CFA CFA Level 1 Question of the Week – Derivatives

Question of the Week – Derivatives

  • This topic has 6 replies, 5 voices, and was last updated Jan-18 by RoyD.
  • Author
    Posts
    • AdaptPrep
      Participant
      Up
      8
      Down

      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
      Participant
      Up
      5
      Down

      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
      Participant
      Up
      2
      Down

      missed the semiannual part. i guess that’s kind of important…. >.<

    • policedog
      Participant
      Up
      0
      Down

      @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…

    • simply_complex2
      Participant
      Up
      4
      Down

      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
      Participant
      Up
      4
      Down

      Woo! I got it right. 🙂 

    • RoyD
      Participant
      Up
      0
      Down

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

Viewing 6 reply threads
  • You must be logged in to reply to this topic.