Here’s a cute one for all you angry lads… Paul McCormack is a U.S. investor interested in valuing a Japanese security. Which of the following regression equations would be useful to McCormack in assessing the currency exposure of the Japanese security to changes in the dollar/yen exchange rate? A) Domestic currency return = á + â (world market return). B) Local currency return = á + â (world market return). C) Domestic currency return = á + â (exchange rate movement). D) Exchange rate movement = á + â (gross domestic product).
C is the correct answer. I put that one up there to help drill home the +1. I don’t care what that question says Dinesh, I’m adding the +1 on exam day. I studied this section in depth in the CFAI cirriculum.
one second too late, I remembered this cause it came up on af when you and I were studying dinesh
Paul McCormack is a U.S. investor interested in valuing a Japanese security. Which of the following regression equations would be useful to McCormack in assessing the currency exposure of the Japanese security to changes in the dollar/yen exchange rate? A) Domestic currency return = á + â (world market return). B) Local currency return = á + â (world market return). C) Domestic currency return = á + â (exchange rate movement). D) Exchange rate movement = á + â (gross domestic product).
I want to say C, but seems to easy, theres always a TRICK
C for Lance’s Q. I don’t know what that heck B and D are with their #947!
c to the latest one? And dinesh I don’t get why it’s a for your previous one, despite Schweser’s answer.
LanceTX Wrote: ------------------------------------------------------- > I want to say C, but seems to easy, theres always > a TRICK I’d say C… a lot of times the trick is there isn’t a trick. Last year on the exam we had to translate the Current Assets via the AC Method. I was like no way it could be this easy. It was.
LanceTX is correct - C is the ans
i’ll join the c bandwagon for the last q
thepinkman Wrote: ------------------------------------------------------- > C for Lance’s Q. I don’t know what that heck B > and D are with their #947! I think that may be for “exposure”… is that an x-rated word or something?
What’s everyone’s confustion with Dinesh’s Question? Aren’t you supposed to use the domestic rfr?
dimitrous Wrote: ------------------------------------------------------- > thepinkman Wrote: > -------------------------------------------------- > ----- > > C for Lance’s Q. I don’t know what that heck > B > > and D are with their #947! > > > I think that may be for “exposure”… is that an > x-rated word or something? HAHAHA… you never know with their sick minds
yeah, so the Korean one. But why not add 1 to the 1.2?
thepinkman Wrote: ------------------------------------------------------- > What’s everyone’s confustion with Dinesh’s > Question? Aren’t you supposed to use the domestic > rfr? Yes you do, the question is why do you not a “1” to the 1.2. y= y(LC)+1 per schweser
“What’s everyone’s confustion with Dinesh’s Question? Aren’t you supposed to use the domestic rfr?” You are, but confusion comes if we need to add 1 to the sensitivity
Did I not sent an easy question to chill you guys out? Where the answer was : Domestic currency return = á + â (exchange rate movement).
For Dinesh’s Q I seemed to have gotten the correct answer a different way 3 + (.8*6) + ((1.2+1) * 2) = 12.2 They have 5 + (.8*6) + (1.2*2) = 12.2 Thoughts?
^^ Thats the million dollar question
pink you wouldn’t want to use the 3% risk free rate - that’s the US rate and the investors are korean, so you should use the korean risk free rate.