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Up5
This is just a personal opinion, so please take it with a grain of salt. I am registered for the December 2014 Level 1 test and so far I’ve covered Ethics, Quants, and I’m half way through Econ. I have used both the CFAI curriculum and Schweser books to study and for those three areas this is my conclusion. For Ethics, I feel the Schweser books are better to grasp the basics of the concepts, but for practice the CFAI case studies are more suitable. The reason is that the wording is long and confusing which resembles the test closer. The Schweser Ethics practice questions are straight forward and easier to answer whereas the CFAI Institute practice questions are more complex.
As for Quants, I went back and forth between both and feel they complement each other. I used both and feel I got a better grip of this section by using both books. For the Econ section, I’d go with the Schweser curriculum, it is so much better. The CFAI curriculum is unreadable and hard to grasp – I was an Econ for undergrad and grad school, and even then, I found it really hard to read of the CFAI books. I ended up reading the Schweser books for LOS 13, 14, 15, and 16, and referring back to the CFAI books to make sure Schweser didn’t miss anything. I hope this helps. Sorry I can’t provide feedback and the other areas, I’m still not there yet! :-/
Up5Ok, I went to look for an explanation in the CFAI book and this is actually clear. From the Equity and Fixed Income Book:
A limit price places a limit on what trade prices will be acceptable to the trader.
Limit buy order at $20 means buy stock at $20 or less. If stock price is greater than $20, the order won’t be executed.
Limit sell order at $20 means sell stock at $20 or more. If stock price is less than $20, the order won’t be executed.Stop price indicates when an order can be filled.
Stop buy order at $20 means buy stock once price is $20 or more, at less than $20, it won’t be executed.
Stop sell order at $20 means sell stock once price is $20 or less, at more than $20, it won’t be executed.Limit buy – buy cheap
Limit sell – sell expensiveStop buy – buy expensive
Stop sell – sell for cheapHope it helps, it definitely helped me!
Up4@haokaiyang – Oh dear! Yesterday I took the two March Mock tests (AM and PM) and those popups were the most annoying distracting thing in the world. Additionally, for the AM session, the exam with the graded answers and the explanations didn’t even show in the screen, which pretty much ruined my day! I took a 3-hour test, got a low score (aghrrr!) and don’t even know which ones I answered right or wrong. As for the loading, I had to wait like 30 minutes before the tests even loaded. I think I’ll end up getting additional third-party mock tests because the CFA Institute’s website seems to be having issues.
Up4Hi all,
I agree with most of you that felt the second part was harder than the first one. I felt the second part had a greater emphasis on problems that required math. I found myself spending over 5 minutes in some of those calculations – I’m sure there were shortcuts to solve them but don’t know them, so I fell behind and had to rush to finish.
I felt my heart pumping at a faster rate when I realized I still had 20 questions left and 45 minutes only. I’m sure a heart attack feels similar, hahahahaha. It felt like I’d faint a little bit! No joke.
I managed to finish my tests on time but the afternoon one was a struggle. I packed my lunch and made sure I had lots of protein and veggies. I am sure that made the afternoon session bearable!
As to what score I expect, it is honestly hard to tell. I feel a lot of the questions were framed to make test-takers fall for traps so I guess passing depends on how many questions you didn’t know and how many questions you knew but fell for a trap. If I fell for too many traps it is pretty much game over… and restart, hahahaha! (Already making plans for the June CFA Level 1, lol.)
Today I feel like someone beat me up with a bat. My body is sore, I have a headache, and my back is in pain. I never thought the stress of this test would affect me physically in such a negative way. Anyway, it is over for now, yay!
I guess my thoughts on this is that whether you pass or not, I am sure all of you that prepared for the test gained a great amount of good knowledge and will help you sharpen your skills even if you decide not to pursue the program ( I do encourage everyone to continue the program though).
Good luck to all and hope you get good news in January.
Up4Nothing awkward on my end except for the large number of people that took the test in pajamas…
Up4@spatel15- I love love your rant!!! I just finished working on that specific problem you’re talking about and went crazy counting the years and got completely confused between the 5% and 12% growth rate. I was thinking profanity probably as much as you did! LOL! That question tested my ability to find information in a gnarly arranged senseless reading and not so much on Equity. I agree with you 100%!
Up4Hello there!
