Q2 Part A, (i), the combination of portfolio 3 and 4 still lies on efficient frontier? Q3 Part D, (ii), where does 90% come from? Q7 Part C. Swap: when vaulating the floating leg, why the last floating payment is not discounted?
which 2008 exam are you referring to? the one I have is downloaded from CFAI, at 1st page, it says the following are representative of qs on 2008 Level III exam. Morning session.
The real CFA 2008 AM exam.
lzhao Wrote: ------------------------------------------------------- > The real CFA 2008 AM exam. Yes, this is what I have. in my 2008 am exam, Q2, starts as, Lou Donaldson and his neighbor, it is about behavioral finance, nothing w/efficient frontier. are you sure if it is 2008 one.
Yes. Sorry, I meant Q4, not Q2
lzhao Wrote: ------------------------------------------------------- > Q2 Part A, > (i), the combination of portfolio 3 and 4 still lies on efficient frontier? Q4 Part A : Any portfolio on efficient frontier can be a combination of two adjacent corner portfolio. > > Q3 Part D, > (ii), where does 90% come from? It’s better for you to send inquiry to CFAI. I was confused by this too. My feeling is that CFAI was not serious in making their guideline answer. > > Q7 Part C. > Swap: when vaulating the floating leg, why the last floating payment is not discounted? Floating leg is dicounted by the factor of 0.9911.
Q3 Part D, > (ii), where does 90% come from? in exam P18, 2nd last para. of vignette, require Titan contribute 927M in 2008, …benefit payment under TEPP 1030M in 2008. 927/1030=90%
> > Q7 Part C. > > Swap: when vaulating the floating leg, why the > last floating payment is not discounted? > for floating bond, the market value is reset to 1 at every single payment day. only the next payment + 1 discounted.
Q 7 part c. It’s theoretically wrong to discount fixed leg for the second payment though. When you cannot discount the floating leg, then you cannot discount the fixed. This will tilt the valuation.
PV (floating-leg) shall be correct, right ? But first term of PV (fixed-leg) shall be wrong, though the final answer is correct. Is it following shall be correct ? PV (fixed-leg) = [(0.055x(180/360)]x0.9911 + [(1+0.055x(180/360)]x0.9649
AMC Wrote: ------------------------------------------------------- > PV (floating-leg) shall be correct, right ? > > But first term of PV (fixed-leg) shall be wrong, > though the final answer is correct. Is it > following shall be correct ? > > PV (fixed-leg) = [(0.055x(180/360)]x0.9911 + > [(1+0.055x(180/360)]x0.9649 good catch. the first term is a little wrong, but the PV(fixed-leg)=1.0187 is right.
Q 7 part c. It’s theoretically wrong to discount fixed leg for the second payment though. When you cannot discount the floating leg, then you cannot discount the fixed. This will tilt the valuation.
derswap07 Wrote: ------------------------------------------------------- > Q 7 part c. > > It’s theoretically wrong to discount fixed leg for > the second payment though. When you cannot > discount the floating leg, then you cannot > discount the fixed. This will tilt the valuation. I don’t understand what you mean, can you advise tangibly ? My calcualtion was done accoding to L2 curriculum which shall be correct. Am I missing anything ?
AMC, My method makes just a little difference. Do not worry about it. Do it your way