SS10: R25: Page154: q22: additional yield widening

SS10: R25: Page154: q22: additional yield widening:

any suggestion the concept behind it? THanks.

this whole concept i found it to be useless and confusing, anyway here is what i got out of the los and not the question specificly

so if you invest in a foreign country and you earn a return of x over your local return bond with same risk

what CFA wants you to solve for is what change in teh spread will eliminate your excess earnings, now a change in spread would mean one going up, or one going down, so if the interest of local currency went up, you will lose value on your investment and this destorys the advantage, if your rate went down, well you would earn more on your bond, and thus you would have been better off investing in your country, and thus also advanatge if lost, now since either of these events can wipe your advantage, they want you to solve for it from the perspective of the one with higher duration, ie if your local bond had higher duration, assume that your local rates will go down, and solve for the amount of decline that will would have made you indifferent bettwen your local bond and the forgin bond.

this is what i got out of it, i think it is BS, CFA stick some useless stuff sometimes, also if you find the orginal writtings, some of these readings have changed very little in 20 years, so much for the money they collect from candidates