Level I



I am struggling to understnad the some of the assumptions from investing in a fixed rate bond.

If the market YTM for the bond, our assumed reinvestment rate, increases after the bond is purchased but before the first coupon date, a buy and hold investors realized return will be higher than the YTM of the bond when purchased.
—Does this mean that the investor will get his par value $1000 as well as coupons. The difference being to normal investment is that the interest gained on the reinvestment is higher and therefore you get more money?

diversification ratio

hi everyone

if my portfolio contains 5 stocks A, B, C, D and E and their returns respectly are 7, -2, 5, -1 and 4 and their S.deviations are 2, 3, 7, 4 and 9

my question is about the diversification ratio, what the is the logic behaind this ratio? if i divide the S.deviation of the portfolio over a S.deviation of one of its security, how i can interpret the result?

for example the S.deviation of the equally portfolio is 5%

so if i take the S.deviation of C stock which is 5, the diversifaction ration = 1, what is the mathimetical logic for the 1?

Share-blocking vs. cumulative voting

Which of the following would most likely be considered a poor corporate
practice in terms of promoting shareholder interests?
A. The firm can use “share blocking:
B. The firm uses a third party to tabulate shareholder votes.
C. Voting for board members does not allow cumulative voting by shareholders
of all votes allotted to their shares.

Cost of trade credit


can anyone explain for me the Mathematical logic of cost of trade credit?

1+ (discount% / 1 - discount%) ^(365 / #days) - 1

why we add 1 and subtract 1?

Weighted Average Collection Example:

Weighted average collection on recievebles increased from 50 to 55 days.

Average days recieveables decreased from 52 to 48 days. 

What is the most likely scenario?

1. Credit standard were relaxed

2. Credit customers are paying more slowly this year

3. credit sales are a greater part of the firm this year.

The answer is 2. But I do get why it could not be number 1 or 3. 

Basically, what is the difference between weighted average collection and the average days recieveables in terms of credit policy for a company?

Suggested practice for the 2016 Level I CFA exam

As I write this note we have about 6 weeks remaining for the exam.  At this stage one of the most frequently asked questions is: “Where should I practice from?”

Here is my response:

1.      Curriculum blue box examples.  If you’ve been following my advice, you should have been working through the curriculum examples as part of your regular study.  At this stage it will be useful to revisit these examples and make sure you understand/remember the key concepts. Pay particular attention to the exam-style (MCQ) questions.

Share repurchase - Direct negotiation

I do not get how direct negotiation share repurchase would increase transfer wealth from the average shareholder to the wealthiest shareholder. 

Shouldn’t everyone get richer because a share repurchase would reduce the shares outstanding, thus increasing the stock price and making equity investors richer?


hello everone

as i learned from curriculum the asset beta = stock beta / 1+ (1-tax%) (D/E%), and the orgin of this formula is Asset bata= debt beta + stock beta  (until here it’s clear)

in the practice problems page 71 book 4 queation #10

they ask if a firm has a stable D/E% of 0.65 and recently they borrowed money and its D/E% increased to 0.75, what’s the effect on the assets beta and stock beta?

FRA question

A manufacturing company reports research costs and a loss on the sale of a business segement on its income statement. Which of these items should be included in operating expense?

A.Neither of these items

B.Only one of these items

C.Both of these items

Corret Answer: C. A loss on the sale of a business segement is extraordinary items and

is not included in operating expense?  Am I wrong ?


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