This will help you pass....

CFA Level III
#81

A

#82

A

#83

A. Sweet question :slight_smile:

#84

If you ask this question to the professional traders, 99.9999% will say B.

But for CFA, A.

Ths is a good question…to distinguish you are a trader or CFA candidate.

#85

Because, EUR/USD = $/€. If CFAI uses EUR/USD, USD is the base currency. See CFAI Vol. 4 Fn. 2, p. 7.

#86

Correct answer is A. I honestly don’t feel an explanation is needed.

#87

Thanks for the Grinold-Kroner question, helped me catch an area where there could be a trick! I double counted inflation and ended up at answer C instead of B. Won’t do that again!

#88

awesome to hear wct2010!!! that’s the reason i’m doing this.

#89

Question 8 (a bit more challenging than yesterday’s)

Mr. Jones replies to his client, “When immunizing your portfolio, all we have to do is make sure the PV of all the cash flows is equal to the PV of the future liabilities, and that the duration of your portfolio is lower than your time/investment horizon. Also, just so you know, when the yield curve is downward sloping, the immunization rate of return will be greater than the yield to maturity of the portfolio.”

Mr. Jones’ statements to his client are most likely:

a. incorrect with regard to the duration only

b. correct

c. incorrect with regard to the duration and the yield curve

(for addtl practice, explain your answer)

#90

C

Edit… i’m second guessing myself now…

#91

Im going with C and will wait to explain if im right.

#92

A

#93

Nice questions buddy

#94

A

Duration nees to be equal to time horizon. Say you’re just investing in zero-coupon bonds, it’s no good them expiring before the time horizon as you’ll face reinvestment risk

If the curve is downward facing, any cash flow will be reinvested at a higher rate than previously. Hence, the rate you can achieve will be higher than the portfolio’s current YTM.

#95

A indecision

#96

the correct answer is A.

mattmania’s explanation is sufficient.

#97

Crap, thought so :-0

EDIT:

Is there a section in the Fixed Income text that talks about the shape of the yield curve and it’s impact on contingent immunization? Spent about an hour looking through the text and I can’t find it’s example.

Any thoughts?

#98

the only thing you have to know relating to the yield curve impact on contingent immunization is: contingent immunization can only be implemented/used when the immunization rate is greater than the required rate of return. (whether the yield curve is upward or downward sloping is irrelevant, so it really doesn’t have an impact on ci).

#99

Question 9 (8 minutes) great VAR practice

A stock analyst would like to assess the VAR for a portfolio consisting of two assets. Asset ABC has an expected quarterly return of 2.5% with a standard deviation of 5%. Asset XYZ has an expected quarterly return of 3.5% with a standard deviation of 4%. The two assets have a correlation of 0.75. Calculate the:

a. 5% quarterly VAR

b. 1% monthly VAR

(no need to show your calculations, i’ll type up answer explanation tomorrow for you to compare)

#100

weights?