let’s say there exists a closed end fund in the US tracking India’s stock exchange. now let’s say in the US, a passively managed index ETF comes out tracking india also. all else equal, what would happen to the closed end fund in terms of it’s premium/discount to NAV if it were trading at: 1. a premium already (aka would this premium go up or down?) 2. a discount part 2- say there’s no ETF but just the closed end on india. now let’s say india imposes restrictions on foreign investment. what’s going to happen to the px/nav ratio if it’s trading at a: 1. premium (aka will the premium go up or get closer to NAV) 2. discount GO!
1a) Closed end fund premuin reflects demand for the securities excess of supply aka illiquidity so premium goes down. 1B) Discount reflect management fees, transaction costs, and illiquidity (liquidity is a premium), with an etf the liquidity premium should improve while other factors remain constant so discount should go closer towards zero so up. 2a) premium refect excess demand for these securities so premium goes higher. b) discount happens because nobody want the securities so discount becomes wider aka down.
creating the etf gives investors another alternative besides the closed end. so if it were at a premium, one would expect the premium to go down since there’s another alternative out there. if it were already trading at a discount, the ETF now makes the closed end potentially even less attractive, so the discount would widen. restricting foreign investment- if it were at a premium, that premium would expect to rise b/c it’s more difficult to invest and it also would cut the discount for the same reason. questions 18 and 19 CFAI reading 35 more or less ask the same things if you want any more info on them. so bipolar, your A’s were good but your B discount sides were backwards. swaption, good morning.
Fell like going back to bed, with this dreaded thought that I have to waste yet another Sunny Sunday studying for the exam.
is it raining in NYC? it looks like it might rain here, so i prob should do the doggie walk now not later. i think ETD 5 minutes for the little man to get his walk. more equity after that- i’m in reading 37 now. did 34, 35, 36 so far this AM. edit- wait, you say sunny? interesting. still looks like rain right now here… think i’m taking the break.
hey Ban i remember you mentioned you lived around the harvard square area, im right by porter.
Sorry I am too lazy (Sunday effect) to create new threads… so piggybacking on banni’s… Under the temporal method, the inventory and cost of goods sold (COGS) accounts are both nonmonetary accounts. Which of the following statements is least accurate regarding these accounts? A) The Inventory account is remeasured using the historical rate under both LIFO and FIFO. B) If the firm accounts for inventory using first in, first out (FIFO), then a more current rate will be applied to the inventory account. C) If the firm accounts for inventory using last in, first out (LIFO), then the beginning-of-period rate is used to remeasure COGS.
swaptiongamma Wrote: ------------------------------------------------------- > Sorry I am too lazy (Sunday effect) to create new > threads… so piggybacking on banni’s… > > Under the temporal method, the inventory and cost > of goods sold (COGS) accounts are both nonmonetary > accounts. Which of the following statements is > least accurate regarding these accounts? > > A) The Inventory account is remeasured using the > historical rate under both LIFO and FIFO. > > B) If the firm accounts for inventory using first > in, first out (FIFO), then a more current rate > will be applied to the inventory account. > > C) If the firm accounts for inventory using last > in, first out (LIFO), then the beginning-of-period > rate is used to remeasure COGS. is it B?
I think the answer to Swaption’s question is C. reasoning: temporal Historic for both LIFO and FIFO is right. So A is fine. When FIFO is used, COGS will have what was purchased first. So Historic COGS, Current Inventory. LIFO -> COGS will have the latest purchases, - so Current COGS, Historic Inventory.
agree C here is the least accurate. i wouldn’t necessarily be he beg of period rate, but rather the historic rate when the stuff was purchased. bipolar- i live in porter. we’re neighbors! i’m not usually into crazy group study sessions, but if you ever want to do a session or grab a beer after this thing is over- bannisja at gmail dot com hit me up.
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