CFA Success: Webinar on Alternative Investments and Portfolio Management

This blog is an extension of our blog on CFA Quants.

Round five of the CFA Webinar Question Answer sessions! This will aid your CFA prep in more ways than one. Find below a recording of the discussion on CFA Alternative Investments and Portfolio Management.

The answers to the questions are given right here as well.

Find here a brief summary of some of the most important points of CFA Alternative Investments and Portfolio Management:

#CFA Success

Question: What is Convenience Yield?

Answer 1: It is called the extra benefit that is derived from holding the physical good rather than future contract.

Question: Who are Venture Capitalists?

Answer 2:

“Investors who provide money to start up firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns. Hence VCs do not ask for the money back, rather own a share of the profit (in simple terms).”

Question: What is the difference between CAL & CML?

Answer 3:

“There is no difference between CAL and CML as they both represent the same thing. They all involve a possible combination of risk free and risky asset.”

Question: Please elaborate Market Risk Premium.

Answer 4:

“Market Risk Premium = E(Rm)- rf.”

Question: What are Call Options and Put Options?

Answer 5:

“In both options, only the buyer has the right to sell or buy. But there is no obligation.

Call Option: The buyer has a right to buy at some specified price in future.

Put Option: The buyer has a right to sell at some specified price in future.”

Question: Explain Contango and Backwardation.

Answer 6:

“Contango – Futures price > spot price (i.e market is at a premium).

Backwardation – Future price < spot price (i.e market is at a discount).

There will be subsequent blogs on more questions and discussions that will take place on the following days. So stay tuned for more!

If you have any queries, comments or questions feel free to post them in the comments section or visit our forum.

Crack the CFA Exam: Webinar on Quants

This blog is an extension of our blog on CFA Webinar on Fixed Income and Equity.

Round five of the CFA Webinar Question Answer sessions! This will aid your CFA prep in more ways than one. Find below a recording of the discussion on CFA Quants.

The answers to the questions are given right here as well.

Find here a brief summary of some of the most important points of CFA Quants:

#CFA Webinar

What is the difference between Z- score and Z-test statistic? I came across a z-score formula: x-u/std deviation z test statistic: x-u/std error.”

Answer 1:

“Z score – It tells us whether a particular score is equal to the mean or below the mean or above the mean. It also tells us how the particular score is away from the mean.

Z test – This is used to comparing the means of two population whether you know sample standard deviation or not but its size must be greater than 30.

If we have n assets and we have to calculate the variance of portfolio,
how do we go about it? Since we have a lesser number of equations, the summation of weight = 1.

Answer 2:

“Sure, it will if you are providing the weights to the assets in proportion to 1. And For finding out the variance of portfolio, you always need to follow this one E(R) = w1R1 + w2Rq + …+ wnRn…….

The Bayes Formula is very confusing. Will the tree diagram work for all types of problems?”

Answer 3:

“Yes. To solve the Baye’s Theorem you can make a tree diagram to make it easy. “

When do we use p-value in hypothesis testing?”

Answer 4:

“P value is a way to reject or accept hypotheses. This is of smallest level significance.”

Please tell me about Sample Error, Standard Error.

Answer 5:

“Sample Error – It is just the difference between sample statistic and population statistics. For example Sample variance – Population variance.

Standard Error – Through Standard Error, we can estimate how much Sample Means will vary from the Standard Deviation of this sampling distribution, which we call the Standard Error (SE) of the estimate of the mean.”

There will be subsequent blogs on more questions and discussions that will take place on the following days. So stay tuned for more!

If you have any queries, comments or questions feel free to post them in the comments section or visit our forum.

CFA Success: Webinar on Equity and Fixed Income

This blog is an extension of our blog on CFA Webinar on Economics.

Round four of the CFA Webinar Question Answer sessions! This will aid your CFA prep in more ways than one. Find below a recording of the discussion on CFA Equity and Fixed Income.

The answers to the questions are given right here as well.

Find here a brief summary of some of the most important points of CFA Equity and Fixed Income:

#CFA Webinar

Question 1:

“Can you discuss Equity Multiplier?”

Answer 1:

“The equity multiplier is a way of examining how a company uses debt to finance its assets. Total assets/ Total stock holder Equities.”

