Think its about time to stop digging into details and start memorizing.
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Formulas
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Graphs
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Tips and tricks
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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:
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Calc compound call premium = cost of call * ((1 + (Libor + Spread) * (days til expiration of option / 360))
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Calculate interest due on loan = notional principal * (Libor + Spread) * (days in Libor / 360)
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Calculate option payoff = notional pricnipal * (Libor - exercise rate) * (days in Libor / 360)
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Calc net loan amount = loan amount - cost of compound call premium
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Calc effective interst = int due on loan - option payoff
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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.