WACC question was totally whacked. First off, Sch sez don’t bother. Fine. It’s basic fng calculation. What pissed me off was cost of debt. Am I supposed to price this company’s debt at risk free 3%? That’s what I did and I know a few others did that, but come on… That was crazy…
most investors engage in exploiting chronic ineff-s despite the evidence that they can persist for a long time
did you guys get 6% for WACC? yeah I used the RFR
nailit Wrote: ------------------------------------------------------- > WACC question was totally whacked. First off, Sch > sez don’t bother. Fine. It’s basic fng > calculation. What pissed me off was cost of debt. > Am I supposed to price this company’s debt at risk > free 3%? That’s what I did and I know a few others > did that, but come on… That was crazy… That threw me off as well. I solved for the new Beta and their new cost of equity, but didn’t know how to solve WACC because I had no idea what the cost of debt was.
agreed motoloco Wrote: ------------------------------------------------------- > I think the morning sesion had the same level of > difficulty of the last year…Obviously if it is > the second time taking the test it will appear > easier… > > at least for me, the afternoon sesion harder than > the mock exam…to many tricky questions
sct123 Wrote: ------------------------------------------------------- > nailit Wrote: > -------------------------------------------------- > ----- > > I thought carve out was a total BS question. I > > surely didn’t come across that calculation > before. > > others did though. > > i caught this one on Thursday in practice exam vol > 2 exam 3 pm question 22.5 never had seen this > before. It was in the CFAI EOC questions
for independent analyst and pension fund question i said that it was non-compliant coz he had acted on material non-public information…there was a somewhat similar question in qbank i suppose… for house money … definitely more risk seeking behavior as they think its something over and above their own money dual reporting…no swiss and japanese…i was confused on this…i think they were talking about total return swap in which you exchange floating for the total return on the index…so it should have been Libor + 3% in exchange for japanese total return…but i got this wrong probably in fund suitability for pension fund…i wrote pension fund is responsible for finding out what about the value / growth style change every now n then? i said they should disclose in quarterly report…dont know if its right
i got .52 for the beta of operating assets but think i was wrong. saved this one for last cause i knew it would take 30 minutes
isn’t the wacc based on beta? beta of debt = zero… and anyway, the WACC i think they wanted was weighted average of operating asset beta… think i might have gone have screwed up “pension assets x beta”. i.e. may have used that as the pension assets at some point. well, hopefully part marks.
Dual reporting, YES. Think of the small investment firms… WACC was whacked…but it was only 4 points.
was the Pen fund in good position to take risk? Yes, they could afford to take more risk than say another fund that’s in a weaker shape. But at the end, let’s remember their objective. They have liabilities to meet and commitments, etc. They have income needs. Where Foundation is really just about meeting a spending requirement. So I think Foundations here, but I kind of obfuscated my answer on this Q so I am hoping for at least partial credit if I am wrong LOL mcpass Wrote: ------------------------------------------------------- > sct123 Wrote: > -------------------------------------------------- > ----- > > foundation > > Typically yes but they stated clearly that the > sponsoring company for the PF was doing great and > was willing to additionally add money to the fund. > For the foundation they specifically stated that > they would not donate anything else. Thus, I > specifically stated that usually it’s a foundation > but due to the above reasons I went for the PF.
I guess this answer and put down 3.5, but apparently it’s not the right one. Slash Wrote: ------------------------------------------------------- > Anyone get the carve-out? I kept getting 3.44 but > I think I may have been brain dead at that point. > > the closest was 3.5
i think for wacc i got something like 6.8% but could be completely wrong. My new asset beta was .85? and then i used 12% for cost equity and 3% for debt. I was searching far and wide for a debt cost …i thought i missed it somewhere.
I fell on my a$$ on that one right out the gate. First put down it was cool cause it didnt appear explicit nuff that dude knew about the tender. Then I kept thinking about it as I was moving through the exam and concluded that he knew, which of course means he should not have traded. monki Wrote: ------------------------------------------------------- > how about the very first question in PM - Yes / No > because not suitable / No because material > nonpublic info? > THat one threw me off already
Taylor Rule??? I got 3.75%, but what about that second part. I said an increase in rate would cause recession, but thinking back i may have made mistake in comparing to neutral rate.
I put down can only report to CEO, but I am not sure on this one. mans Wrote: ------------------------------------------------------- > A compliance officer can have a dual reporting > structure during the transition, right? >> I dont > think they can have dual reporting structure. They > can report to CEO and/or Board of Directors not to > Information Officer.
freaked Wrote: ------------------------------------------------------- > what about the value / growth style change every > now n then? i said they should disclose in > quarterly report…dont know if its right I put they needed no additional disclosures. However, I looked it up in the books and if I am reading it correctly they “must disclose and receive agreement from clients before making any changes to the investment strategy”.
op asset beta = 0.5 wacc = 3 + 0.52*9 = 7.68%
yep, putties were otm, worthless paper. no credit risk. no calcs. at least thats what I went with. if I was right, that saved me sh1tload of time. sct123 Wrote: ------------------------------------------------------- > what about the am question on the options. strike > and spot was both the same. i put no credit > credit risk because a euro option but put there > could be potential credit risk to hedge myself. > not sure on this one.
cant self train. pretty sure about this one. cdogstu77 Wrote: ------------------------------------------------------- > What about compliance system? Does compliance > officer have to train employees or can they do it > themselves? I think i got this wrong. …i said > they could self train.