FinShiksha - CFA Level 1- Two Full Length Mock tests.Dear All,We are conducting CFA Level 1 Mock test in May 2013. The Fee for these two tests which includes four tests of 3 hours and 120 questions each (i.e 480 questions in 12 hours) is Rs.2000. If interested please register in the below link we will get back to you with further details
FinShiksha - CFA Level I Mock Tests - May 2013
CFA Level 1 question for 10-April-2013
If a bond trading at $ 98,000 today is expected to provide $ 100,000 in 160 days, calculate the Money Market Yield
a) 2.04%
b) 4.59%
c) 4.50%
Ans B: Holding period yield = Discount/ price = 2000/98000 = 2.04%
Money market yield = HPY * 360/t = 2.04%*360/160 = 4.59%
CFA level 1 question for 12-Apr-2013
BlueBull Ltd issued a bond with following terms on 1-Apri-2013.
Face Value- Rs.1,000; Maturity date- 1-April-2022.
Coupon for 1-April-2014 to 1-April-2016 is 0%
coupon from 1-April-2017 to 1-April-2022 is 11%
Issue Price – Rs.898/bond.
The type of the bond that BlueBull issued is
a) Discount Bond
b) Step-up bond
c) Deferred Coupon bond
CFA Level 1 free sectional mock test on FRA
Dear All,
On Popular demand we have again opened up the Free CFA Level 1 sectional mock test on FRA. Those who have not attempted it last month can give a try now. The sectional mock test is available in the below link
�>��Y�
hey guys is there nyone who purchased the kaplan schweser notes? if so leme know which package u've opted for?
Hey i m an engineering final year student . What should i do to Crack CFA level 1 ? Also please provide some links which will help me in my preparation .... Thanks 😃
CFA Level 1 question for 15-April-2013
Which of the below statement is NOT correct about Zero coupon bond
a. Zero coupon bonds will never trade above par value
b. Price of Zero coupon bonds are less sensitive to change in interest rates
c. Zero coupon bonds will be issued at a deep discount to the face value
CFA level 1 question for 12-Apr-2013
BlueBull Ltd issued a bond with following terms on 1-Apri-2013.
Face Value- Rs.1,000; Maturity date- 1-April-2022.
Coupon for 1-April-2014 to 1-April-2016 is 0%
coupon from 1-April-2017 to 1-April-2022 is 11%
Issue Price – Rs.898/bond.
The type of the bond that BlueBull issued is
a) Discount Bond
b) Step-up bond
c) Deferred Coupon bond
Ans C: Discount Bonds are one that trades below its Face value
Step up bonds are one that provide increasing coupons.Deferred bonds are one that starts paying coupon after few years of issue.While this is a discount bond, discount bond is a not bond type. It is based on trading/ issue price
CFA Level 1 question for 15-April-2013
Which of the below statement is NOT correct about Zero coupon bond
a. Zero coupon bonds will never trade above par value
b. Price of Zero coupon bonds are less sensitive to change in interest rates
c. Zero coupon bonds will be issued at a deep discount to the face value
Ans B: For bonds with similar maturity the 'Duration' of Zero coupon bond will be higher than coupon paying bond. Hence the price of Zero coupon bond is more sensitive to change in interest rates.
Should we score above 70% in all sections or above 70% on the total score ?
CFA level 1 question for 18-April-2013
Adam purchased a 5 years semiannual floater bond at a price of $101.23. The face value of the bond is $100 and the coupon is LIBOR+40 bps. The spread for life of this bond is closest to
a) 15.21 bps
b) 15.40 bps
c) 63.82 bps
CFA Level 1 question for 19-April-2013
Steyn and Shewag were discussing about utility value of investments and made the following statements
Steyn: The Co-efficient of Risk aversion has a major influence in deriving the utility value of an investment for each investor. Higher the coefficient of risk aversion higher will be the slope of the utility curve for the investor. A higher standard deviation in general will increase the utility value of an investment for a risk averse investor.
Shewag: The investor who is 'risk neutral' will have a risk aversion of coefficient of Zero and he will have flat utility curve. Higher the return, higher will be the utility value for a risk neutral investor irrespective of the volatility of the returns of the investment.
a) Steyn is correct
b) Shewag is correct
c) Both are correct
CFA Level 1 question for 20-Apr-2013
Which of the below statements are correct
i) Sharpe ratio measures the reward per unit of total risk
ii) Treynor ratio measures the reward per unit of un-diversifiable risk
iii) Jenson's alpha measures Excess return provided per unit of expected return
iv) M2 measures the excess risk premium generated by the portfolio (adjusted for the portfolio risk ) against risk premium of the market
a) i,ii
b) ii,iii,iv
c) I,ii,Iv
CFA Level I Quick Concepts - Calculating Full and Clean Price for a Bond
CFA Level 1 question for 19-April-2013
Steyn and Shewag were discussing about utility value of investments and made the following statements
Steyn: The Co-efficient of Risk aversion has a major influence in deriving the utility value of an investment for each investor. Higher the coefficient of risk aversion higher will be the slope of the utility curve for the investor. A higher standard deviation in general will increase the utility value of an investment for a risk averse investor.
