AdaptPrep

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We will use a binomial distribution with p = 0.85 and n = 10. We want to calculate:
Pr(X >= 7) = Pr(X = 7) + Pr(X = 8)
Pr(X = 7) = (8 choose 7) * (0.85)^7 * (1 – 0.85)^(8 – 7) = 0.3847
Pr(X = 8) = (8 choose 8) * (0.85)^8 * (1 – 0.85)^(8 – 8) = 0.2725
Pr(X >= 7) = 0.3847 + 0.2725 = 0.6572

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For the effective annual yield, you
annualize the holding period yield:

HPY = (P1 – P0 + D1) / P0 = (100 –
101 + 2) / 101 = 0.99%

EAY = (1 + HPY)^4 – 1 = 4.02%

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The exchange rate decreased to
101.34 units of the price currency per 1 unit of the base currency. For ease of
explanation, let’s suppose this exchange rate is quoted in Japanese yen (¥) per
United States dollar ($).

A decrease of the yen-per-dollar
exchange rate to 101.34 is equal to an increase in the dollar-per-yen exchange
rate to 1/101.34 dollars per yen. We are told this exchange rate appreciated by
7.5%.

That means the exchange rate was
(1/101.34) / 1.075 = 0.009179 dollars per yen, which is equivalent to 108.94 yen per dollars.

Alternatively, because (1 / 1.075)
– 1 = -6.98%, a 7.5% appreciation of the dollar-per-yen exchange rate is
equivalent to a 6.98% depreciation of the yen-per-dollar exchange rate. If the
exchange rate was X, that means X(1 – 6.98%) = 101.34. Solve for X = 108.94.

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The Global Investment Performance Standards (GIPS) are a
consistent baseline that companies can follow to give credibility to their
performance results. They came about because companies were taking advantage of
all sorts of potential biases to
skew performance results in their favor.

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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.

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Since costs are reasonably estimated, IFRS allows revenue
recognition up to the point of costs (then the profit is recognized upon
completion). In the first month, Medialink is expected to incur $1.0 million /
24 = $42,000.

If the project proceeds as expected, Medialink
will incur $42,000 of revenue and $42,000 of costs (for $0 profit) each month
until the last month.

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@CedricJ,

This is Ben Kester with Passed Tense. As GeorgeKop alluded to, our Adapt exam engine is unique in that it it learns about you as you use it, giving you harder questions as your “Earned Level” increases. Mock Exams are a great indicator, but only for a single point in time. We designed Passed Tense’s Adapt engine to give you a more complete picture of your preparedness through taking multiple practice exams.

We wrote the questions so that Level 7 difficulty corresponds to our estimate of the average difficulty of the CFA exam. As more people use Adapt it gets “smarter”. Adapt uses credibility theory to adjust the difficulty level for each question. So if some questions are too easy, they will lower in difficulty as more people answer.

If you would like harder questions that are comparable with what will be on the exam, you can click on “Custom” on the Account screen and then select a custom exam with difficulty level 7.

By the way, we’re having an “Earned Level Challenge” over the next few weeks giving $50 to the 20 users with the highest Earned Level in Adapt. Check out our blog for details

Please let us know if you have any other questions!

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The break-even point for this option is $43, meaning
that the stock must drop from $50 to $43 within the next four months. It is
entirely possible that such a situation could
happen (which is why the put is worth $5), but chances are that it won’t happen. In that case, Jonathan is most likely to make a
profit.

Note that while it is less
likely for Stephen to make a profit, he does have greater profit potential,
which is why he would purchase this option in the first place.

[AdaptPrep]

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The interest rate is the sum of the following factors:

• Real interest rate
• Inflation premium
• Default risk premium
• Liquidity premium
• Maturity premium

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The least likely method is returning the swap to the exchange. Most swaps are over-the-counter
agreements, so there is no exchange. Even if there were, the exchange isn’t in
the business to assume one side of the swap, but rather to pair buyers and
sellers.

The following methods of terminating a swap are feasible:

• Purchasing a swaption
• Selling the swap to a counterparty
• Enter into a separate offsetting swap
• The contract specifies early termination by either party
  with cash settlement

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Yes, the correct answer is Neither I nor II.

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Each of these investment needs corresponds to a specific
type of investor:

Individual investor:
Accumulate capital over the next 30 years to be payable for an uncertain number
of future years

Endowment: Provide
an inflation-adjusted amount, payable for the next 50 years

Defined benefit plan:
Grow the assets over a long term, with varying inflows and outflows each year

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The difference between a price index and a total return
index is that the total return index includes reinvestment of all cash flows,
whereas the price index just includes price changes of securities. The total return index then will be higher.

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Stagflation (high unemployment and high prices) is most
likely to occur when supply is suddenly tightened (left shift in the short run aggregate supply curve). Because there
is less goods, prices increase as consumers compete for them. Likewise,
companies are producing less, so require fewer workers.

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The Standard which applies is:

Misrepresentation:
Members and Candidates must not knowingly make any misrepresentations relating
to investment analysis, recommendations, actions, or other professional
activities.

By not citing her sources, Krystal has misrepresented the
research findings she posted.

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For a finance lease, the cash flow considered to be interest
($300,000) is considered operating
cash flow. The rest goes in the financing cash flow.

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The two primary market manipulations are transaction-based
and information-based. There is nothing illegal about purchasing a large number
of call options, so there is no violation there. By spreading false
information, Allen is guilty of information-based
manipulation.

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The quantitative criteria
necessitating a company to disclose separate information about any operating
segment are:

• The segment constitutes 10 percent or more of
  combined operating profit, assets, or revenue.
• The combined revenue from external customers for
  all reportable segments is less than 75 percent of the total company revenue.
• A single customer represents 10 percent or more
  of the company’s total revenue.

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wannabe1988, you can solve these with a lot of algebra work. Or, you can use an easy trick. Plug the answer choices into the equation, and see if they work:

Our roots are 0% and 62%.

[AdaptPrep]

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First, we must calculate the cash flow yield. This statistic is calculated just like the IRR:

504.13 = 100 / (1 + r) + 500 / (1 + r)^2

r = 10%

The Macaulay duration is the weighted average of time to receipt of each payment, discounted at the cash flow yield:

MacDur = [1(100) / 1.1 + 2(500) / 1.1^2] / (100 / 1.1 + 500 / 1.1^2) = 1.82

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