FAQ and topical issues for Subject SA7

SA7 FAQs and topical issues (updated January 2020)

This thread contains some of the the Subject SA7 questions most frequently asked by students, with answers written by ActEd's tutors. It also contains a list of 'topical issues' questions on subjects that have been discussed in the financial press over the previous 2 or 3 years, and that might be relevant for students studying for Subject SA7. As ActEd's tutors do not see any exam papers prior to the exam, the topics discussed are not intended to indicate what might or might not come up in the forthcoming exams. They are only intended to encourage students to read around and be up to date on current financial issues.
This thread was last updated in January 2020.

Question
What material from other subjects will I need to know to pass SA7?

Answer
The subjects that contain useful information are: CB1 (was CT2), CP1 (was CA1) and most importantly SP5 (was ST5).

Analysing this in more detail, the relevant areas and topic from these earlier subjects (using the older naming convention) are as follows:
CB1: long-term finance, derivatives, analysing accounts, capital structure and cost of capital, and dividend policy
CP1: money markets, property markets, macro economics and the impact on investment markets, investment strategy (for both institutions and individuals)
SP5: Everything!

Numerical questions have been more frequently assessed in Subject SA6 since 2015 when the core reading was revised. These have tended to come from material in Subject SP5. This trend appears to be continuing in the Subject SA7 papers that we have seen to date. A list of numerical techniques that COULD be examined, or have been examined in the past is as follows:
Performance measurement and attribution
Risk-adjusted performance measures
Valuing derivatives including options, swaptions, futures and swaps
VaR analysis
Risk-neutral pricing

Subject SA5 would commonly examine more general ‘corporate finance’ concepts using numbers, and these could include:
forecasting the cashflow or profits from a business proposal
analysing a set of accounts for credit risk
simple present value or IRR calculations.

It is likely that these will continue to feature in Subject SA7 given the material from Subject SA5 that has been incorporated into the new course.

It was also common for marks to be available for knowledge outside any of the subjects listed above, both in Subject SA5 and in Subject SA6. Commonly the areas examined were simply issues that had been discussed in the financial press in the years leading up to the exam. Examples include BREXIT, Scottish independence, Quantitative Easing, multi-national companies and taxation, negative inflation as well as various aspects of regulation and legislation (eg Solvency II, Basel II and III).

It is worth noting that Subject ST6 (now SP6) is not required for Subject SA7.

Bookwork recall questions are likely to be from the Core reading for Subject SA7 only. Evidence from the first two SA7 exams suggests that bookwork has become more important than it was in the past.

Question:
How do I know which of the past paper questions from Subject SA5 and SA6 are relevant for my study for Subject SA7?

Answer:
I have produced a list of past questions from these exams indicating where I believe that questions are still relevant and where they are no longer relevant. This is attached to a separate thread.

Question:
What topical issues are relevant for the coming sitting?

Answer
It is impossible to say for certain, but the examiners for Subject SA6 often focused on issues that affect investment consultants in the 24 months prior to the exam date. Examiners for Subject SA5 have focused on corporate activity, taxation issues or regulatory changes that have happened recently or are ongoing. The examiners are not scared of focusing on current issues when designing questions.

There are many such topics, and it is difficult to second-guess what the examiners may select. I have attached a document with a selection of questions on such topics. The list is not exhaustive and the solutions reflect only the views of an individual - there will be many alternative views held by others in the financial markets. Also, as the virus pandemic only really affected markets from Feb or March 2020, and the exam papers for April and September 2020 would have already been written by then, it is less likely (but not impossible) that a question will relate to this.