Variety of difficult questions

Thanks in advance to everyone who answers. This exam is definitely fast approach and its sooo frustrating when you can’t figure out where you went wrong! Ethics Q: Schweser, book 6, afternoon Q 8 1. Campbell Hill, CFA, has recently joined a pension fund mgmt company at Chief Compliance Officer. Hill distributes a memo stating that effective immediately, material supporting all company research reports will be kept in the company database in electronic form for ten years, while hard copies of the same material will be maintained for one year only. The memo also states that hard copy records of all material supporting investment-related communications with clients must be kept on file for five years (the period mandated by local regulations). With respect to Standard V© Record Retention, which of the following statements is TRUE? A. Only the policies regarding research reports is a violation, because record retention refers to hard copy, not electronic records. B. Hill’s policies regarding both research reports and investment-related communications violate the Standard. C. Hill’s policies regarding investment actions does not violate, but policy regarding investment-related communications does because Standard required records be kept for seven years. D. Neither of Hill’s policies violated the Standard. Eco questions 2. The 1 year forward rate for the British pound is USD 1.5670 and the spot rate is USD 1.5530. The real rate of interest is 2% in all world economies. If expected inflation =3% in the US and interest rate parity holds, the nominal interest rate in the UK is closest to: A. 2% B. 4.06% C. 5.95% D. 5% 3. Which of the following portfolio’s cannot lie on the efficient frontier? Portfolio Expected Return 1 8 6 2 10 6 3 14 12 4 14 16 A. Porfolio 1 B. Portfolio 3 C. Portfolio 1 and 4 D. Portfolio 2 and 3 Fixed income questions: 4. A bond priced at par ($1,000) has a modified duration of 8 and a convexity of 50. If the interest rates fall 50 basis points, the bond’s price goes to approximately: A. 1,041.25 B. 1,040.00 C. 958.75 D. 875.00 5. A manager established a collateralized commodity futures position with a contract value of $20million. He purchases a 60-day T-bill with a bank discount yield of 8.867 to collateralize the futures position. After 60 days, the loss on the futures position is $100,000. The holding period return on the position, is closed to: A. -0.5% B. 0.9978% C. 1.0000% D. 1.2254%

I believe the answers are: 1 – D. Seven year retention in electronic or hard copy in the absence of shorter local law. 2 – B. Solved in a separate thread. 3 – C. Portfolio 1 has less return for same risk as an alternative; 4 has more risk for same return. 4 – A. Price rises by about 4.125%. 8(.005) + 50(.005)^2

chebychev Wrote: ------------------------------------------------------- > I believe the answers are: > 1 – D. Seven year retention in electronic or > hard copy in the absence of shorter local law. do you mean that if local law says less than 7 yrs, you have to go by that? I thought it was all about following the more strict rule (CFAI in this case)

The handbook states that “In the absence of regulatory guidance, CFA Institute recommends maintaining records for at least seven years.” Here, there is mandatory regulatory guidance, so I believe that following the mandatry regulation would not be a violation of the code. (The code does not say that records must be maintained for seven years regardless of regulatory guidance.)

Answers are D A C A C

CFABoston, consider the following thread on question 2:,634830

Can someone work out question 5? Thanks.

culley Wrote: ------------------------------------------------------- > Can someone work out question 5? Thanks. From Schweser: Establishing a collateralized position in commodities futures requires simultaneously purchasing government securities in a value equal to the contract value of the futures contracts. The actual discount on the 60-day T-bills 0.08867 (60/360) = 0.014778, so the effective 60-day yield is 1/(1 ?0.014778) - 1 = 1.5%. The return from the futures contracts is - 100,000/20,000,000 = -0.5%. The net holding period yield is 1% = 1.5% - 0.5%.

Eh, so what are the answers?

Sorry will post them when I get home tonight (am currently at work).

i disagree with Schweser answer for problem 5. my answers are 1) C 2) B 3) C 4) A 5) B investment = 20,000,000*(1-8.867%*60/360)=19,704,433 return (20,000,000-19,704,433)-100,000 = 195,567 holding period return = return/investment = .9925% (not 1%) closer to .9975% than 1%

Thanks for the help everyone! Here are the answers: 1. D 2. B 3. C 4. A 5. D More to come soon!

no 5 is C no?

Not according to Schweser, may be an error though.

Sample exam 2, morning session, Q120

I did that problem in the sample exam, I thought the explanation said 1%