Shewag: The investor who is 'risk neutral' will have a risk aversion of coefficient of Zero and he will have flat utility curve. Higher the return, higher will be the utility value for a risk neutral investor irrespective of the volatility of the returns of the investment.
a) Steyn is correct
b) Shewag is correct
c) Both are correct
Ans A: The utility value of an investment will be given by the formula
U = Expected Return – (0.5* Risk aversion coefficient * Variance of Return)
Shewag Statement 1: Correct. As per the above formula, if risk aversion coefficient is higher the investor's utility will drop drastically for each unit of increase in variance. In other words to derive the same utility, for each unit increase in risk a risk averse investor (i.e one with higher risk aversion coefficient) will demand higher return. Hence the most risk averse investor will have the steepest utility curve i.e slope of utility curve of risk averse investor will be higher.
Shewag Statement 2: Wrong. Intuitively, for a risk averse investor the utility value of an asset with higher risk will be lesser compared to a utility value of an asset with lesser risk. Hence this statement is wrong. Mathematically the risk averse investor will have a positive risk aversion coefficient. In the above formula if the risk aversion coefficient is positive for every unit increase in variance (holding return constant) the utility will decrease.
Steyn Statement 1: Correct. The risk neutral investor will have risk aversion coefficient of Zero. As per above formula if Risk aversion coefficient is Zero Utility value will be equal to expected return irrespective of the risk. Hence the utility value will be a straight line for risk neutral investor
Steyn Statement 2:Correct. In continuation with the above if the 2nd part of the equation is Zero then utility value is equal to Expected return. Hence as expected return increases utility value will increase for a risk neutral investor.
CFA level 1 question for 22-Apr-2013
Below are the details related to the portfolio of MNA advisors.
Risk Free Rate 8%
Market Return 13.45%
Standard Deviation of Portfolio 18%
Beta of Portfolio 1.10
MNA advisors are evaluating addition of a new stock with an expected return of 13% and Standard Deviation of 25% to the portfolio. It is advisable to add the stock if new stock has
a) Coefficient of correlation of above 0.72 with the portfolio
b) Coefficient of correlation of above 0.80 with the portfolio
c) Coefficient of correlation of below 0.60 with the portfolio
CFA Level 1 question for 20-Apr-2013
Which of the below statements are correct
i) Sharpe ratio measures the reward per unit of total risk
ii) Treynor ratio measures the reward per unit of un-diversifiable risk
iii) Jenson's alpha measures Excess return provided per unit of expected return
iv) M2 measures the excess risk premium generated by the portfolio (adjusted for the portfolio risk ) against risk premium of the market
a) i,ii
b) ii,iii,iv
c) I,ii,Iv
Ans C: Correct: Sharpe Ratio = (Rp – Rf)/ Standard deviation of Portfolio. The standard deviation includes both systematic and un-systematic risk. Correct: Treynor ratio = (Rp – Rf)/ Beta of Portfolio. The Beta includes only systematic risk which cannot be diversified Wrong : Jenson's alpha = Actual return – expected return. This provides measure absolute excess return and not excess return per unit Correct: M2 = (Rp- Rf)* SDm/ SDp - (Rm- Rf)
CFA level 1 question for 23-April-2013
During economic expansion the credit spreads will
a. Expand
b. Shrink
c. Will not change
CFA level 1 question for 22-Apr-2013
Below are the details related to the portfolio of MNA advisors.
Risk Free Rate 8%
Market Return 13.45%
Standard Deviation of Portfolio 18%
Beta of Portfolio 1.10
MNA advisors are evaluating addition of a new stock with an expected return of 13% and Standard Deviation of 25% to the portfolio. It is advisable to add the stock if new stock has
a) Coefficient of correlation of above 0.72 with the portfolio
b) Coefficient of correlation of above 0.80 with the portfolio
c) Coefficient of correlation of below 0.60 with the portfolio
Ans C: (Please refer page 300 in Equities section i.e book 4 )
Intuitively lesser the correlation better it is. However to identify the cut-off point we should use the following approach
A new stock can be added to the portfolio if
( Expected Return of New stock – Risk Free rate) / Standard Deviation of New Stock
Is Greater than
( Expected Return of Portfolio – Risk Free rate) / Standard Deviation of Portfolio * Coefficient of correlation between New stock and Portfolio
Rf
8%
M
13.45%
Std Dev of Port
18%
Beta of Port
1.1
Expected return of portfolio = Rf + beta * (Rm- Rf) = 14%
Now to test whether new stock can be added substitute above portfolio return and new stock's expected return of 13% and standard deviation of 25% in the first equation can be i.e
(13% - 8%)/ 25% > (14%-8%) *X/ 18%
i.e 0.2 > Coefficient of correlation * 0.33
i.e 0.6> coefficient of correlation or
Coefficient of correlation
CFA level 1 question for 25-Apr-13
The price yield relationship curve of the bond for prices above the callable price
a) Will have higher convexity compared to an option free bond
b) Will have negative convexity
c) Will have similar convexity as an option free bond
