CFA Mock Exam - Ouch.. offering, question, across, reduce, should

RoastBeef

In question 42:

How can "B" not be the cheapest collar? You're offering to take a loan at 6.5% and give it at 4.0%. Widest range so it has to be the cheapest!! Why is "B" incorrect?

In question 46:

Again "B" diversifying across currencies should reduce risk? Why does the CFA not agree? (Those bastards, ha ha).

Got a 65% btw: boo @#$%& hoo!

NakedPuts00

46: I think it says eliminate risk, I got this wrong too.

NO EXCUSES

dyga

Are you asking about #41 actually?

B.
You buy a put. Put strike at 4.0 makes the put cheaper -> collar cheaper
You sell a call. Call strike at 6.5 makes the call cheaper -> collar more expensive

Correct answer:A
You buy a put. Put strike at 4.0 makes the put cheaper -> collar cheaper
You sell a call. Call strike at 5.5 makes the call more expensive cuz its more likely to be ITM -> since you sell the Call, you get more money and the collar is cheaper

Windjammer

bpdulog Wrote:
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> 46: I think it says eliminate risk, I got this
> wrong too.


He's correct. THey say "eliminate risk" but diversifying only decreases risk.

Lemme know if you happen to have 2010 or 2009 Mock exams! :-)