I even did calculations for both currencies, just to see if it was a trap…they really gave answers for both currencies as far as I recall.
LordJeffrey Wrote: ------------------------------------------------------- > IH8FSA I did it the same way as you did. I had no > problem on any of them and my calculations were > all coming up near exact. However, was confused on > the one with the 90% Equity and 10% debt that they > wanted you to make 50/50 equity/debt and buy > treasuries futures. What was the calculation for > that one? for this one i think you had to use ((Duration(Target) - Duration(Current Bonds))/Duration(Futures)) * Value of Bond/Price of Future This was a really tricky one where you could do the problem 3 different times and come up with a different multiple choice answer each time. I think i got 558 like CP0821.
hk Wrote: ------------------------------------------------------- > I even did calculations for both currencies, just > to see if it was a trap…they really gave answers > for both currencies as far as I recall. Yes they did. I didnt notice and my answer come up. My thinking was “oh great another easy question. Im doing really well.” Thats another lesson – If you think you are doing well you better go back and check on everything.
LordJeffrey Wrote: ------------------------------------------------------- > IH8FSA I did it the same way as you did. I had no > problem on any of them and my calculations were > all coming up near exact. However, was confused on > the one with the 90% Equity and 10% debt that they > wanted you to make 50/50 equity/debt and buy > treasuries futures. What was the calculation for > that one? Yes I also had problems with this one. I probably spent 25 min on it. The answer choices were 558, 722 & something else in the 500’s. I can’t remember the other number but I know I selected A, which was the lowest number of futures. Was 558 choice A?
I skipped this exact problem and went back to try to do it at the end. I still couldn’t figure it out, so I just guessed at A because it was the lowest (558 maybe?). I figured the other one in the 500’s (564 or something) was the trap answer for those that failed to catch the exchange rate aspect because using the exchange rate would have lowered the number. And 722 was out in left field. Crossing my fingers here.
Well my thoughts were right, this was a trick and I’m glad I noticed it right away. As for that 90/10 to 50/50, I think I got 558 as the answer. It’s not that complicated, similar examples were in older practice exams and in the book I think. I don’t remember exact numbers but here’s the thinking behind it. Say… Portfolio has $200 in assets 10% bonds, 90% equity that means $20 in bonds, $180 in equity But you want a 50/50 split so you want $100 in bonds, $100 in equity What this means is that you have to convert $80 of equity into “cash”, and then convert that “cash” into bonds. You use the typical (Dtarget-Dcurrent/Dfutures)*(Value of holding or portfolio)/PriceOfFutures Dcurrent is 0, because you’re converting “cash”. Dtarget is given in question. Value of holding is precisely the $80 that you’re trying to convert. Price of futures is given. (price of the futures on the bond contract, NOT the S&P futures)
Where the F**KKKKKKKKKKKKKKKKKKKKK was the currency difference given ??? Anyone in 8181 in Asia find the currency exchange rate given ?? I looked pretty hard for it and cldnt find it ! Besides the vignette stated something along the lines of "reporting in USD while all investments were just held in CHF for translation purposes or smthing like that !
I did it both ways, and it came out the same, so as long as you translated it to one currency, you were good.
I think it was CHF 88 million you were trying to convert