cash Sweep

CFA Level II
#1

What is the effect of Cash Sweep on equity guys?

#2

I heard from a little birdie that it generally will do something to the cost of capital but dont quote me on this.

#3

so every year a fund cash sweeps its required return of equity declines?

#4

wake2000 Wrote: ------------------------------------------------------- > I heard from a little birdie that it generally > will do something to the cost of capital but dont > quote me on this. Generally speaking, it means excess cash goes to payoff debt, lowering the riskyness of equity.

#5

100% agreed

#6

Yihaaaaaa, from what I read on the forum, I have at least 2/120…already a good start! But why did they ask about excess earning and direct income approach…:@

#7

I don’t really remember this question much, but I picked the MC answer that had the word equity in it… was that right?

#8

magicskyfairy Wrote: ------------------------------------------------------- > I don’t really remember this question much, but I > picked the MC answer that had the word equity in > it… was that right? I won’t address a question from the exam, but by lowering the risk of equity, you would lower the beta as well.