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bcp901

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tT
发表于 2013-4-16 09:03 | 只看该作者

Few more questions

his, corporate, executive, officers
Just wanted to confirm a few things:
1) Best practices in corporate governance dictate that the board must be responsible for hiring the CEO and setting his compensation package. I think this is wrong. BOD is responsible for hiring the Chairman and not executive officers. Also, compensation package will be set by the compensation committee.
2) Question 12.4 on Schweser 2009 Exam 3, PM. Could some pls. spare 5 mins and explain wtf they are talking about in this problem? The answer in no way seems to make sense with respect to the question.
3) Q. 12.6 of the same vignette: Why isn’t the answer B?? The question is a bit long, so, would really appreciate if you read it directly from the book.
4) 18.4, talks about dollar duration. Where are thet getting the 10.15 from??? Schweser is really slacking off.
Thanks a lot !

 

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Makavelim3

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2#
发表于 2013-4-16 09:03 | 只看该作者
1) Best practices in corporate governance dictate
that the board must be responsible for hiring the
CEO and setting his compensation package. I think
this is wrong. BOD is responsible for hiring the
Chairman and not executive officers.
No. The BOD (or more commonly, the nominating committee) nominates new board members including the chairman for the shareholders to vote. Just watch what happened to GS yesterday.
The BOD selects/hires the CEO, normally by a search committee.
compensation package will be set by the
compensation committee
Yes. The compensation committee is composed of some members of the board.

2) Question 12.4 on Schweser 2009 Exam 3, PM.
Could some pls. spare 5 mins and explain wtf they
are talking about in this problem? The answer in
no way seems to make sense with respect to the
question.

Confusing explanation and bad question. Key points:
enhanced return by picking more idiosyncratic (non-beta, unsystematic) risk
of the LA debts
option A only DECREASES (or at best, SAME) returns by improving quality (less risky)
option C clearly only decreases return.
3) Q. 12.6 of the same vignette: Why isn’t the
answer B?? The question is a bit long, so, would
really appreciate if you read it directly from the
book.

China is clearly better than India, given the data.
It should be also ok to invest bond here as well, but there is
not enough data to conclude about the ability of the gov to repay the debt.
E.g., the data given for Russia and Brazil.
Plus the expected savings  investment so they have no need to issue new bond.
A is not correct since we don’t know about growth opportunity of Brazil.
C is correct given the data, compared to Brazil.
4) 18.4, talks about dollar duration. Where are
thet getting the 10.15 from??? Schweser is really
slacking off.

10.15 is a plug number to get the right side to be equal DD 6932.53. However, I think it is an error since DD is by def the change for 100bps not 50 bps as calculated here.
Thus duration should be double that, i.e., 20.3. It would be more consistent with the fact that the bond is 20 year and 270 days.
Anyway, it is irrelevant for the calculation of the answer since you use the given DD of 6932.53 as input.
Hope it helps.

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