CFA I Questions

Hi all,

A few questions from the CFA I end of chapter problems:

Reading 32 #17 - the answer computed Olivia’s salary with annuity due. Shouldn’t this be a regular annual discount (i.e. at the end of the year) since salary are normally not prepaid, rather than like a rent or insurance premium that are prepaid in advance ?

Reading 35 #12 - the question is basically using Brinson-Fachler, rather than BHB model. My question - will the exam normally specify which model to use? Since both models use slightly different computation methods ?

Reading 20 #32 - for the + shift, specifically (- twist + butterfly) - where does the -0.7610% come from ?


Greetings friend! I can’t speak to questions 1 and 3 above, since they are specific to your readings.

I can answer question 2 however since it’s a general one - the CFA exams almost always want Brinson-Fachler model, not BHB. This is in my opinion one of the major shortcomings of the Kaplan study program, if you are perchance using them, since in my old L3 materials they confused the two and didn’t adequately distinguish which is more important. BHB, to my knowledge, is a niche formula. Brinson-Fachler is the dominant formula everyone generally means when they say “Brinson.”

On the exam, if you see Brinson then assume unless they specifically say BHB that it’s in fact Brinson Fachler that they’re referring to. Having said that, if the test asks about BHB, you’ll be glad you memorized it too.

Also as a final tip - if you’re using Kaplan, please do cross check the CFA curriculum for the correct Brinson Fachler formula. When I took L3, Kaplan had some errata in their formulas. You don’t want to be on the wrong side of the pass rate despite diligently memorizing all the Kaplan formulas if you’re using them, because they are not always correct… even on the QuickSheet.

Cheers - good luck - you got this :+1:

Thanks, much appreciated for your input on BHB vs. Brinson models!

1 Like