An AR(1) model equation should be Xt=b0 + b1 X(t-1) + Et
For an AR(1) to have an adequate forecasting utility, b1 < 1
A unit root means that the coefficient (b1) of the AR(1) model is equal to 1
In other words, the slope of the coefficient is one (b1=1). Picture a perfectly straight line in a 45 degree angle in an X and Y graph.
When there is a “unit root” b1=1 and a random walk occurs.
There are two types of random walks: Without a drift and with a drift
No drift – b0=0 and b1=1 (no intercept)
Xt = b0 + b1 X(t-1) + Et
Xt = 0 + (1) X(t-1) +Et
Xt = X(t-1) + EtWith a drift b0>0 and b1=1(there is an intercept)
Xt = b0 + b1 X(t-1) + Et
Xt = b0 + (1) X(t-1) + Et
Xt = b0 + X(t-1) + EtWhy b1=1 – unit roots a problem? Because the mean reverting level is undefined
Mean Reverting Level = b0/(1-b1), if b1=1, then the Mean Reverting Level is b0/0 which is undefined.
When the Mean Reverting Level is undefined, the time series is non-stationary.I hope this helps!
Up4I used paper for both L1 and L2 and I did find them useful.
Up3Hi all,
Thank you so much for all your suggestions, there are fantastic and gives me an idea of what other CFA candidates are doing to tackle this. I am barely reading this and before checking the forum, I actually did a LOS count per day, and my conclusion was one or two LOS per day should be my goal, which come up to seven LOS reading per week. I work full time Monday through Friday 8 to 5 and while my job is not extremely demanding, like most of CFA test-takers, I get exhausted by the time I come home, and find it hard to study. However, I manage to study regularly for about 2 or 3 hours in the evenings during the week. As for the weekends, I study about 8 hours a day (Saturday and Sunday), a total of 16. My hours range from 20-30 hours a week depending on how late I come home (I work at different sites all the time). My educational background is an MA in Economics (why?!! I’ve never liked Econ), I have ten years of accounting experience (have had an accounting job before I even graduated from college), and minored in Finance.
@Maroon5- I do like the page count, I will definitely start keeping track of what I have left and how much I have accomplished. Also, I do agree that the areas of weaknesses will show up during the practice tests, which is why I don’t want cut time on those!
@jessmat- I described my background above since you asked. Thanks for posting those links, I read all the articles this morning (at work). Oh I know, I’m a bad girl, reading blogs during work hours, ha ha. The tips offered there are very helpful and there are some I already follow but some new ones I’ll apply to my prep. Also, thanks for making the page calculation! I didn’t do a Schweser notes calculation since it is not my primary studying source; however, maybe I’ll change my mind since things are more condensed there. It totally helps figuring out the amount of reading I have to do per day. It is good to know there are more candidates in the forum suffering like me, ha ha! Oh, and thanks too for liking my profile pic, it shows exactly how I feel about this whole CFA business.
@Maverick- I am too studying from the CFAI books (they’re my main source) and I’m using the Schweser materials to clarify concepts that are not clear to me from the CFAI readings. Last week, I actually started doing exactly what you suggested. I think I got caught up in the details before but when I realized I was behind, I began doing “more selective” reading. I started doing light readings for topics I already know and spending a bit more time on topics I have trouble with.
Up3Maybe some may disagree with me on this one, but I tend to do better if I study “backwards.” I go directly to EOC questions and mock test questions and “risk-focus” my studying based on that.
I studied the traditional way (reading first and then doing the EOC questions) for Ethics, Quants, and FRA, and I was extremely unproductive and slow.
You may also want to try the Pomodoro Technique (link: http://en.wikipedia.org/wiki/Pomodoro_Technique) which are studying blocs of 25 minutes with breaks of 3-5 minutes in between. I get distracted easily and this always helps me to stay focused during my study time and at work.
Up3Hi there,
I failed level 2 last June and I’m retaking the test in June 2017. I highly recommend getting the new notes as items in the curriculum have changed. Major changes are in the derivatives section, alternative investments section, portfolio management, and maybe corporate finance. I just received the new notes, I’m going over the material, and I definitely see changes. For example, there is a brand new chapter on hedging strategies in the derivatives section.
