Can someone please explain the following inconsistency: In the Sample Exam 3 Question #20 reallocating the portfolio to convert a portion from value-stock portfolio to growth the answer (as presented in the pdf CFAI provides) we assume in beta of cash to be ZERO. However… In the Mock Exam Question #45 when reallocating the portfolio to adjust the stock to bonds we assume the beta of cash to be teh duration of the cash index of 0.25. In both scenarios, the postion is cash is synthetic as the transaction is intended to be instantious. Can someone please explain this annoying inconsistency?
In the Sample 3 we are not given the duration for the cash equivalent, so i used a zero there. In the mock, the duration for the cash equivalent contract was given as .25, hence the .25 was used there. I know there has been a lot of debate on this, but the rule of thumb **I** am following is that you use zero unless told otherwise.
yeah, my problem was that i didn’t see the .25 in the mock so I went wrong. but if it’s mentioned, use it.
plyon has another loooong thread on this. no conclusion was reached…