# Sample 3

Q18 Why CFAI uses US bond duration as denominator? This means the US bond yield to decrease. If i use Euro bond duration as denominator, it means Euro bond yield to increase. Both spread changes would eliminate the yield advantage. I remember Schweser says always using the higher duration as denominator, and i laughed off. But is it the default one if question does not specifically ask the yeild change on which bond? Q4 WTF. CFA is a postgraduate program? Is it because you need undergraduate degree to take the exam? We better check with the Department of Education. Fixed income is killing me. 33%. Hate those conceptual double questions. I calculate correctly the covariance, and forward credit risk (well, the number is a guess). Need to check out the equation, it looks different from Level II.

You don’t always use the higher duration. Read what they are asking in the question. They will usually word it as “In terms of the U.S Bond, what would the yield spread have to change by” or something like that… Whichever bond they want the answer in, is the duration you use in the question.

The question is Over one year, the spread change that will eliminate the yield advantage of euro-bond over us-bond is closest to b) 0.17 c) 0.19 What’s your guess? I though i should calculate yield change for euro-bond. The good news is that we do not need to care about currency movement here. But could CFAI add extra condition “if we hedge the currency…”?

anyone? bumped

Would you mind pasting the entire question for me…curious to see it.

Elcaro, your subject line a bit vague, but I’m also interested in this. It appears that they use the higher duration bond. But unfortunately neither Schweser nor CFAI shows us an example such as this. Postgraduate program? this is bs.

Here is the input Duration Yield CountryBeta RFR Spot Forward US 5.9 x Eruo 5.5 x + 1.02% And the question is Over one year, the spread change that will eliminate the yield advantage of euro-bond over us-bond is closest to b) 0.17 c) 0.19 1.02%/5.9 = 0.17% - B 1.02%/5.5 = 0.19% - C