Hi guys.
Do I understand correctly, that MVO leads to concentrated asset allocations, and this concentration is due to the fact that MVO is seeking the highest return assets, so it will concentrate the allocation to those assets?
Because this is in contradiction to the fact that MVO is also based on diversification… which means, concentration should not be an issue (though I know it is, because that is one of the MVO criticisms). How would you reconcile this? Thanks!!
I am having problem understanding the logic behind EOC # 23: Rd 10.
Explanation given:- Inter-market carry trades do not, in general, break even if each yield curve goes to its forward rates. Intra-market trades will break even if the curve goes to the forward rates because, by construction of the forward rates, all points on the curve will earn the “first-period” rate (that is, the rate for the holding period being considered). Inter-market trades need not break even unless the “first-period” rate is the same in the two markets. If the currency exposure is not hedged, then breaking even also requires that there be no change in the currency exchange rate.
Can anyone help?
Hi,
Can someone explain to me how they are working out the figures on the Smiths example.
1. I got this answer right.
2. This answer was later corrected to 6,275,000 but I still cant get to that answer.
3. I got 6,691,026 for this one
4. I got 2,682,718
Can someone let me know where I am getting wrong.
Thanks
Lennon is the client, Everett (18) and Marshall (14) are the children.
Which of the sub-portfolios dedicated to Lennon’s aspirational goals is in the best position to tolerate the greatest risk exposure? The one dedicated to:
A. Everett’s education
B. Marshall’s trust
C. University endowment
A is correct. Both of the funds planned for the trust and university endowment represent an imminent need (immediate for the trust and within two years for the endowment). The funding needed for education, however, extends over the longest time horizon, possibly as long as 8 to 10 years. Thus, its sub-portfolio would be in the best position to take on the greatest risk.
I would have went for B - because of the longest horizon. However, it requires immediate funding (this year). Therefore needs to be liquid.
However, for endowments, aren´t they supposed to have a very long horizon? Funding begins in two years, yes, but the horizon extends beyond the 8-10 years of university time horizon?
Thank you!!
Excess Return over MTCR’s formula is equivalent to a Sharpe Ratio.
The calculation is: (R p -R f ) / MCTR
The Sharpe ratio adjusts for risk, and can help you determine the investment choice that will deliver the highest returns
while considering risk.
However, I still cannot understand why an optimal asset allocation involves the fact that ALL assets have MCTR and hence equal Sharpe ratios? Why is not an optimal asset allocation involving assets with highest Sharpe ratios? (but not necessarily equal?)
Thanks!!
A taxable portfolio should be less frequently rebalanced. Due to:
1. Frequent rebalancing leads to realizing gains, hence you pay more in taxes (higher taxable income)
2. A tighter corridor involve higher transaction costs, therefore it is better to have a wider range/corridor. Also, due to the lower volatility after-tax, you need larger movements to change the volatility/risk level.
Why would you want to increase the risk level in this case? Because higher risk leads to better returns, OK, but is there any kind of aspect I´m missing here?
Many thanks, guys.
Hello colleagues,
I passed the CFA L3 exam several years ago and then unexpectedly got a lucrative job in consulting (not related to the investment industry). Now, I am in the process of changing careers and would like to refresh the CFA Program material.
Could someone please share with me Schweser Study Materials L1 - L3 for recent years, preferably, as PDF files? If the Schweser books for L3 are 2-3 years old, it is perfectly OK with me. Ready to pay for them.
P.S. Just in case. If somebody has an open position for a CFA Program graduate, drop me a line. I am from Belarus, my first language is Russian, speak English very well, and I have been living in Toronto for 22 years.
This is a massive beast of an example; what is the essence we need to extract from this? I doubt we’re expected to regurgitate the process of completing this example on the exam…or do we?
I believe example 4 in 2019 curriculum is different question.
Hi boys and girls,
So obviously I failed in 2019 and I didn’t even have enough time to read through the notes once. Given that the notes are pretty expensive and I wonder whether it is worthwhile to buy the 2020 schweser? Am I gonna miss out a lot by using the 2019 notes? Thanks for the recommendations!
