# Its about time - Memorize

Think its about time to stop digging into details and start memorizing.

1. Formulas

2. Graphs

3. Tips and tricks

4. Notes

Agree - has to be the strategy now for ‘weak’ areas Anyone have tips/tricks for EAR calcs? Like a foreign language to me…

Secret Sauce and quick review of EOC’s for me

review all mock questions i got wrong, do all IPS one more time to practice the return calculation, and go over weak areas that I made a list of (today and tomorrow). Thursday will be one last review of flashcards, friday, one more read through the asset manager code and maybe a bit of GIPS but calling it early to relax and get ready…

whisper whisper : what is EAR lgirl?

are you referring to EAR when combining a put or call with a loan, or when doing total return analysis?

and yes, definitely do Ethics! I have been postponing Ethics till date, but now is the time - 2 out of the 10 vignettes is still a lot of marks! It’s also the border-line decider

I’m at the point where I just want to torch everything

Ethics/GIPS today (could there be a more painful day?!), review mocks tomorrow, do one final AM, and lots of flashcards.

Yep. At this point there should be no suprises / new material, just memorization and refining one’s understanding.

Today: Review CFAI Mock PM Exams

Tomorrow: Review 2009 - 2011 AM Exams

Thursday: AMC & Corp Finance

Friday: Ethics, a few flashcards, reivew about 10 formulas that have been hard to memorize. Look at PM Exams again to refresh on a few calculations.

Sat morning: Wake up early, eat breakfast, knock this mofo out.

Yep… time to memorize about 30 acronyms

use the calculator much easier:)

EAR for borrower who purchases a call option:

1. Calc compound call premium = cost of call * ((1 + (Libor + Spread) * (days til expiration of option / 360))

2. Calculate interest due on loan = notional principal * (Libor + Spread) * (days in Libor / 360)

3. Calculate option payoff = notional pricnipal * (Libor - exercise rate) * (days in Libor / 360)

4. Calc net loan amount = loan amount - cost of compound call premium

5. Calc effective interst = int due on loan - option payoff

6. EAR = (notional principal + effictve int / net loan proceeds)^(365 / days in Libor) - 1

That’s not really a tip/trick, but that is how you do it. *Fixed*

should be cost of call * ((1 + (Libor + Spread) * (days til expiration of option / 360))

SHOULD INSTEAD BE notional principal * (Libor + Spread) * (days in Libor / 360)

should be

notional pricnipal * (Libor - exercise rate) * (days in Libor / 360)

This line 6 was the only place where the POWER was correct.

[/quote]

This line 6 was the only place where the POWER was correct.

[quote=“drewd313”]

Ha ya your right, my bad. I think I would have realized that if I was actually doing the problem, but just typing it out I got a little carried away with the POWER.

I know that happens quite a bit.

And given the number of calculations … it is quite natural.

And as a natural extension.

On the IR Put:

You pay the Put Premium, as well as take on the Loan. So at time 0 your outflow = © Loan + IR Put Premium adjusted for the time when you decided to take on.

At the expiration of the IR Put:

You pay the A) Loan Interest + Principal = Principal * [1+(LIBOR at Last Reset + Spread) * N/360]

You pay the B) Put Payoff = Principal * Max([Strike - LIBOR at Last Reset],0) * N/360

Calculate [(A+B)/C]^365/N - 1 = EAR

In one of the exams the constructed a collar around the loan. so two payoffs, two premiums (or net premium) - be prepared

I got about 400 flashcards I need to get through - thursday and friday is going to be pure cramming those! I know about 60% of it.

hmm…I think this is one area of the text I will be PRAYING does not come up in meaningful size!

For borrower: [(1 + lowest of rates) * Principal / (Principal - FV of option premium at expiration)] - 1

For lender: [(1 + highest of rates) * Principal / (Principal + FV of option premium at expiration)] - 1

Use appropriates rates and annualize.