# The "Be careful to:" Thread

Cash & Carry, you are also short (borrow) the value of the spot at RF rate. Right?

paca06 Wrote: ------------------------------------------------------- > Cash & Carry, you are also short (borrow) the > value of the spot at RF rate. Right? sorry, i just meant really which is CC and which is reverse? CC is short future, long spot and borrow money. have to check the exact math. then reverse CC is long future, and the opposite of the rest.

Hedge return = -%hedged*currency change Cash duration = not always 0.25 PE and RE - benchmark is not a requirement 3 scenarios under which market value of commodity swap changes MPSR Put strike price + put price = effective conversion rate Rl+(f-s)/s even is IRP does not hold

tom18606 Wrote: ------------------------------------------------------- > Hedge return = -%hedged*currency change > Cash duration = not always 0.25 > PE and RE - benchmark is not a requirement > 3 scenarios under which market value of commodity > swap changes > MPSR > Put strike price + put price = effective > conversion rate > Rl+(f-s)/s even is IRP does not hold looks like an interesting list, but i don’t understand all of them. can you elaborate on “3 scenarios”?. and i don’t remeber the “put strike price” one as you have it? on the PE and RE, don’t all the normal requirements still apply? i.e. u need a benchmark. i thought the normal req’s don’t apply, but i think i read that they do

3 scenarios - rate changes, forward prices change and overpayment/underpayment (value to one party in either case) PE and RE, book says “if they present” otherwise just disclose the reason why no benchmark. Please double check. You have a put strike is \$0.90/euro and price of put is 0.10. Basically you are paying \$1 for 1 euro (effective rate)

Is that inflation before tax calculation explicitly written in the CFAI text? Some of the older exams have the pretax gross up calculation first then add inflation

Ferrari321 Wrote: ------------------------------------------------------- > Is that inflation before tax calculation > explicitly written in the CFAI text? Some of the > older exams have the pretax gross up calculation > first then add inflation Yes it is - i believe its in the Individual IPS section but cant remember where

For private and company sponsored foundation the minimum spending rate is 5 percent so if they give you anything less then that you have to use 5 percent!

Retain your records for the higher of the legal minimum and whatever CFA code/standards you’re concerned with: …SIX years under the asset management code of conduct …SEVEN years under the CFA Standards. (CFA Vol 1 p.88 and 211)

Remember to read the wording VERY carefully in Ethics / GIPS questions. I noticed the Mock (and even L2 questions) ask either… “Are the actions in compliance with the requirements of…” while others ask “Are the actions in compliance with the requirements and recommendations of…” Easy to miss “recommendations” if you’re just looking for the word requirements.

Jscott24 Wrote: ------------------------------------------------------- > Calculate the FUTURE VALUE of the interest rate > option call premium when calculating effective > interest I want to add that the risk free rate to calculate the FV of the premium is the LIBOR plus any bp - i.e. the actual borrowing rate

pz2009 Wrote: ------------------------------------------------------- > Jscott24 Wrote: > -------------------------------------------------- > ----- > > Calculate the FUTURE VALUE of the interest rate > > option call premium when calculating effective > > interest > > I want to add that the risk free rate to calculate > the FV of the premium is the LIBOR plus any bp - > i.e. the actual borrowing rate nice - good addition, forgot about that

Jscott24 Wrote: ------------------------------------------------------- > pz2009 Wrote: > -------------------------------------------------- > ----- > > Jscott24 Wrote: > > > -------------------------------------------------- > > > ----- > > > Calculate the FUTURE VALUE of the interest > rate > > > option call premium when calculating > effective > > > interest > > > > I want to add that the risk free rate to > calculate > > the FV of the premium is the LIBOR plus any bp > - > > i.e. the actual borrowing rate > > > nice - good addition, forgot about that CFAI book reference to this concept?

^yes they do

no, i mean where?

dont have it open because im in shutdown mode but the section on interest rate options - reading 43? Right after equity option strategies

ok - im also in that mode, but this will bother me if i dont look at it. thanks for the info

Jscott24 Wrote: ------------------------------------------------------- > dont have it open because im in shutdown mode but > the section on interest rate options - reading 43? > Right after equity option strategies Jscott, you are ready! do you know why the discount rate for Forward rate agreement is normally just LIBOR, not the actual borrowing rate?

I think thats just standard practice You have an example of this?

no example on hand. hopefully no questions on FRA.