Question 2:

“Please explain Zero Volatility Spread.”

Answer 2:

“It the equal amount of spread that we must add to each rate on the treasury spot yield curve in order to make the present value of the risky bond’s cash flow equal to its market price.”

Question 3:

“Could you please tell me the difference between the coupon rate of a callable and a non callable bond?”

Answer 3:

“Callable bond always has a greater coupon rate because bond seller has the right to call it back if conditions are favourable. But Non– callable bond has no option so it has a coupon rate lesser than Callable bond.”

Question 4:

“Can you explain the Boot-Strapping concept?”

Answer 4:

“The Bootstrapping concept involves discounting by spot rate not by one specified rate.”

Question 5:

“What is reverse stock split?”

Answer 5:

“Here stock split means giving 2 for 1. And reverse stock split means giving 1 for 2 just reverse of that.”

Question 6:

“What is Macaulay Duration?”

Answer 6:

Macaulay Duration estimates interest rate sensitivity based on time in years. Macaulay Duration is the earliest measure of duration. Hence, it is not an appropriate measure of interest rate sensitivity of bonds with embedded options.”

To read more, just follow the link to CFA Webinar on Quant.

If you have any queries, comments or questions feel free to post them in the comments section or visit our forum.

There will be subsequent blogs on more questions and discussions that will take place on the following days. So stay tuned for more!

CFA Exam Tips: Webinar Q & A on Economics

This blog is an extension of our blog on CFA Webinar on Ethics and Corporate Finance.

Round three of the CFA Webinar Question Answer sessions! This will aid your CFA prep in more ways than one. Find below a recording of the discussion on CFA Economics.

The answers to the questions are given right here as well.

Find here a brief summary of some of the most important points of CFA Economics:

#CFA Webinar Questions and Answers 

Question 1:

Explain demand function in detail.

Answer 1:

It is the behavioural relationship between quantity consumed and a person’s maximum willingness to pay for the particular quantity. If the price is higher, that means lesser quantity demanded by buyers or vice-versa. There are many factors that influence a buyer’s decision. For example – Income, taste & preferences, price of substitute goods.

Question 2:

Is the increase in the prices of onions an example of cost pull inflation?

Answer 2:

Yes, you can say this one is an example of cost pull inflation.

Question 3:

Can you touch upon monetary and fiscal policy?

Answer 3:

Monetary policy – Federal bank takes action in regards to monetary policy.

This is done through:

  • Policy rate
  • Reserve requirement
  • Open market operation
  • Fiscal Policy – Government deals with this when they use spending and taxation to take control over the economy.

    To read more, just follow the link to CFA Webinar on Fixed Income and Equity.

    If you have any queries, comments or questions feel free to post them in the comments section or visit our forum.

    There will be subsequent blogs on more questions and discussions that will take place on the following days. So stay tuned for more!

Crack the CFA Exam: Webinar on Ethics and Corporate Finance

This blog is an extension of our blog on CFA Webinar on FSA: Questions and Answers.

Round two of the CFA Webinar Question Answer sessions! This will aid your CFA prep in more ways than one. Find below a recording of the discussion on CFA Ethics and Corporate Finance.

The answers to the questions are given right here as well.

Find here a brief summary of some of the most important points of CFA Ethics and Corporate Finance:

#CFA Webinar

Question 1:

In country risk premium, can we be asked to calculate the standard deviation equity index or sovereign bond?

Answer 1:

No, there is very little chance that they will ask you to calculate this.

Question 2:

What is the correct treatment of floatation costs?

Answer 2:

Always include in CF0 for correct treatment of flotation cost.

Question 3:

How many questions can be expected on GIPS?

Answer 3:

You cannot tell for sure. But you can expect 3-4.

Question 4:

When you notice a violation, do you ask the person to stop doing it or inform your superior or go to the compliance department?

Answer 4:

If you have noticed a violation, you need to first disassociate yourself from this and then you need to inform your supervisor or go to the compliance department.

Question 5:

Is misconduct is specific to conduct at work?

Answer 5:

It is not necessary that it is specific only to conduct at work.

Question 6:

Can non-public information be used for clients?

Answer 6:

If you have non-material, non-public information, then you can use it for clients or for other reasons. But if you have material non public information then you cannot use it for client recommendations or analysis.