Why the gamma of a stock is 0?
Gamma = change in delta 1/1=1?
change in underlying
Hello all,
Can someone explain the relevance of contemporaneous and forward relationship in equity factor rotation strategy.
Thanks
P
After discussing her short- and long-term goals, Murray tells Virginia that he is concerned about her current tax situation. He asks her to confirm that for tax purposes, her cost base for the shares that she inherited from Richard was virtually zero. When she does, he reminds her that Canada has no inheritance tax but a capital gains tax in which one-half of the capital gain is taxable at the individual’s marginal tax rate on the disposal of the property.
Q. The nature of the tax affecting Virginia that concerns Murray is most likely described as a tax on:
wealth.
income.
value added
Correct answer is income.
My question is: why? Could someone pls tell? It is clearly not wealth, nor value added, however, I would have classified it as “capital gains”?
Thank you!
Murray describes the differences between deterministic forecasting and Monte Carlo simulation in investment planning and the traditional and goal-based approach in constructing portfolios. After hearing about these methods, Virginia states that she thinks that the goal-based investing approach is best suited for her needs because
it allows her to specify a level of risk tolerance for each goal,
growth toward each goal on a straight-line basis is much easier to understand, and
it provides the ability to predict the probability of success of each goal
Q. With respect to Virginia’s preference for the goal-based investing approach, her comment that is most appropriate is the one dealing with:
risk tolerance.
growth toward a goal.
probability of success of a goal
Correct answer is A. However, under C: C is incorrect. Probability of success is not a feature of goal-based investing; it is an outcome of the Monte Carlo method for determining capital sufficiency.
Could someone pls tell me how come this is the case? Goals-based investing is optimized for a minimum probability of sucess, so it does have this probability of success as a feature… Many thanks!
The oil firm that Jacobs controls is headquartered in the island country of Mahjong, located near Sahjong. Because of the foreign location of the oil firm, Simson believes there might be opportunities to reduce taxes.
Simson knows that Sahjong uses the exemption method, whereby it does not impose taxes on income that stems from a foreign country. However, Sahjong will soon hold parliamentary elections, and the opposition party is said to favor the deduction method. Simson plans to investigate how this possible change might affect Jacobs’ tax liability. She compares the tax rates in the two countries in Exhibit 3.
EXHIBIT 3
COMPARATIVE INCOME TAX RATES: Sahjong 10%, Mahjong 15,5%
Q. If the opposition party wins the election in Sahjong and its tax proposals are passed into law, the tax rate that Jacobs will face on income stemming from Mahjong will be closest to:
Under deduction method, I would say 15.5% go to Mahjong… could someone pls tell me if you agree? Thanks!
Does anyone know what is the number of words available / required for subjective questions
Hello - good morning -
What are the thoughts of using CFAI’s Q-bank? Use it as part of the review at the end? or using it as part of regular post reading in tandem with the end of chapter “Practice Problems”?
regards - Jean
Has anyone here used these materials for level 3? I really need some advice
Wald has a realized capital gain of CLC 50,000 in another taxable account. Her advisor reviews that account and notices that Stock Y has an unrealized loss of CLC 45,000 and a cost basis of CLC 220,000. The advisor explains two alternate plans to Wald:
Plan A: Sell Stock Y in Year 1 to realize the loss and replace it with Stock Z, which the advisor believes will have the same expected return as Stock Y. In Year 2, sell Stock Z at an expected market value of CLC 250,000.
Plan B: Hold Stock Y until Year 2 and then sell it at an expected market value of CLC 250,000. B.
Demonstrate that the amount of Wald’s total two-year tax liability is the same for both plans. Show your calculations.
Could someone please explain the rationing that should be applied in such a case, with the replacement of stocks with same returns? I have seen the solution, but do not really get it…
Thank you, I would appreciate it very much, I got very frustrated because of this :(
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