Up3Hi there,
Here is the answer to your first question: “Can someone help to verify if my understanding on the revaluation model is correct? When an asset is revalued higher than its historical cost, the gain is recorded on both the OCI (under revaluation surplus) and Balance Sheet (under shareholders’ equity in the revaluation surplus), correct?”
You are correct. However, in other problems there will be no account called Revaluation Surplus, it may go straight to Retained Earnings.
If the asset value (revaluation) > asset historical cost:
Assets increase by revaluation amount minus the extra accumulated depreciation
Equity increases by revaluation amount minus the extra accumulated depreciation
Net Income remains unchanged
OCI increases by the revaluation amount minus the extra accumulated depreciationHowever, keep in mind that if asset value revaluation < asset historical cost (impairment) it will flow through the income statement.
Up3Hi @rogileiza,
I understand that the formulas to get the justified trailing and leading multiples are counter intuitive. You’d think that the leading multiples would have the (1+g) and the trailing would not have the growth factor. However, it is backwards. Below are the derivations using the GGM:
justified trailing P0/E0=(1-b)(1+g)/(r-g)
justified leading P0/E1=(1-b)/(r-g)Using the Gordon Growth Model:
justified trailing
P0=D0(1+g)/(r-g) using the GGM – then divide everything by E0P0/E0=(D0/E0)(1+g)/(r-g) – D0/E0 = Dividend payout = (1-b) at time=0
Then – P0/E0=(1-b)(1+g)/(r-g)
leading trailing
P0=D1/(r-g) using the GGM – then divide everything by E1P0/E1= (D1/E1)/(r-g) – D1/E1 = dividend payout at time=1
Then – P0/E1=(1-b)/(r-g)
Up2Hi @tingwuwang,
Let me try this. If volatility is high, prices (and interest rates) will fluctuate more often and in greater proportions. A put option gives the right to the security holder to “return” “sell back” the security if the price falls below a certain threshold (the strike price). The put option is a protection to the bondholder. In times of high volatility (uncertainty), bondholders will be more willing to protect themselves against price declines, which will increase the demand of putable bonds (bonds with protection against losses), and therefore, the price of these putable bonds will increase.
Makes sense?
“Don’t really understand how an increase in volatility increases a putable bond’s value but decreases a callable bond’s value using this.”
I think it has to do with this:
Put-Call Parity of European Options
c + K·e^–rT = p + S0 c — the European call option price,
p — the European put option price,
S0 — the current stock price,
K — the strike price at maturity,
e — the mathematical constant number with value of approximately 2.71828,
r — the risk-free interest rate,
T — the time to maturity,
e–rT — the discount rate for the strike price K,
K·e^–rT — the present value of the strike price today, which is expressed sometimes as K·B or PV(K).If volatility is high (K·e^–rT) will be high. Call and Put values will be affected this way (based on the above equation):
c = p + S0- K·e^–rT – If K·e–^rT is high, call value decreases
p = c -S0 + K·e^–rT – If K·e–^rT is high, put value increases
Refer to this link for example problems:Up2Totally looking forward to an answer. I don’t get this concept either…
Up2Oh thank you. I think I mixed Misrepresentation with Conflicts of Interest indeed. I hope I can pick on those details on the Exam Day! :smiley:
Up2Thanks for posting this! I had no clue. I’m glad I ran into this. It is good review.
Up2Hello there,
Cash Flow from Operations (CFO) = Sales- Fixed expenses- Variable Expenses + Depreciation Tax Shield is correct indeed.
The Schweser Books provide the formula in the following ways which could be helpful depending on the information you get in the vignette.
CFO= (Sales – Cash Expenses – Depreciation) x (1-Tax Rate) + Depreciation
or
CFO= (Sales – Cash Expenses) x (1-Tax Rate) + (Depreciation x Tax Rate)Cash Expenses – Include both fixed and variable expenses.
The problem will always tell you whether the fixed and variable expenses were incurred in cash or credit. My perception, out of having done multiple practice problems, is that if the problem does not specify if the fixed and variable expenses were paid in cash, you just assume they were paid in cash.
I hope this helps.
Up2Just for reference, here is the answer I got for question # 1
Up2This is what I got for question #2. As far as why the increase in assets minus the extra depreciation is taken from the denominator is because a) the accounting equation needs to balance and b) because the amount of revaluation increases equity. I hope these answers help.