Question 7:

What if you go for a company visit? The information you get from it may be material, but non public. Can’t you use the information in that case?

Answer 7:

No, you are not supposed to use this information for investment decisions.

Question 8:

There is a figure for optimal capital budget. What does it mean?

Answer 8:

It means that the budgeting has a set of projects that maximizes a company’s wealth.

Question 9:

Could you please explain the standard on Independence & objectivity at the end of the session today? The confusion around when we ought to accept gifts/sponsored trips/accommodation, etc.

Answer 9:

If the gifts are modest you can accept it or otherwise you need to take written permission from everybody involved.

Question 10:

Are portfolio managers allowed to participate in oversubscribed IPOs?

Answer 10:

No. It is unethical to participate in oversubscribed IPO.

To read more, just follow the link to CFA Webinar on Economics.

If you have any queries, comments or questions feel free to post them in the comments section or visit our forum.

There will be subsequent blogs on more questions and discussions that will take place on the following days. So stay tuned for more!

CFA Webinar on FSA: Questions and Answers

Now that the CFA exam is just around the corner, we are sure you are notching up your CFA preparation by greater levels. Needless to say, CFA candidates around the world are feeling the same way right now.

Therefore, EduPristine is conducting a series of webinars to answer any questions or doubts on various topics.

The answers to the questions are given right here as well. This is bound to aid your CFA exam prep for certain.

Below, you will find a brief summary of some of the most crucial points on FSA.

#CFA Questions and Answers

So without further ado, let’s proceed to the questions and answers!


Years of life with no salvage value, tax rate 41 %, revenues 14384 constant over the years, using SLM for financial purposes, and accelerated depreciation is 35% for year 1 & 2, and 30% for year 3. Year 4 and 5 the tax rate has changed from 41 to 31 %. What will be DTL at the end of year 3. What will be the adjustment at the end of year 3 in income statement? Will it be DTL or DTA? Explain this in detail.

Answer 1:

  • Straight-line depreciation = $25,352 / 5 = $5,070.
  • Income using straight-line depreciation = $14,384 ’ $5,070 = $9,314.
  • Accelerated depreciation (years 1 and 2) = 0.35($25,352) = $8,873.
  • Income (years 1 and 2) = $14,384 ’ $8,873 = $5,511.
  • Accelerated depreciation (year 3) = 0.3($25,352) = $7,606.
  • Income (year 3) = $14,384 ’ $7,606 = $6,778. 

Deferred tax liability at the end of year three, after the change in the expected tax rate, will be $3,144: 

  • DTL for year 1 = $1,178.93 = [($9,314 ’ $5,511) (0.31)].
  • DTL for year 2 = $1,178.93 = [($9,314 ’ $5,511) (0.31)].
  • DTL for year 3 = $786.16 = [($9,314 ’ $6,778) (0.31)].
  • $1,178.93 + $1,178.93 + $786.16 = $3,144

If you are paying less and you need to pay more in the near future you, create DTL because this is a liability."

What is valuation allowance? Explain in detail.

Answer 2:

“DTA & DTL is just only because of the temporary difference between financial statement and tax accounting. Hence, if in the future you are estimating that your future profit is not sufficient to pay more taxes you need to adjust your DTA through valuation allowance(GAAP). “

Is it possible to adjust Deferred Tax Asset with Deferred Tax Liablities?

Answer 3:

DTA can be adjusted or netted off against DTL, only when the enterprise has a legally enforceable right to set off.”

What is the carrying value of a bond?

Answer 4:

“It is the value of Bond according to company balance sheet.”

Please tell me how to convert from LIFO to FIFO or vice versa.

Answer 5:

“End Val – Beg Val = NI – Div Declared”

What is the difference between cash flow and fund flow?

Answer 6:

“Cash flow statement only records the cash inflow and outflow of company and they deal with financial statement.

Fund flow statement basically deals with sources of funds and application of funds.”

To read more, just follow the link to CFA Webinar on Ethics and Corporate Finance.

If you have any queries, comments or questions feel free to post them in the comments section or visit our forum!

There will be subsequent blogs on more questions and discussions that will take place during the following days. So stay tuned for more!