P - PV(CF) or FV(CF) - mystery solved - I think

CFA Level II
#1

So follow my logic - and I got this wrong so not trying to convince myself. The price of a future is P*(1+RF) - FV(CF) The price of a future is P + PV(CF) The cost of financing is basically the difference between the PV(CF) and FV(CF) so Step 1. P - PV(CF) = we back out the already included PV of cashflows Step 2. We add the risk free rate : P - PV(CF) + FV(CF) - PV(CF) Cancel the PV(CF) out and you are left with P - FV(CF) So the answer could have been P - FV(CF) I am almost certain that this is an experimental question and will be removed. I guarantee you that almost no CFA could do this on exam day other than by guessing.

#2

Not sure what version I had but this question seemed incredibly easy to me. I saw the numbers and what they were for and had the answer immediately. An answer I was (and am!) 100% sure about I had it correct. It seemed similar to a question on a Schweser practice exam I think.

#3

Are you trying to solve a mystery or create a larger one :slight_smile:

#4

Yeah, my little proof is not right because you still need to subtract FV(CF). This question makes no sense and will most likely be removed.

#5

along with contango hopefully

#6

SkipE99 Wrote: ------------------------------------------------------- > along with contango hopefully Why would they remove the easiest of the 120 questions?

#7

phils23 Wrote: ------------------------------------------------------- > SkipE99 Wrote: > -------------------------------------------------- > ----- > > along with contango hopefully > > > Why would they remove the easiest of the 120 > questions? LOL… seriously, this is the least controversial question on the entire exam. guys i am an analystforum novice, can someone tell me how to edit a previous post? i notice sebrock did this above.

#8

there’s a link under your post that says edit

#9

Yeah, I dont know where everyone is getting normal contango. There is no such thing. There is backwardation and normal backwardation and here the future was clearly over the spot so it was contango. I really need to stop posting and start enjoying my summer. God I hate the CFAI for making me wait so long.

#10

yeah but you can only edit a post within a couple minutes after posting it.