CFA CFA Level 1 Question of the Week – Derivatives

Question of the Week – Derivatives

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    • AdaptPrep
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        Haspiess Systems, Inc. and Signicomp Manufacturing enter into a netted interest rate swap, with a notional $75M. Haspiess will pay a fixed 5%, and Signicomp will pay LIBOR + 75bp. LIBOR is 3.5%. The first semiannual payment will be closest to:

        • Haspiess paying Signicomp $600,000
        • Signicomp paying Haspiess $600,000
        • Haspiess paying Signicomp $300,000
      • AdaptPrep
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          The amount Haspiess owes is 0.5 * $75,000,000 * 5% = $1,875,000.
          The amount Signicomp owes is 0.5 * $75,000,000 * (3.5% + 0.75%) = $1,593,750.
          The netted payment will be Haspiess paying Signicomp $281,250.

        • simply_complex2
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            • CFA Level 1
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            if only the exam was color coded to highlight key words…wishful thinking haha. but i definitely agree. a lot of my mistakes stem from the fact i dont take the time to properly read the question

          • shannondaily
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              Woo! I got it right. 🙂 

            • simply_complex2
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                • CFA Level 1
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                missed the semiannual part. i guess that’s kind of important…. >.<

              • policedog
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                  @simply_complex2‌ that’s what I feel is 80% of the reason of wrong answers when I take an exam. Its not like I don’t get it, but the question often makes things so convoluted that its so easy to miss/confuse things. So far no remedy found except to keep practicing…

                • RoyD
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                    In the KS books, words like ‘most likely’ or ‘least likely’ are usually in Italic. Does help.

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