DigitalWizard

[DigitalWizard]

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So for @simply_complex2‌ and @jmsatchwell‌, what do you use as the risk free rate? and how would we know that it gives us the closest CAPM answer?

  @WesMantooth‌, brilliant. Thank you.

[DigitalWizard]

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We had one guy finish at an hour in on the first session. He must have been studying hard for a year. We also had a line of 20 or 30 people that didn’t make the doors closing to start the session. (they were let in after the timed portion started, and had to catch up). I saw some people trying to sleep that looked obviously worn out from an all-nighter or two.  Poor folks don’t know what hit them. We had a few people doing stretches while waiting for the exam to start. The proctor in the bathroom giving everyone the “evil eye” was certainly creepy but understandable. We had nice stacking chairs that used suspended cloth as their seat and back! Very impressed when I was worried about folding metal, or old classroom stools or something. Things were smooth and everyone did a great job getting people in and out, etc.  I hope I pass!

[DigitalWizard]

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– I suppose most of us were exposed to Prob, Stats, and Algebra in High school. However, if you have a weak spot there, then reviewing the algebra will go a long way to managing all those equations and how to manipulate them to get what you need out of it.  
– The study material seems nearly identical to an Intro to Prob and Stats class I had.
– In addition, get some training on using the calculator, while you will still need to know the underlying concepts of the topics to know what to do, it seems to save a lot of math computation time if you can use the Finance calculator correctly during the exam.

[DigitalWizard]

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Thank you @jmsatchwell, you forced me to dig through the curriculum ;-).
I found where this problem was referencing, page 49 of Volume 4. Section 3.3.1. It looks over CAPM and mentions “If we are evaluating a project with an estimated useful life of 10 years, we may want to use the rate on the 10-Year Treasury bond”.  

Also I found on page 251 of the 2014 Level 1 Volume 1 CFA curriculum book where it is defining risk rates: The footnotes suggest the 90 day US T-Bill as the best proxy of the Risk Free Rate.
In addition, one could show that a shorter timeline has less default risk, and with no other indications or wording in the test question about the length of the “project”, the 90 day T-Bill would have (albeit perhaps slightly) less risk than the 10 year T-Bond and is a better choice for the RFR.

I suppose this exercise was simply a “heads up”. Once in a while questions ARE vague, unfair, or even simply wrong.  😉
(Not as often as I first thought they were! I’ve had to prove myself wrong too many times. haha!)

On to more questions!

[DigitalWizard]

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If your investment flows are already negative then capitalizing will indeed increase flow, making it more negative, or even more outflow. Same with operating, I think keeping inflow and outflow instead of just saying “cashflow” and assuming it is positive to the company.

[DigitalWizard]

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If you just got your MS in Finance, I would take the mock right away and see how poorly you did and realize what you need to hit the hardest over the next 3.5 weeks. Also, see 300 hours’s article on mock exams, you should take several, not just one.

[DigitalWizard]

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I was getting low 60s on some 120 question mocks, then I got a 69% on a Schweser exam, all new questions to me, I was pretty excited as that was at 3 weeks out. Then I took the free Investopedia CFA L1 “quizzer”, and scored a 47%. I was not as excited. Actually I was quite discouraged and figured it was Investopedia’s test that was the problem.  (haha).

I then did the CFAI Mock AM session and scored a 56%, so now that we are 2 weeks out I am pretty nervous.

I am going to do some more tests and review.

[DigitalWizard]

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Thanks @fabian, I think it is a great tool to see how things are going, it works best when you have a lot of data points and a good representation on how much effort it will take to increase a low score.  Not unlike the subjectivity of valuations in the real world, I can come up with a handful of “reliable” models that differ in their results by 50%. 😉

Well good news I’ve added a few more mock test results to my own copy of this spreadsheet (I didn’t change the public facing one). And by my recent small improvements in all the other areas, it accentuates EVEN MORE that Ethics is what I need to focus on to gain the most amount of points on the exam.  Crazy right? I just can’t get enough ethics, I think so many mock ethics questions are so judgment based or assumption based, it is hard to score more than 80% on these pretend questions. Either that or I just can’t seem to get all the little tricky words they use interpreted into the applicable standards. 😉

[DigitalWizard]

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From all the mocks I’ve been taking, at a minimum you need: DuPont(in all its varieties is best), beta, Capm, Weight of a two asset portfolio, WACC, cost of preferred stock, Cov(), DDM, Standard error, CV, roys/sortino/sharp, leverages, duration & convexity, throw in a bunch of ratios for Financial reporting and analysis and I think you’ve got a set of winners to focus on. That doesn’t include the stuff that the calculator knows how to do, TVM, CF, Stats, Depreciation/Amortization, etc.  I am sure there are hundreds more, but these are the ones that have come up a lot that I have in my notes.

[DigitalWizard]

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I am in the same boat, anyone with experience have some thoughts?

