Ying

[Ying]

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Here is the question.

The expected (local currency) return on the bonds is 8.50%, and the 1-year risk-free yields are 1.3% in the United States and 4.6% in Australia. The spot exchange rate is USD0.6900/AUD1 and the one-year forward rate is USD0.6682/AUD1.

Given the exchange rate and interest rate data provided, if the Australian currency risk is fully hedged, the bond’s expected return will be closest to:

5.20%.
5.34%.
3.90%.

Thank you!

[Ying]

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Thanks Alta12, but that did’t answer my question. The answer given is 5.34%, not 5.2 %. Please see my first message. My question is between those two approach, why we should use RLC+f discount. and f discount calculated with exchange rates is different from IRP.

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I’m rewriting this year too and so panic about the morning session, English is my second language, sometimes I feel like I know how and why, but always couldn’t use the words the guild line answered used. And they don’t allow graders to read into the answer, that sucks! Besides, anyone found morning session just getting harder and harder every year?

[Ying]

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Hi @Sophie, thank you for your respond. I was being silly. What does 6-6 mean really? lol. This is a question from practice tests offered by CFAI, it’s under the last session, Portfolio Trading-Perf Eval-GIPS – Chung. Do you still be able to see the test?

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I have found someone else’s summary, but still have a few doubts (underlined). Can somebody please help me clarify? Thanks!

Fees

GIPS: gross (but net recommended)

Real Estate: gross or net (but deduct transaction fees for both)

Real Estate Closed End Fund: net (but deduct transaction fees)

Private Equity: gross and net (but deduct transaction fees for both)

Private Equity FOF: gross of investment management fees but net of partnership/fund/expense fees & carried int) (Isn’t carried int part of investment management fees?)

SMA: net of entire bundled/wrap fee (unless direct trading expenses can be identified)

AMC: gross and net (like Private Equity)

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