Financial Income Securities

[2013 CFA Level 2 Group]

Use this discussion thread to ask and discuss queries related to FIS Topic.

[Jehanzaib Zafar]

Sir,

I've a question regarding the difficulty level of your quizzes and how do they compare with the actual exam difficulty level? I'm able to score 75%+ on the FI quiz that you have on your website and I am starting to feel cozy about it. Please tell me if I'm being lulled into the false state of comfort specially given the fact that i was only able to score around 55% in EOCs. I must confess though that I was able to pick few points from the questions I did wrong in EOC and i didnt repeat those mistakes when I attempted your questions. 

Please advise me on this.

Regards

On Mon, Apr 15, 2013 at 7:39 PM, 2013 CFA Level 2 Group <2013-cfa-le...@googlegroups.com> wrote:

Use this discussion thread to ask and discuss queries related to FIS Topic.

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Jehanzaib Zafar
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[Jehanzaib Zafar]

can someone please share their scores on sir's quizzes?

[vaibhavapj]

I feel language of quizzes are straighforward unlike scswer,

सोमवार, 15 अप्रैल 2013 8:09:20 pm UTC+5:30 को, 2013 CFA Level 2 Group ने लिखा:

[Jehanzaib Zafar]

what are you scoring in sir's quizzes? over 70%? Has anyone tried finquiz??

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[Sahar merchant]

R43: q23, 24. 26
R44 q3l , 32,35
R45: Q 6,9, 28
R 47: Q8

[Andrei Radu]

Quiz FIS, question 22, discusses Structured IO tranches securities; however this does not appear in any LOS in curriculum 

is it or not a LOS ?

[vaibhavapj]

In cfa mock 2009 morning q no 45  says

If mortgage rate rise above contract then for IO strips, May increase or decrease

I thought IO always increase if interest rise?

सोमवार, 15 अप्रैल 2013 8:09:20 pm UTC+5:30 को, 2013 CFA Level 2 Group ने लिखा:

[Reha Vashist]

Can anyone please explain how rise in stock price will make convertible bond to under perform

[Reha Vashist]

 @ keith there a lot of good questions in swhweser question bank on convertibles ! give it a shot

[Reha Vashist]

which of the following scenarios will lead to convertible bond underperforming the underlying stock ?
a    stock price is stable
b     stock price rise
c     stock price fall   
Ans  B stock price rises

[Andrei Radu]

Stock price falls: bond not converted but gets the coupon thus bond performs better than the stock as you do not lose as being long the stock;

Stock price stable: bond not converted but gets coupon vs a neutral return on stock;

Stock price increases: bond converted but underperforms the return on the stock as you paid the conversion premium when bond bought.

Any other opinions welcomed.

[Reha Vashist]

thanks but will please elaborate on Stock price increases: bond converted but underperforms the return on the stock as you paid the conversion premium when bond bought.

[Reha Vashist]

another q
stock price increased by 10 % , by what % will the convertible bond  price increase ?
a   10%
b    less than 10 %
C   unchanged
ans    less tha 10 %

[Andrei Radu]

There is a market conversion premium that you have to pay to have the conv bond.

This means that you pay more per unit of stock to have the stock through a convertible bond.

When stock rises you could have earned more by owning directly the stock than by owning the stock through the bond. This is that you paid the conversion premium. At the same holding period, the return on the stock is higher than the return from the bond due to this premium paid.

[vaibhavapj]

Today i doing FI from CFA book. Things becoming so much more clear

सोमवार, 15 अप्रैल 2013 8:09:20 pm UTC+5:30 को, 2013 CFA Level 2 Group ने लिखा:

[vasundhara]

Didn’t understood the following points

1.      With an asset-backed security, one of the following call provisions may be granted to the trustee: 1) percent of collateral call, 2) percent of bonds, 3) percent of tranche, 4) call on or after specified date, 5) latter of percent or date, or 6) auction call.

2.      Home equity loans can be either closed end (i.e., structured the same way as a fully amortizing residential mortgage loan) or open end (i.e., homeowner given a credit line)

3.      There are two reasons why the MPR is important. First, if the MPR reaches an extremely low level, there is a chance that there will be extension risk with respect to the repayment of principal. The length of time until the return of principal is largely a function of the monthly payment rate. Second, if the MPR is very low, then there is a chance that there will not be sufficient cash flow to pay off principal. This is one of the events that could trigger early amortization of the principal.

Question : R46 Q36(B) and R46 Q43

[vaibhavapj]

Is inverse rate floater tranches in syllabus?

5 questions were asked today in mock conducted by CFA india society

सोमवार, 15 अप्रैल 2013 8:09:20 pm UTC+5:30 को, 2013 CFA Level 2 Group ने लिखा:

Use this discussion thread to ask and discuss queries related to FIS Topic.

[Andrei Radu]

This is with regard to reading 45. 

However the LOSs do not detail about such instruments (a.k.a. floating rate tranches or structured interest only tranches page 421curricullum)

However in Arif's quiz on FIS there is a question on structured IO tranches. 

I skipped the pages 

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[vaibhav aggarwal]

Arif sir

do we have to do this ?

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[vaibhavapj]

Arif Sir

Why is No adjustments required in tree in binomial method but there is adjustment needed in interest rate tree in Monte carlo method ?

सोमवार, 15 अप्रैल 2013 8:09:20 pm UTC+5:30 को, 2013 CFA Level 2 Group ने लिखा:

Use this discussion thread to ask and discuss queries related to FIS Topic.

[syed shujaat]

Dear Mr. Irfanullah:

I did not get the following questions.

reading 44, question number=22(a,b)--i always messed up in these questions, give some logical reasoning.

reading 44, question number=38.

reading 45, question number=28.

reading 47, question number=27,31.

Regards,

S.Umair

On Mon, Apr 15, 2013 at 7:39 PM, 2013 CFA Level 2 Group <2013-cfa-le...@googlegroups.com> wrote:

Use this discussion thread to ask and discuss queries related to FIS Topic.

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[Rukhshinda Khan]

Sir, please explain the following:

 

*According to liquidity preference theory, whether all types of yield curves are possible or only upward sloping?

*Page#366 of the curriculum, it is mentioned that "the higher the premium over straight value, the less attractive the convertible bond." Why?

*R-44, Practice Problem-37, why coupon is calculated on call price?

*Please explain calculation mechanism for the bond i.e. both callable and putable if it is important from the exam perspective.

 

Regards

Rukhshinda

On Mon, Apr 15, 2013 at 7:39 PM, 2013 CFA Level 2 Group <2013-cfa-le...@googlegroups.com> wrote:

Use this discussion thread to ask and discuss queries related to FIS Topic.

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