@rollover2
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Up5
This might be cultural differences, but just FYI your question came across to me as very entitled. You’ll get a better response to your questions if you ask clearly, maintain politeness and help others in the forum when you can.
But I’m nice, heh. So here goes:
The unbiased/pure expectations theory assumes that current long-term interest rates can be used to predict future short-term interest rates. So this means that instead of purchasing one three-year bond, an investor may buy:
a one-year bond now and another two-year bond later, ora two-year bond now and another one-year bond later.
According to the unbiased expectations theory, the returns should be identical in all 3 cases, i.e. for a given holding period, the average expected annual yields on all combination of maturities will be equal.
However, for this theory to work, one of the main assumptions is that investors are indifferent between owning a single long-term security or a series of short-term securities over the same period, i.e. risk neutrality. So, risk neutrality implies that all investors are indifferent to interest rate reinvestment risk, and that investments of different maturities are perfect substitutes for each other.
But in reality, it is unlikely the case. But that’s another story.
Up5@Dt98 – I would have chosen EV of A is lower than B.
EV has the component ‘market value of common stock’ = market value of shares x number of shares outstanding (NOSH).
As NOSH includes the number of treasury shares, you need to deduct this out to get the correct market value of common stock, therefore EV of A is lower than EV of B.
Is this the right answer?
Up4My calculation has a slight difference in FV due to more decimal points in i/y (usually I go for 4 dp): n=140, i/y = 2.4695, PV=0, PMT = -2000, FV = 2,383,163.16 (at t=60)
Here we expect the FV to be significantly higher vs. the first very first question, given the higher savings per period ($2,000 per quarter vs. $29.6 per week which is roughly equal to $384.80 per quarter). So the FV here is about $2.38million when you save more ($2,000 per quarter) although the compounding period is less ($29.6 per week), given the same annual effective rate.
So next we want to find the monthly annuity income from the pot of money at retirement age (t=60), so PV should be the pot of money $2.38m:
Then, at t=60, PV = – 2,383,163.16, N = 360, I/Y = 0.816, Monthly PMT = 20,548.59
Yes seems quite high, but there is the power of monthly compounding on such a large $2.38m base over 30 years.
Hope I’ve done this right, have a check?
Up3I would prioritize CFAI’s qbank since they set the exam, seems like they are the middleground in terms of difficulty. Then would do some MM, and if I have time, Kaplan last. Rather be surprised that it is too easy, than too tricky in the real exams!
May be worth checking out other providers as well that are offer free L1 question banks like Uworld, heard that you can customize difficulty in that and may be useful to replace that over Kaplan if you run out of questions.
Up1I got Kaplan’s and it’s pretty awesome for free testing. As I’m an L2 candidate, didn’t get to try out Uworld’s I’m afraid so can’t help you there!
Up1Sorry didn’t use Wiley myself… just CFA curriculum. it’s good but very wordy 🙂
what is in your short list currently?
Up0Agree with the monthly periodic rate.
However in your first TVM calculation, I seem to get a PV of $463,908 with the same input of: r = 0.816 n = (90-60) * 12 PMT = $4000.
In the second TVM calcs for weekly savings: I thought 0.1878% should be the weekly periodic rate, instead of the monthly rate of 0.816%. PMT seems to be $29.6 per week savings assuming my previous PV above of $463,908 is correct. Can you double check?
The calculation should be similar if you change savings frequency, but you need to update the periodic rate accordingly.
