标题: Quiz Total Bond return [打印本页] 作者: transferpricing 时间: 2011-7-13 13:30 标题: Quiz Total Bond return
Calculate the one year expected return:
Beginning price $103, 5% semiannual coupon, expected price at the end of one year: $102.5.
Annual reinvestment rate: 2%.作者: Windjam 时间: 2011-7-13 13:30
I got 4.393% but that's just based on CF analysis
25.25 + 25 - 5 = 45.25 / 1030 = 4.393%
do we have to adjust for BEY? I know this is how they are generally quoted, but when calculating total return wouldn't the actual total return be more accurate?作者: NakedPuts00 时间: 2011-7-13 13:30
That is always the assumption. A lot of times I think this forum attempts to trick people, but bonds always have the annual coupon.作者: ohai 时间: 2011-7-13 13:30
FinNinja Wrote:
-------------------------------------------------------
> I got 4.393% but that's just based on CF analysis
>
> 25.25 + 25 - 5 = 45.25 / 1030 = 4.393%
>
> do we have to adjust for BEY? I know this is how
> they are generally quoted, but when calculating
> total return wouldn't the actual total return be
> more accurate?
A lot of the Schweser questions used to ask for BEY.
This used to be a very large portion of the fixed income section so a lot of the Schweser material leaves this as legacy.
It is literally a single blue box now.作者: liangfeng 时间: 2011-7-13 13:30
Paraguay Wrote:
-------------------------------------------------------
> FinNinja Wrote:
> --------------------------------------------------
> -----
> > I got 4.393% but that's just based on CF
> analysis
> >
> > 25.25 + 25 - 5 = 45.25 / 1030 = 4.393%
> >
> > do we have to adjust for BEY? I know this is
> how
> > they are generally quoted, but when calculating
> > total return wouldn't the actual total return
> be
> > more accurate?
>
> A lot of the Schweser questions used to ask for
> BEY.
>
> This used to be a very large portion of the fixed
> income section so a lot of the Schweser material
> leaves this as legacy.
>
> It is literally a single blue box now.
Paraguay is actually correct! It was a CFAI question.
However, what I am struggling with is why is the BEY the total return? I thought the EAR is the total return which would be 4.39 ?
In SS9, p.49 Q8, Schweser asks for the "total effective return" which in their guideline answer is the effective annual return (EAR).
Any explanations gentlemen?作者: Unforseen 时间: 2011-7-13 13:30
Mr.Anderson Wrote:
-------------------------------------------------------
> Paraguay Wrote:
> --------------------------------------------------
> -----
> > FinNinja Wrote:
> >
> --------------------------------------------------
>
> > -----
> > > I got 4.393% but that's just based on CF
> > analysis
> > >
> > > 25.25 + 25 - 5 = 45.25 / 1030 = 4.393%
> > >
> > > do we have to adjust for BEY? I know this is
> > how
> > > they are generally quoted, but when
> calculating
> > > total return wouldn't the actual total return
> > be
> > > more accurate?
> >
> > A lot of the Schweser questions used to ask for
> > BEY.
> >
> > This used to be a very large portion of the
> fixed
> > income section so a lot of the Schweser
> material
> > leaves this as legacy.
> >
> > It is literally a single blue box now.
>
>
> Paraguay is actually correct! It was a CFAI
> question.
> However, what I am struggling with is why is the
> BEY the total return? I thought the EAR is the
> total return which would be 4.39 ?
> In SS9, p.49 Q8, Schweser asks for the "total
> effective return" which in their guideline answer
> is the effective annual return (EAR).
>
> Any explanations gentlemen?
Old convention from before we all had bloomberg terminals and tradeweb.
BEY used to be the only way to quote a bond that people could understand.作者: Analyze_This 时间: 2011-7-13 13:30
I am European. We almost exclusively have annual coupon payments.......
so but why uses Schweser in ther EOC question the EAR for the total return? Or does it depend on their wording of total "effective" return?
Edited 1 time(s). Last edit at Tuesday, May 31, 2011 at 10:50AM by Mr.Anderson.作者: Valores 时间: 2011-7-13 13:30
Mr.Anderson Wrote:
-------------------------------------------------------
> I am European. We almost exclusively have annual
> coupon payments.......
>
> so but why uses Schweser in ther EOC question the
> EAR for the total return? Or does it depend on
> their wording of total "effective" return?
I guess it depends on their interpretation. Again, this used to be a very large part of the curriculum circa 2006-2007, it is one blue box now. Schweser LIII is very poor.作者: wake2000 时间: 2011-7-13 13:30
4.345% BEY作者: aidebaobao 时间: 2011-7-13 13:30
Paraguay - could you indicate the blue box you are refering to? I am looking at SS9 example 5 on page 27 of CFAI text, but I don't see a mention that total return should be in BEY. I know this is probably a small chance question, but it seems like easy point if I can get a clear answer on proper format.
If this used to be a big part of the test before there is a chance it could show up now. It would be one of those curve balls from CFAI that those in the know could score points over those in the dark.作者: PalacioHill 时间: 2011-7-13 13:30
FinNinja Wrote:
-------------------------------------------------------
> Paraguay - could you indicate the blue box you are
> refering to? I am looking at SS9 example 5 on page
> 27 of CFAI text, but I don't see a mention that
> total return should be in BEY. I know this is
> probably a small chance question, but it seems
> like easy point if I can get a clear answer on
> proper format.
>
> If this used to be a big part of the test before
> there is a chance it could show up now. It would
> be one of those curve balls from CFAI that those
> in the know could score points over those in the
> dark.
I was just talking total return analysis in general is a single blue box.作者: NakedPuts2011 时间: 2011-7-13 13:30
vikas5871 Wrote:
-------------------------------------------------------
> 4.3 PER CENT
That's an interesting way to do it.作者: mik82 时间: 2011-7-13 13:30
THANKS PARAGUAY.....
BUT I FOUND IT REALLY BORING......作者: zwjy 时间: 2011-7-13 13:30
So BEY is correct, EAR is incorrect, right?
Or does this really matter to CFAI at level III?
I know BEY is the way to quote, I also know that BEY is not the true EAR.
I hate quoting conventions! I know why they did it, but really we have the technology now to move away from that. Why continue to confuse people?作者: Chuckrox 时间: 2011-7-13 13:30
FinNinja Wrote:
-------------------------------------------------------
> So BEY is correct, EAR is incorrect, right?
>
> Or does this really matter to CFAI at level III?
>
> I know BEY is the way to quote, I also know that
> BEY is not the true EAR.
>
> I hate quoting conventions! I know why they did
> it, but really we have the technology now to move
> away from that. Why continue to confuse people?
Why in the fixed income section do they say "The asset swap curve is gaining minimal acceptance in the USA."
Pretty much every screen your bring up prices off ASW and TSY both and routinely spreads are quoted ASW.
I have found the Level III curriculum to be very untimely. Level II seemed like very relevant and timely information (pensions, derivatives, etc.). Level III seems behind the times.
Edited 1 time(s). Last edit at Tuesday, May 31, 2011 at 11:29AM by Paraguay.