[DigitalWizard]

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Yeah, I didn’t have a watch and the “countdown” from the proctors is a lagging indicator, so I got pressed for time at the end on both, no time to review.  😐    BRING A WATCH

[DigitalWizard]

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Ethics is quite subjective at times. I think some ethics answers would differ between two official question writers. I often come across questions that I dismiss the official answer, hoping that the real exam will take more thought into removing the need for blind assumptions. However, you only need to get 70-80% of the ethics questions right to feel “safe” on that topic. 

[DigitalWizard]

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Here is a practice question that shows that photocopying material to sell is against the standards. I don’t know about selling the ownership of the material. You may have to consult a KS and Tax attorney just to be sure you are good to go.

Rebecca Wong is enrolled to take the Level I CFA exam. Her friend William Leung purchased

Level I study materials from a well-known CFA review program the previous year. Leung made a

photocopy of the previous year’s copyrighted materials and sold it to Wong to help her study. Who

most likely violated the CFA Institute Code of Ethics or any Standards of Professional Conduct?

A. Both violated.

B. Only Leung violated.

C. Neither violated.

Answer – Both Violated

Photocopying copyrighted material, regardless of the year of publication, is a violation of Standard

I(A) because copyrighted materials are protected by law. Candidates and members must comply with

all applicable laws, rules, and regulations and must not knowingly participate or assist in a violation

of laws.

[DigitalWizard]

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I find myself drinking too much water during mock exams, I am sure that three bathroom breaks will not only waste valuable time, but could also make the proctor suspicious and he’ll throw me out for excessive “leg bouncing”. (the trying-not-to-pee-while-you-are-sitting-at-a-desk kind of leg bouncing)

[DigitalWizard]

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It is a statistical impossibility to score a zero without knowing that you are purposefully choosing nearly every wrong answer. Perhaps the “Average Min” should be “Absolute Min” at Zero.
If there is a large group writing this test and getting lower than a 33.3%, I just don’t understand what happened to them. Apparently their midpoint is 25%, but that is less than randomly filling in the answers. Perhaps that lower slope should flatten out, a sort of “glass floor”. Start with 40 as your midpoint and work your way up from there, see if that helps explain things similarly but with a little more cushion towards the 33.3%.

[DigitalWizard]

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Maybe more if you want to have more confidence going into the exam. 😉

[DigitalWizard]

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I bought 5ADay for Level-1.  It was handy if you are traveling (NOT WHILE YOU ARE THE DRIVER).  IF and Only IF you have already covered the material. It was not good for breaking into new topics, but it did a great job summarizing important phrases and concepts so you could recall and ingrain those concepts when reviewing on the go. I never used it while sitting at my desk or on my couch. Those times were best for thousands of practice questions and reading detailed material. End result, if you want a nice summary refresh app and you’ve got the money, then go for it.

[DigitalWizard]

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I could read the article in 45 seconds, then using spreed, I can do it 20 seconds. At 3000 wpm I could “read” the CFA curriculum in 5 hours. NOT SKIMMING, as that is dangerous and you might miss a word (like the word “not” is so small yet changes a whole idea). Speed reading every word is only possible by not sub-vocalizing and then by seeing larger “chunks” as you read. It is entirely possible for us normal people who practice speed reading to grab a new story and keep more than 80%-90% comprehension as you have the entire book still fresh in your mind from only 60mins of reading it. It is a skill that requires constant practice to keep up.

CFA material is NOT the same. I still must chug at 200-600 wpm to digest the topics and do the problems, etc no shortcut to understand new complex educational material. However, when reviewing already covered material I can zoom right to where I don’t understand and then slow down to give that time to think and connect the topics. Real speed reading is highly recommended.

@stassajin I am sure you can come across papers that support what I have said. As well, most of what Sophie was trying to get at is valid with a few caveats of understanding what she is getting at, and when to use which of her numbered techniques. ( like don’t skim when you need to read the material, minimize unnecessary backtracking when you should instead get fresh air and stop “zoning out”.)

btw, A good reader that just pronounces the words fast is different from a real speed reader who breaks through the glass ceiling of just sub-vocalizing quickly. It goes so far as the very talented speed readers can really read by glancing down the page or two at a time and recognizing all the words and sentences as symbols with meaning, understanding the page in fractions of a second.

I wish I was better and more consistent but the technique comes in handy. While it may not be for everyone, it should be taught as part of how to read shortly after a child can read story books accurately without stopping to sound out words.

Great Article Sophie, as usual! I love speed reading and try to teach the principles to those around me.

[DigitalWizard]

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Salimathur, I believe Arif charges for those lectures, do you represent his company?

[DigitalWizard]

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Also depends on your situation, if you are single with no kids during a summer break from College or during a period of unemployment, you could potentially put in 700 hours when a working family person with kids could only put in 100.  

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