cvillecfa Wrote: ------------------------------------------------------- > i would actually go with short here - - schweser > says simply “long if going concern” in their > template but i have been handwriting notes from > actual cfa tests onto my sheet and i have “depends > on retirement age and age of workforce” written - > - looking through the tests again tonight - will > repost when i see the test that caused me to write > that okay - my bad - - 2001 CFAI exam - - this was bugging me - Q1 answer on the time horizon for a pension plan says “although going concern pension plans usually have a long horizon . . . has a shorter time horizon because of the reduced retirement age and relatively high median age of the workforce” so yeah, this is just comparing it to another pension plan so i guess the answer is still “long term” but may be helpful to throw in the qualifier
SHORTER. that is what i remember too
^agreed.
cvillecfa Wrote: ------------------------------------------------------- > 3rd & Long Wrote: > -------------------------------------------------- > ----- > > life ins company is broken up into the two > > following pieces: > > > > participant portion (Fixed Income piece) > matching > > assets with Liabs): Low risk, high liquidity > need > > > > surplus allocation (equity piece): Hgh risk, > lower > > liquidity need > > > yeah, that’s what schweser says in their template > but 2003 CFAI test answer simply says “minimal” - > - feel like i may not get many points for the > schweser answer given how far off it was I don’t want to confuse you specially so close to the exam, but when you consider liquidity requirements for Life insurance companies you have to do so in the context of the int. rate environment given. If int. rates are trending down, this reduces the Desintermediation risk and this will lead to lower liquidity requirements. The opposite will happen if int. rates are going up ( Liquidity needs will be significant due to increased surrenders of policies, disintermediation)
yep - - i think that’s consistent with the CFA answer from '03 too - - they said “in the absence of cash flow volatility” and disintermediation would clearly be that - - that’s a good point, i’ll add it to the sheet - thanks
I have to review all his for the 4th time… not looking forward to it.
I hate schwesr AMs. Use CFAI historical…that’s better. Comp is right - long but shoter.
it is always SHORT-ER never SHORT from what i remember
and the “shorter” time horizon will decrease risk tolerance, since payments to retirees will need to be made sooner, hence less ability to take excessive risks
Ran into another question like this today… will definitely make it a point to answer it on the exam with the word “SHORTER” as opposed to short.
This is very important stuff for LIII 2011