking “what spread change could in the WORST CASE wipe away the advantage?”
Hope this helps!
Up3Hi @vincentt‌, I suppose you mean the question from April 18?
“Mary Brickland, CFA, is analyzing two different domestic bonds. Bond A has the longer modified duration at 9.50 with a yield of 9.12%. Bond B has a modified duration of 7.30 and a yield of 7.80%. Brickland has an investment-holding period of one year and expects a favorable credit quality change for Bond B to increase its market value during this time frame. If Brickland buys Bond B, what is the required basis point change in the spread (in terms of the required yield on Bond B) to offset Bond A’s yield advantage?”
It does seem inconsistent. I think in this particular case, the question states that there will be an event that affects the yield of Bond B. Then the question has this phrase as well “(in terms of the required yield on Bond B)”. This leads me to believe that they expect the yield on Bond B to change and not on Bond A – so it makes sense to use Bond B’s duration.
This does almost-but-not-quite contradict the situation described earlier, as in that case we don’t know which of the two bonds will move to make the spread decline.
Up3Passed! Congrats to all the others in the 54% 🙂
