It seems like almost all the EOCs have to do with cash and carry, which isn’t reverenced in the LOS but must be important. I don’t understand how you get the amount for the “tailed gold” in part C of question 1. It seems pretty close to subtracting the answer from part B, but I don’t understand why you would do this.
I’m also confused about how they get the future value amounts for the storage costs for part C of -.0305 for June and -.0309 for March
June: 0.03*(e^(0.06*3/12)) = 0.03045 ~ 0.0305 March: 0.03*(e^(0.06*9/12)) =0.03138 ~ 0.0314 , but CFAI gives 0.0309 and nothing in the errata , so maybe I am wrong
0.03*(1+6%/4)=0.0305 0.03*(1+6%/2)=0.0309
The first few words of the problem are: " Assume that the continuously compounded interest rate is 6% " But they use a formula for non-continuous rate? Is that going to happen on the test as well? What if they give two answers for the March , one at .0309 and one at 0.0314 . Should I guess they are going to use a wrong rate ?
sorry for the confusion. I was just gleaning quickly through the question. The correct calculation is 0.03*exp(6%/4)=0.0305 0.03*exp(6%/2)=0.0309 which will give you the same answer numerically as the linear method. The main point however was that you calculated interests for 3 quarters instead of 2 quarters, thus giving 0.0314 instead of 0.0309. Remember: storage cost is paid at THE END of the quarter. Hope that it is clearer.
Yes it is , and thanks for the correction