I do not understand the questions understand, especially, investment, sometimes, regarding

tango_gs

Hi all,

I am having some trouble with the questions, whether it be in the EOC questions or in the CFA mocks, especially regarding:
1. When you have to do arbitrage, sometimes it is assumed that you already have the required $ amount to do the arbitrage and sometimes the amswers assume that you have to borrow to get the initial investment amount. Which is which? Given that the questions are not really clear about that...
2. In some item-sets, we are presented with figures, followed by comments. My first intuition would be that the comments are relative to the presented figures. However, some answers do not take the quantitative data into consideration. Again, sometimes it does not seem very clear when we should disregard the quantitative data or not.

profil

with the arbitrage transactions if they give you a a starting amount say $1,000,000 USD amount to start with they will say whats the arbitrage profit for the investor and the choices will be

A) $5000
B) $15,000
C) $37,500

if they dont give you a starting figure then you have to iterate the percentage return you can achieve with arbitrage. You can just start with $1,000,000 and do the calculation as you would, except your computed answer should be divided by $1,000,000 to get a percentage return.
The answers would then be something like

A) 5%
B) 7%
C) 12.5%


With regard to your second point, sometimes they will provide data that is irrelevant. Sometimes the data they provide is the data you need and its all there, other times (most i found) they give you SOME of the data, but all of the required inputs to calculate everything you need to answer the questions. If the data you need isn't explicitly given, then look at creative ways to compute the data you need with the given information.