# Level III

## 2013 CFAI Mock Q: 27 in PM Section

I don’t quite understand why the variance gives the following formula

Var(M) = Var(F1) * (b1)^2 + Var(F2) * (b2)^2 + 2 * b1 * b2 * Cov (F1,F2) + Var (error)

Why are the beta’s squared and how do we calculate the error term here? Thanks. Continue reading

## 2010 Mock PM section #35

Over the next six months Vertex is forecasting:

• low and stable implied interest rate volatility
• a positively sloped yield curve with short rates rising 25 bps and long rates rising by about 75 bps.

Q: Given Vertex’s interest rate volitility and yield curve forecasts in Statement 4, compared to bullet structures, callable strucutres and putable structures, repsectively, will most likely:

1) underperform, outperform

2) outperform, underperform

## Cheapest to Deliver or Futures Price

For hedging or reallocation if they give you both futures price and the cheapest to deliver price…how do you know which to use in the formula? Continue reading

## Schweser Online Mock

Anyone do the online Mock?  I thought it was pretty relevant and was more accurate than the 6 mock exams they give out. Continue reading

## Strategy for \$10 million AUM index fund for Russell 2000

To minimize tracking error, what would one use?

Full replication? Optimization? Or stratified sampling?

I don’t know how many stocks Russell 2000 has but if it is 2000 (http://www.russell.com/indexes/data/fact_sheets/us/russell_2000_index.asp), you have about \$5000 per stock if they were equal-weighted, and they are not. So you’ll probably have \$100 to buy some stocks, barely enough. The question is, is that enough for full replication? Continue reading

## Schweser Practice Exam 1 - Morning Session Question 2 - Contradiction

Question 1 - Answer states a return objective of 11% to meet her needs and maintain the purchasing power of her portfolio.

Question 2 - Asks you to choose allocation bands to asset classes that are in line with her IPS from question one.

The only possible way to meet the objective of 11% return is too choose a higher allocation to REITS and International equities. (US equities only has an expected return of 8.5%, obviously bonds and cash below that) Continue reading

## Where are the PM mocks?

All I have are AM tests from the cfa site but I keep seeing posts for PM tests for 2012 or other years. Someone please tell me where to get these. Much appreciated. Continue reading

## Ethics: Duties to Employers

Pg. 99 Required Readings, Example 3.

David Edwards, a trader at Wheeler a national brokerage firm, assists a customer in paying for the securities of Highland by using anticipated profits from the immediate sale of the same securities. Highland is not on Wheeler’s recommended list.

The example above was supposed to highlight how Edwards’ supervisor failed to supervise him.  However I am confused as to what activities Edwards engaged in that were a violation. Continue reading

## How do you guys feel about 2012 Mock?

I did several Scheweser practice exams and scored OK (around 70), but this 2012 Mock is killing me…the way they present questions is kind of award to me.( I did half of the questions and almost fall asleep…)  How do you guys feel? Continue reading

## MAR/VAR and choosing from a group of portfolios

In questions where given investor circumstances (usually IPS related) and asked to select the best portfolios allocation among a group of portfolios, I have seen Schweser use an analytical VAR element to reject certain portfolios (in which they give a confidence level so you can perform the calculation) and when given a Roy’s Safety First Ratio that must be surpassed (where they will give the minimum acceptable ratio and the minimum acceptable return). Continue reading

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