Which of the below statements are LEAST likely to be correct
I. During a company's election of TWO directors for the board, if an investor holds 100 shares then under Cumulative Voting structure the investor can cast up to 200 votes for any one director
II. A participatory preference share allows the holder of the shares to participate in the election of directors
III. A convertible bond is equivalent to a package of Holding a Bond and Shorting a Call option on the common shares of the company
A five year $100 face value bond is trading at $102.34. The bond pays a coupon of 5% per annum paid semi-annually. An analyst made the following comments about the bond
I. The current yield of the bond is 4.89%
II. The yield to maturity of this bond is less than its current yield.
III. The duration of the bond is close to 4.49 years.
Mark and Jadeja were discussing about bonds and made the following statements. With respect to these statements they are
Mark: A supranational bonds are the ones that issued by ones like Quassi Government agencies. An secured bond is one which has specific collateral to which the bond holders have first lien
Jadeja: A dual currency bond is one which the holder has an option to choose the currency in which he can receive the coupon at every coupon date. Unlike floating rate bonds a Zero coupon bond will never trade against its face value unlike coupon paying bonds.
a) Mark is partially correct and Jadega is partially correct
b) Mark is completely correct and Jadega is completely correct
c) Mark is Partially correct and Jadega is completely correct
Bernard and Stephen are discussing about bond coupon structure and made the following statements. With respect to those statements
Bernard: 'Credit linked coupon' bonds would pay different coupons that are dependent on the current credit rating of the issuer. 'Step-up bonds' are typically issued with the aim of matching the startup project's cashflow with the bond's coupon
Stephen: A 'payment in kind' bond can choose not to pay coupon if the issuer does not generate enough cash flow. A deferred coupon bond can defer a coupon indefinitely at the discretion of the issuer.
a) Bernard is completely correct and Stephen is completely incorrect
b) Bernard is partially correct and Stephen is completely incorrect
c) Bernard is completely correct and Stephen is partially correct
Sameer made following statements about contingency provisions in bonds. He is LEAST likely correct with respect to
I. A callable bond with make whole provision ensures that the bond holder is compensated for the reinvestment risk
II. The advantage for an issuer in issuing convertible bond includes potentially lower coupon for bonds and higher issue price (compared to current prices) for equities
III. A CoCo bond is one which can be converted in to equities if certain conditions are met
Hudson made following comments about public issue of bonds. He is LEAST likely correct with respect to
I. A Best effort offering is one in which investment bankers try to 'make market' for the bonds in secondary market on a best effort basis
II. A Shelf registration is an issue in which more bonds similar to the current series of outstanding bonds will be issued
III. If the bonds are auctioned during public offering and if the issuer allots bonds on single yield basis then cut-off yield will be fixed as lowest yield at which all the bonds that are being issued will be sold.
Cavalin made following statements about bonds. She is MOST likely correct with respect to
I. A bond that issued without prior announcement of issue schedule is called 'On the run issue'
II. Credit rating agencies typically assign different credit ratings of foreign currency bonds and local currency bonds issued by same sovereign nation
III. A floating rate coupon bond issued by the US central bank will always trade at par
CFA Level 1 Exam: Almost 20 Days to go! Preparation Tips for Candidates..!!
The final days before any exam are crucial. The CFA Level 1 Exam is on June 7, 2014. You want to make most of the time that's left and yet won't like to do something really silly at this juncture. So, here are some tips for the last month of CFA preparation :
It's important to make sure that you don't stress yourself out before the D-day. Whatever you're do between now and the exam in June- be it work, study, relaxation or whatever constitutes your schedule, just try not to overdo any and keep things in harmonious concord.
If you're feel you are a bit lagging in your study schedule ( most of us do), don't get yourself over anxious. Re-prioritize things, workout an updated plan and follow it. Make a realistic commitment to study/revise and follow it strictly.
Divide your sessions into short periods of time. Take little rest after each study lesson.
It's good to get yourself acquainted with as many sample/mock questions as possible. You can try our free sample questions here.
Review the main concepts every day and again after every week. This will help you to record information as a long term memory.
So pull yourself together and get ready for the challenge.
Can anyone explain the following(quoted from schwesser):
"When you expect to receive the commodity in the future, we say you are long the commodity and you will hedge the value of expected commodity by selling the corresponding futures contract. If you will deliver the commodity in the future, you are short, and you will hedge by taking a long position in the corresponding futures contracts."
I assumed taking long position in futures meant receiving the commodity end of the contract OR hedging the prices (in order to reduce the risk) and offsetting the trade future. => In this case, I'm the buyer and consequently I'm long on the commodity. right?
