Over the long run - does corporate growth rate = GDP growth rate?
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Corporate growth rate vs GDP growth rate
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Change in 2017 vs 2018 material
Have you guys seen any significant change between the 2017 vs. the 2018 material?
I haven’t seen anything but I wanted to get a second eyes on this.
thanks
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FR&A - downstream sales with equity method
I’m very certain that downstream sale can be recognized to the percentage of goods sold to outside parties. But from my undergraduate accounting class (Canada) I also clearly remember that downstream sale is NOT recognized. Tried google and find it seems to be a difference between US GAAP and IFRS. Could anyone provide a more definitive answer?
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Ratio translation difference (for receivables turnover) under temporal method
The CFA Institute text in Reading 18, EOC #19’s answer states that revenues and receivables (monetary asset) would be the same if translated under either accounting method.
I thought that revenues were multiplied by the average rate and receivables by the current rate. Wouldn’t this change the receivables turnover ratio since they are being translated by different exchange rates?
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Recovery rate
If 1 - recovery rate = payout ratio and 1 - recovery rate = loss given default then payout ratio = loss given default?
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American Call options
Hello everyone,
i’m facing some issues understanding what does it mean when it’s said that, a non-dividend paying call option on a stock will not be exercised early because it won’t be valuable? it’s the case for only American call option
i’m not getting the idea behind this concept! anyone some help please?
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YTM VS Spot Rates
I know that it is a lame question for some of you, but I feel that I do not grasp the difference between YTM vs Spot Rates 100%. This is what I understand,
1. YTM is like IRR, it is a calculated rate which flattens the yield along the tenor of the bond, and it indicates the total % yielded when holding a bond till maturity.
does it differ along the years??
2. Spot Rates are the rates that you receive every year, it differ from one year to the other. Spot rates are determined based on the rates in the market.
Is this explanation correct!!
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Interest rate risk, and duration
I’m working on a duration question and I got stuck.
IF interest rate rise, or if the yield curve steepens, then we would want to reduce our duration or interest rate risk.
But what if the interest rate falls? Is that considered an interest rate risk as well?
Also, would we want to reduce our duration, or increase it?
Thanks so much.
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Third Party Provider Practice Question Mistakes
Do you guys see a lot of these? I am coming across several with the provider I am using. Not gonna name them on here. But they are a CFA approved prep provider and I have found 2 incorrect answers to ethics practice questions I am doing. This seems a little odd.
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Stuck: Arbitrage profit made on futures/forward on bond (derivatives)
I am stuck at this question… for so long.. desperately need help!
Quoted futures price = 125
Conversion factor = 0.90
Time remaining to contract expiration = 3 months
AI over the life of futures contract = 0
Quoted bond price = 112
AI since last coupon payment = 0.08
AI at futures contract expiration = 0.2
Current annual risk-free rate = 0.30%
What is arbitrage profit on the bond futures contract?
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In the solution, they recalculate the adjusted price of the futures (125 x 0.9) and then add 0.20. Shouldn’t the 125 already include AI at time T? Anyway the final answer is 0.5356.
I was attempting to convert the quoted bond price to quoted futures price and compared with the given quoted futures price of 125 to find the arbitrage value.
My calculation:
Formula used, F0(T) = [ (Price of Bond + Accrued Interest at time 0) – PVCI] – (Accrued Interest at time T) = 111.88
Therefore, quoted F0(T) = 111.88/0.9 = 124.31
Value of the arbitrage = (125 – 124.31)/ [ 1 + (0.0003) (3/12) ] = 0.68948
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I would have thought whether you compare between futures price or quoted futures price, the arbitrage value should be the same. but clearly i am wrong! Masters, teach me!
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Soft-Dollars??
Does anyone have a good handle on what soft-dollars are?
I have some questions that maybe someone can answer via a thumbs-up/down system?
1. Soft dollars can only be used to pay for tools that aid the investment decision making process?
2. Soft dollars can be used for contributions to charity at the direction of the client?
I would love to get a better handle on what soft-dollars are. Any readings you can point me in the direction of doing I would be very appreciative.
Sincerely - someone who always manages to fail ethics.
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Economics Reading 13
Why does expansionary monetary policy put a downward pressure on the exchange rate?
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7.03E-07 = 0.000000703?
Is it correct?
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Pension contribution AFTER TAX adjustment in cash flow?
Excess Company’s Contribution vs. Total Pension Costs on an after-tax basis is adjusted in cashflow statement by deducting the same from financing cashflows since it is analogous to paying debt early. Yes makes sense but question is why on after tax basis?
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Economics, Reading 13, EOC #20
Can someone please explain #20 from Reading 13 in Econ? The question reads:
The international parity condition Goldsworthy will use to provide the estimate of the future JPY/GBP spot rate is most likely:
covered interest rate parity.
uncovered interest rate parity.
relative purchasing power parity.
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Tag along drag along provision in private equity
From what I am reading, the tag along drag along provision (with regard to private equity) says that firm management (which are shareholders in the company) are offered the right to an acquisition of the company.
In one of the practice exams, I am reading that the firm has a right to sell its equity stake in the company upon the sale of the stake by private equity owners (which falls under the tag along drag along provision).
How does the first definition of the tag along drag along clause translate into the second definition?
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Credit Rating
I do not get this question!
Chole then asks Garzon to use the reduced form model, which applies option pricing methodology, to value the debt of Company C. She indicates that the expected discounted payoff of Company C’s debt is
$500,000, assuming the company does not default on its debt, or
$200,000, assuming the company defaults on its debt..
Garzon should conclude that the value of Company C’s debt is closest to:
$200,000.
$500,000.
$700,000.
C is correct. The value of Company C’s debt is closest to $700,000. Using the reduced form model, the value of debt is determined by calculating the expected discounted value of debt after adjusting for risk. The value of the company’s debt can be decomposed into two parts: the expected discounted payoff of company debt, assuming there is no default, and the expected discounted payoff of debt if default occurs. The expected discounted payoff of Company C’s debt is $500,000, assuming the company does not default, and the expected discounted payoff is $200,000, assuming default occurs. Therefore, the value of Company C’s debt is $500,000 + $200,000 = $700,000.
Is not the total debt without defaulting $500,000, then why would I add the $200,000. As far as I understand, the $200,000 is the remaining debt that I will pay in case of default which is a part of the $500,000, so why would I add them together to get the value of the company’s total debt?
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Payout Ratio & Recovery Rate
In Credit Default Swaps, the recovery rate is the rate that the protection buyer gets in case of default let’s say it is 40%.
The payout ratio, is the amount that the protection seller pays. Based on the curriculum it is equivalent to 1-recovery rate, in that case it is equivalent to 60%.
My question is, should not the two be the same, as the amount paid by the seller is what the buyer gets??
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Venture capital method for valuation
Hello,
Is it safe to say that the venture capital mode for valuation would be the most appropriate for firms that are in the early stages of growth (and are expecting to see high growth in the near future)?
Relative to the DCF method, the venture capital method is meant for companies that do not have a long history of cash flows (may even be cash flow negative since they are in the early stages of operations) and thus we must value based upon the venture capital mode in order to compute a reasonable valuation for a start up company that is still in the very early stages of operations?
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Where to find the hardest mock exams possible?
I am trying to target using the hardest mock exams possible, does anyone know where this would be avaliable?
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