The official Beatthecfa's Challenge questions thread

rus1bus Wrote: ------------------------------------------------------- > I got 1st one wrong. I chose 3 yr deferral as > against 1 yr deferral. > > My immediate thininking was to compare it to a > european call option, with option value as S minus > X discounted by number of years. So, I chose 3yrs > giving me higher option value vs choosing 1 yr. > > But, where I got wrong (now that you have given > the correct answer!) was that S is the Maturity > Value of the Bond, so time scale to discount X > starts from Maturity Date and not today. So, a > call option deferred closer to Maturity will have > a LESSER value than a call option deferred further > away from Maturity Date. > > And I was thinking 2nd question was more > intelligent :slight_smile: > > Thanks. At the first glance, i was thinking the same as you.

rus1bus Wrote: ------------------------------------------------------- > I got 1st one wrong. I chose 3 yr deferral as > against 1 yr deferral. > > My immediate thininking was to compare it to a > european call option, with option value as S minus > X discounted by number of years. So, I chose 3yrs > giving me higher option value vs choosing 1 yr. > > But, where I got wrong (now that you have given > the correct answer!) was that S is the Maturity > Value of the Bond, so time scale to discount X > starts from Maturity Date and not today. So, a > call option deferred closer to Maturity will have > a LESSER value than a call option deferred further > away from Maturity Date. > > And I was thinking 2nd question was more > intelligent :slight_smile: > > Thanks. At the first glance, i was thinking the same as you.

D. Equity Swap

regarding the first question, if one said which has the highest Yield to first call it would have been D since the first call was 3 years out I’m going to say C for the new question

+1 on D, Equity Swap

I got your neck and wrist oh so bright

D equity swap, if fixed rate payer pays 5% and earns return on s&p but the s&p goes down he pays the fixed rate and the rate lost on the s&p, right??

daddybackstab Wrote: ------------------------------------------------------- > D equity swap, if fixed rate payer pays 5% and > earns return on s&p but the s&p goes down he pays > the fixed rate and the rate lost on the s&p, > right?? yes, exactly.

D. Equity Swap

Equity swap is the correct answer. Should have got there by elimination if you didn’t follow daddybackstab’s thinking. Anyway, ROUND 3: Question 1 A company owns a copyright, which was initially worth $100. Last year it was revalued to $110. This year, the copyright is worth $125 and the company wished to revalue it to reflect its current value. Which of the following statements is correct regarding the revaluation of this identifiable intangible asset: A. IFRS does not allow upward revaluations of identifiable intangible assets. B. Under IFRS, the company would have a higher NP margin compared to a situation in which no revaluation was recognized. C. Under IFRS, the company would have a higher total shareholders’ equity compared to a situation in which no revaluation was recognized. D. Under IFRS, the company would have a higher NP margin and total shareholders’ equity compared to a situation in which no revaluation was recognized. Question 2: Which of the following is least likely a margin measure for floating-rate securities: A. Spread for life B. Average quoted spread C. Discount margin Answers plus ADVICE in 24 hours :stuck_out_tongue:

Round 3 1) C 2) No idea, C?

  1. C 2. C Very interesting questions, beatthecfa !! specially the first one.

C, B first one - Assets increase by 15, you balance that with an increase to 15 in retained earnings, amortization expense will increase by a little so NP margin should not improve. second - I remember reading A, but I don’t know the difference between B or C

  1. C Gains a losses will by pass the IS and go straight to reserve. I think these are not to distributed and must be reinvested into business. 2) B (but not sure)
  1. C 2. C

C no impact on net income for adjustments to intangibles C these are easy braah, I just copied off Rus1Bus

I’m going with 1)C and 2) b

Q1) C Q2) B (Not sure abt this)

I_Passed_Level_1 Wrote: ------------------------------------------------------- > C no impact on net income for adjustments to > intangibles > C > > these are easy braah, I just copied off Rus1Bus And I just copied from Revenant, easy for me too :slight_smile:

ANSWER TIME!! First question- C Second question- B So I was really impressed that so many of you got the first one right! However: If we were reversing a previously recognized write DOWN, the adjustment would flow through the income statement to the extent of the previously recognized write down. In that case, both NP margin and SE would be higher. Anyway, the second one I just put in there because Schweser doesn’t cover it. Therefore, I think only one of you got it right. Its straight from the TB. Rus1bus: 2 out of 4 buddy, you’re not doing well on the beatthecfa challenge bro! Good thing you’re already through to Level II :stuck_out_tongue: Round 4 Question 1 In which two of the following five situations do Deferred Tax Assets NOT arise: A: The tax base of an asset exceeds its carrying value B: Higher expenses are charged on the financial statements than on the tax return. C: A liability’s tax base is greater than its carrying value D: Taxes Payable are higher than income tax expense. E: The firm has tax credits that directly reduce taxes. Question 2: Comparing FIFO based accounts to LIFO based accounts, which of the following is most likely incorrect if inventory quantities are stable and prices are falling: A: The current ratio is lower under LIFO B: The quick ratio is higher under FIFO C: Working capital is higher under FIFO