For the last question when we want to convert the Midcap securities to cash, why dont we take the Beta into consideration? Don’t we want to reduce the Beta to 0? I got the 322 which is the answer but when I factored in the beta i got 300, which wasn’t one of the answers, but then I decided well let me see how many cash eqivalents I would have to buy (why? b/c I wasn’t thinking right) to convert into synthetic cash and the answer was there! Thanks CFA for the fake out b/c it was wrong. They didnt take teh Beta into consideration… So the difference in beta of .25 is not “risk-free”. Not too happy. Also, I was p!ssed off about the question on the “Current Credit Risk” question, since when is “Current” = Potential??? I always thought that Current was immediate and potential was Now. Poor wording I think on the Institute. Finally, I guess when they state “receive fixed pay floating” you are on the “sell” side of the transaction, but if they said “pay floating receive fixed” you would be on the long side of the transaction??? Who the heck knows.
had the same issue with the midcap question. in fact, if you look the relevant material in the books it specifically states that the formula they use in this problem is appropriate only if the portfolio being de-equitized is identical to the index underlying the futures contract. it’s readily apparent from the information in the question that they aren’t (even if you account for the fact that the futures contract will have a different beta than its underlying index). if you take their 322 number and calc out what happens if the market portfolio goes up 10% in the quarter and the beta relationships hold…well, you end up with a pretty darn unhappy client…
I posted this question yesterday in this forum. It seems they made a mistake in the future question. In the text it clearly says " Synthetic cash: beta of the two must be the same" otherwise the cash flows won’t match off-course. As for the " Receive fixed …" I made the same mistake and I was like … hummm … how would I know who’s long and who’s short …
Yeah plus I think their first question that was correct/incorrect I got right b/c the person didnt consider the different Betas!!! They set me up and then ambushed me! The other one I got wrong in that section which I’m p!ssed about was the Eurodollars one, I forgot to increase the value first by the Rf rate…damnit!!! Won’t make that mistake again.
Ok, so I dont feel so bad, we are all in the same boat
How did everyone do on that one? Was this the mock 30 question one or a 60 question one?
83%. Banged out the Ethics and Alternative Investments sections :). I’m supposed to review SS13 today, which I think might have gotten me an extra point, but not on the last one since I think its a flawed question.
If only they showed you how you were doing compared to others on these things like Schweser does.
you are giving CFAI ideas to make more money.
83% on sample 2