wannabe1988

# wannabe1988

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• wannabe1988
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5

Anyone? ðŸ™‚

• wannabe1988
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4

You are brilliant! thank you so much! ðŸ™‚

• wannabe1988
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4

I think I have understood the difference between EAR and EAY. EAR is used to capture the effect of more than one compounding per year. EAY annualised a yield to make it comparable to other one year yield.

I have two new questions now though.

1) Why is BEY formula BEY=[(1 + EAY)^1/2] – 1? why do you square the first term? Am I right to say BEY function is to restate any yield with monthly, quarterly or semi-annually compounding into one year yield?

2)How do you know when to use EAY, money market yield and bond equivalent yield?

• wannabe1988
Participant
4

I agreed with you. I am pretty sure these are the reasons why effective duration is as such but I cannot put my head around how the capping is affecting the effective duration (formula wise). If the capping decreases YTM, shouldn’t the effective duration increases? if effective duration decreases that means YTM increases greater than under option-free bond?

• wannabe1988
Participant
4

By the way, I am trying to avoid creating too many threads but i hope it’s okay that I ask another question related to bond here.

For the following question, if the yield curve is downward sloping, isn’t that implied that the short-term bond is more volatile thus requires greater interest rate to compensate for the volatility? But according to CFAI answer, for such a yield curve, volatile short-term bond does not necessarily implies higher interest rate than long-term bond but I thought volatility usually implies higher interest rate?

• wannabe1988
Participant
4

Hi Thanks for the clarification. If the null hypothesis is not rejected for a general t-test for the regression coefficients (t-stat < t-critical), does that mean the independent variable doesn’t have the explanatory power on the model and hence it is not appropriate to use the model to draw any conclusion?

• wannabe1988
Participant
4

Thanks @googs1484

What I wanted to know is why do we need to re-classify the periodic pensions? I understood the mechanism of the re-classification but couldn’t catch the reason why the need to re-classify them. For example, why do we need to re-add the entire amount of pension costs to operating income?

Understood about the points you made about NIE under IFRS. I got the same understanding but was confused by this sentence in the note, “Under IFRS, net interest expense/income on the P&L incorporates a return on plan assets based on the discount rate”. But I think i understood it now – they are referring to the second term of the following formula: NIE = (PO x r) – (Fair value of plan asset x r).

• wannabe1988
Participant
4

Also to follow up on the question on revaluation, the second question asks for financial leverage with asset revaluation removed from the calculation. In the answer sheet, the way to compute this is by removing the revaluation surplus and depreciation expense. I can understand how revaluation surplus and depreciation surplus change the value of “Average Total Asset” (numerator) but the solution also deduct the revaluation surplus and add the depreciation expense to the “Average Shareholders’ equity” (denominator). The formula to compute without the revaluation surplus is given as follow:

total asset with revaluation – valuation surplus + depreciation expense (divide by) total shareholders’ equity – valuation surplus + depreciation expense

my question is why do we include valuation surplus and depreciation surplus in computing the denominator?

thank you.

• wannabe1988
Participant
3

Thank you everyone! I was thinking the same thing as Yeshank in that when they say t=4, i usually assume it to be ordinary annuity unless it is stated as annuity due. Hence t=4. I thought when a question does not state the type of annuity, we usually assume ordinary annuity?

thank you again every for your feedback!

• wannabe1988
Participant
3

The first formula is the general t-test formula. The second is the correlation t-test formula which is less well-known (at least to me). If i understood it correctly, the second formula’s application is based on a null hypothesis that the correlation between two samples is equal to zero and the alternative hypothesis is there is some forms of correlation.

• wannabe1988
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3

Got it! Thanks again for answering my question!! ðŸ™‚ ðŸ™‚ the answer is super clear!

• wannabe1988
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3

Really need some help here. Thank you in advance!

• wannabe1988
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2

Guys, thank you. I understood it thanks to the explanations. Basically a fiduciary call is a naked speculative position & covered call is a hedged position ðŸ™‚

• wannabe1988
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2

Thanks a lot! that makes a lot of sense! ðŸ™‚

No apology is needed, @googs1484
Thanks for helping too!
• wannabe1988
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2

Thanks rsparks!

• wannabe1988
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2

assuming simple regression with only one independent variable.

• wannabe1988
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2

@googs1484 haha no problem! we are in the same shoes but good to have someone to discuss about this =)

• wannabe1988
Participant
2

Sorry, my assumption doesn’t make any sense. I need help! haha!

• wannabe1988
Participant
2

Thanks for the explanation! Somehow it helps! Apparently from 2015 onward, AFS for debt is not longer permissible – it’s either Held-to-maturity or Held-for-trading. Nevertheless, based on your example, doesn’t seems like it’s going to be a big problem so long we understood how it affects the financial statements.

• wannabe1988
Participant
1

anyone? ðŸ™‚