Judy Dudley, CFA, is an anlalyst and plans to visit a company that she is analysing in order to prepare a research report. Standard I(B) Independance and Objectivity: Requires Dudley to pay for all her own expenses and to not accept any gifts or compensation for writing a report. Required Dudley to pay for her own transportation costs, to not accept any gifts or compensation for wrigint eh report, but allows her to accept accomodations and meals that are not lavish. Requres Dudley not to accept any compensation but allows her to accept paid transportaion, lodging and meals. Allows Dudley to accept tranportation, lodging, expenses, and compensaion for writing a research report, but reuires that she disclosed such an arragnement in her report. Answer being D. I think this standard is one of the most trickiest allong with all those questions asking you what is NOT needed in GIPS. But the point about this question is that I read a similar question a couple of days back and remembered in the answer it said that she must pay for all transportaion and lodging but can accept small gifts. I specifically remember it but I can’t find the exact question. Has anyone else come accross conflicting answers in ethics between papers? ------------------------------------------------------------------------------------------------------------- An investment has an expected return of 10% with a SD of 5%. If the returns are normally distributed, the chance of losing money is closed to: the answer is 2.5%. I just took an educated guess here and got it right but can someone please explain the logic as I don’t understand the answers. -------------------------------------------------------------------------------------------------------------- A $1000 par semi-annual pay bond is trading for 89.14, has a coupon rate of 8.75% and has accrued interst of $43.72. The clean price of the bond is: 847.69 891.40 935.12 10000 The answer being B. I don’t get it. It’s the clean price the normal price of the bond less accrued interest so why isn’t it 891.4-43.72? (which is what i put) Any help much appreciated. Thanks
mambovipi Wrote: ------------------------------------------------------- > Judy Dudley, CFA, is an anlalyst and plans to > visit a company that she is analysing in order to > prepare a research report. Standard I(B) > Independance and Objectivity: > Requires Dudley to pay for all her own expenses > and to not accept any gifts or compensation for > writing a report. > Required Dudley to pay for her own transportation > costs, to not accept any gifts or compensation for > wrigint eh report, but allows her to accept > accomodations and meals that are not lavish. > Requres Dudley not to accept any compensation but > allows her to accept paid transportaion, lodging > and meals. > Allows Dudley to accept tranportation, lodging, > expenses, and compensaion for writing a research > report, but reuires that she disclosed such an > arragnement in her report. > > Answer being D. I think this standard is one of > the most trickiest allong with all those questions > asking you what is NOT needed in GIPS. But the > point about this question is that I read a similar > question a couple of days back and remembered in > the answer it said that she must pay for all > transportaion and lodging but can accept small > gifts. I specifically remember it but I can’t find > the exact question. Has anyone else come accross > conflicting answers in ethics between papers? > > -------------------------------------------------- GIPS? > > An investment has an expected return of 10% with a > SD of 5%. If the returns are normally distributed, > the chance of losing money is closed to: > > the answer is 2.5%. I just took an educated guess > here and got it right but can someone please > explain the logic as I don’t understand the > answers. > > -------------------------------------------------- P(Return < 0) = P( return < 2 s.d. below the mean) . Since 95% of observations fall within 2 s.d. of the mean, 2.5% fall in the lower tail and 2.5% fall in the upper tail => ans = 2.5% > > A $1000 par semi-annual pay bond is trading for > 89.14, has a coupon rate of 8.75% and has accrued > interst of $43.72. The clean price of the bond > is: > 847.69 > 891.40 > 935.12 > 10000 > > The answer being B. I don’t get it. It’s the clean > price the normal price of the bond less accrued > interest so why isn’t it 891.4-43.72? (which is > what i put) > > Any help much appreciated. > > Thanks
oh > A $1000 par semi-annual pay bond is trading for > 89.14, has a coupon rate of 8.75% and has accrued > interst of $43.72. The clean price of the bond > is: > 847.69 > 891.40 > 935.12 > 10000 > > The answer being B. I don’t get it. It’s the clean > price the normal price of the bond less accrued > interest so why isn’t it 891.4-43.72? (which is > what i put) > In the US bonds are quoted clean.
The first question has been addressed in another thread. The second question is asking what the chance is of getting an observation less than or equal to two standard deviations below the mean. The z-table reveals the answer of approximately 2.3%. The third question is somewhat tricky. The convention is that bonds are quoted clean, so accrued interest is not part of the bond price. Thus, it does not need to be deducted to get the clean price. The stated bond price is the clean price. If they asked for the full or “dirty” price, you would add the accrued interest.
i think i had read somewhere that bond price quotes are clean price quotes i.e. they do not consider accrued interest when quoted…
An aside here - even ten years ago, there was nobody who took these exams who hadn’t bought and sold bonds before. Every time I read these comments like “I read somewhere that bonds are quoted clean” I always think “Haven’t you looked at the friggin invoice?”
I’ve never bought or sold a bond before. i work purely in equities. Before studying for this exam I didn’t know much about them. i don’t think that unusual.
It’s not unusual now.
For question B; the 95% with 2 SD’s sound good. But if we are only looking at him loosing money then we are only concerned bout the left tail arnt we? so it should be 5%?
Bsivia: The 5% represents both tails. The loss tail would only be half of that, which would be 5% divided by 2, hence 2.5%.