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I just straight up struggle at these DDM questions. I am constantly wondering if I have to take the req rate of return as the denominator versus the constant growth at just D/expected rate of return – growth. You get growth at times by taking ROE * RR (1-div payout). So much to remember and I STILL get the questions wrong. Any last minute tips on this? Figure I should focus on stronger areas and not get bogged down here (though I know its very important).

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Ahhh i didnt realize they all must sum zero. Thanks again!

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Thanks @fp92

Understood on both risk risk and investment offset each other due to market and reinvestment from the investment horizon.

Follow up question is – this is all under the assumption that we would take our fixed coupon payment and reinvestment that $$ paid to us (in the form of a coupon) and into this same theoretical bond, correct?

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@cfachris so data mining is NOT sampling. Is that the key diff?? I hate when definitions can be almost the same.

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Thanks Zee. Another question I have as I was reviewing is still relating to forward from spot rates.

I notice on some problems that you are raising to the 1/2 power. For example, (1.08^4/1.06^2)^1/2 – 1 = 10.04% whereas some problems I see in kaplan dont do that. Is it due to the fact the implied forward loans are for more than one period? It seems to be the case (calculating for one period would mean you would not raise to the power of 2), but not 100% sure.

If you could clarify this – I would appreciate it. More or less trying to understand the logic if that makes sense. If need be – I can show some questions from kaplan. Thanks!!

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Thanks rahul!

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I got the concept on multiple IRRs. Thanks again bud!

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end of year deposits ughh got it. Thanks

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Thanks gents!

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thanks!

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thanks @cfachris makes sense!

So I wrapped up portfolio management today and thought of the theory regarding shorting a risk free asset (such as a government bond) while borrowing on margin to purchase a riskier stock (say amazon) to create a risk-less asset.

Could it be possible to eliminate unsystematic risk by diversifying to your 30 stocks and effectively eliminating systematic risk by diversifying in uncorrelated market stocks? For example, diversifying in stocks holding betas of .5, 1.0, and 1.5?

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Thanks for the feedback. I actually noticed it upon re-reading the LOS. Will we have to memorize the Z table stats or will they provide those tables? Didn’t look like there was an option for this particular problem.

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@manteca makes more sense now. I think I just was reading too fast and didnt see the margin piece. Clearly its not the full return

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Sorry @fp92 – I was not clear enough. I was seeing if you could calculate this problem by using the TVM functions in your calculator. The question did state 93.5 as a FYI

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roger that @rahul12

I think your point 2 above helped clear things!

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thanks Mikey – how do you get the 8NCR4? Order matters for NCR and doesnt for NPR, correct? Get confused with this. I understand the first part, but unsure of where you get 8NCR4.

 

Patrick

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Mike – youre the man. Your response was diligent and cleared it up for me. Thanks!

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@Sophie so is Kaplans answer wrong then? They have 3,504,167 vs your number of 3,494,583.

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