New Plan

WHy am i wasting time on redicukous hard stuff that i will prob get wrong on the exam like calculating the EAR for interest rate options… or the entire second half of options (after the payout patterns)… when at most itwill be 2 questions?

Spending time on stuff i KNOW will be tested.

yeah that calculation is a lot of work. but once you get it down after doing 3 or 4 of those problems its relatively straight foward.

i would rather this type of question than anything with - name two advantages and disadvantages of …

but i agree - lots of calcs and takes too long. the manuel silva case had the EAR of a put and the next question the EAR of a call.


i feel kind of dumb and it drives me NUTS that i spent a full day a few months ago learning it and i had it down. I remember you pretend the initial “loan” is a loan that earns interest. And depending on if its a call or put you add or subtract it.

Hopefully a quesiton will be like… If you are going to borrow in the future… do you buy a call or put? (call)

If you are going to lend in the future… what do do? fear rates will go down, but a put.

Think of it like this: We learned the broad concepts and have a good base but going into the exam you need to sharpen your edge and fine tune your techniques for the weight you are about to carry. You’ve been playing with wooden sticks to practice but we’re going to war now - it’s time to bust out the katana, buff out your armor, and become one with the weight you are about to carry. Sharpening your formula knowledge is how I’m going to get that question right that everyone else is going to miss, because I know I can move that much quicker than you with my armor being put on for practice just 1 week earlier.

Pass or sepuku mother truckers.

nah dont feel like that. i think its up there with one of the most detailed calcs for the L3 curriculum. so frustrating. whether you add libor to the premium compounding or not? there are so many little details on that EAR calc i cant see them asking that. i hope not at least!

youre right if its anything it will be a call or a put. or what will the cost of the premium be in 30 days…

or lets hope not at all!

Man up and relearn it. It’ll take 30 seconds to remember how to do it, assuming you did it correctly in the past. There are no shortcuts. Potentially 4 points on the exam, difference between a pass and a fail if you’re right on the line.

There are a ton of little turds throughout the curriculum, but they add up to being a big pile of shit come exam day. Suffer now and win in August.

haha. Jsobes. haha…

I’ve been wondering this myself, actually. A few stupid calculations that require 3/4/5 steps. Not sure if it’s worth learning these things 100%. Takes time to learn, maintain, redo, etc.

The calculations are the easiest points to get on L3 in my opinion. Generally the question is pretty black and white unlike some of the more esoteric qualitative questions you’ll find in the AM. You don’t wanto to get a Band 10 email in August and kick yourself because you didn’t know the process. I’ve been there.

Well no one ask you to do them in steps. Take it easy and do it in one step. Try to see if the option is in the money then use it in the calculation withought computing the effective interest rate ( actual payment ± option payoff) dunno if that help. For example. If you want to compute the EAR for a borrower just compute in the numerator the payment to the lender ( notional principal + ( LIBOR in the money plus margin ) * n/N) / what you received ( notional principal - call future premium) then annulize it .

Hahaha, love this. You Japanese? lol