CFA CFA Level 3 CFAI 2013 PM Question 50

CFAI 2013 PM Question 50

  • This topic has 10 replies, 3 voices, and was last updated Oct-17 by Alta12.
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    • vincentt
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      @alta12 @RaviVooda
      For the 9th Itemset question 50, it ask about how to achieve the new target duration, in exhibits 2 there’s info on CTD and also future contracts, how do we know when to use CTD or futures?

    • RaviVooda
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      @vincentt, can you paste the question, I am not able to lcoate it.

    • vincentt
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      50. Given Bixby’s new target duration and the data in Exhibits 1 and 2, the most appropriate action using Treasury futures is to sell:
      A. 646 contracts.
      B. 789 contracts.
      C. 811 contracts.


      @RaviVooda
      ‌ here u go

    • RaviVooda
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      @vincentt‌ we settle all bonds with Cheapest to deliver bonds

      (4.25-5.5)/5.3 * (300,000,000/97750) * 1.12 =811 contracts

    • vincentt
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      @RaviVooda‌ so the future price is for anything apart from bonds?

    • RaviVooda
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      @vincentt two forms here

      no of contracts = ((target duration – current)* price )/Dollar duration per futures contract

      it is same as (((target duration – current)* price )/(duration of CTD bond * Price of CTD)) * CTD conversion factor

    • vincentt
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      @RaviVooda‌ can you tell me which reading and los is the first one?

      So you’re saying the future price contract in exhibit 2 is just a distraction and it’s irrelevant in this context?

    • RaviVooda
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      @vincentt both formulas are in fixed income reading only. Both are in the same LOS.

      in exhibit 2, had the duration of futures contract been given, we can calculate it. In this case since it is not given we can use the cheapest to deliver bond where all details are given

    • vincentt
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      they look similar hence i missed that one out, thanks for point it out @RaviVooda

    • RaviVooda
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      @vincentt I too didn’t closely notice it until u asked me. When I solved problem, I however used CTD bond and got it right 🙂

    • Alta12
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      @vincentt @ravivooda I used CTD too. Didn’t notice the futures price distractor.

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