I’m not sure if this is a trick, or I’ve just been lucky, but a lot of times I don’t even do the quantitative questions because based on the answers I know which one is correct. For example, if CFA is asking for EAR on a loan, and it gives you the original term rate (LIBOR +X) and the call option that is purchased (Strike at Y) and then the final ending rate at option expiration (Z) the multiple choice will usually be:
B) New Number not mentioned in problem set at all
If the option strike Y is lower than the ending rate, Z, then I know the answer is B. Likewise if the option is out of the money, then the EAR will just be close to the LIBOR+X, or C. It might be slightly higher if the premium is super high on the option but you get my point. Does anyone else do this? Is this luck or just a benifiting from understanding what the answer should look like?