Good luck tomorrow everybody

The hour finally approaches , thank goodness .Nearly time to forget everything we've learned but not yet oh not yet .Must hold onto the formulas for a few more hours , all the ones that the tables neglected but we should not , nay will not. To all you who read this nonsense before the exam , what are you doing ? Get back to work!

 

How did you get on?

 

em pretty good

but I messed up reddingtons and the lognormal question , oh and i forgot to define no arbitrage . The calculations took ages to do ,I've never ran out of time in an exam before but I could of used another 30 mins in this one . Probably the toughest exam I've ever taken , rattling off theorems in my college exams was a bit easier than doing calculations .I thought the paper was perhaps a bit tougher than recent diets but that could just be me lying to myself .Loads of my old class were there doing either ct1 or ca1-2 , guess us mathematicians don't have much imagination when it comes to career choices. So how was it for you ? and anyone else who took it , dont think this is the right place for a tread like this but nobody reads or writes in the other section.

 

Hi Hamilton,

I had the same exact prob. I didnt have time to the Reddington question. I couldnt match the DMT on the paper and wasted a lot of time. But the rest of the paper wasn't bad. And I agree with you on the timing. Another extra half an hour would have been ideal. Anyway lets pray that the pass mark is not too high. lol.

Good luck with ur other exams.

 

oh i did the reddington

question got the dmt part ( got it wrong at first but then luckily noticed i was out by a factor of v ) but then the simultaneous equation i got worked out with a neg amount of one asset so i thought this is wrong time to move on. The optional redemption dates question was horrible! think I got that wrong , I mean when the second bloke buy it off him has it still got the optional redemption time and does this change cause the new investor doesn't pay tax.

 

Nervy!!!

I thought it was a very sneaky paper, there was lots of little things that were upsetting during an exam:

Loans question:
Capital outstanding after 5 payments was greater than the inital loan amount, made sense eventully but wasted some time checking my answers!!

DMT question:
worked out okay for me, think I might have messed up the last bit though, still not sure if the spread of assets was greater than the spread of liabilities!!

DDP Question:
Looked at it, read it, could see I was stuck for time so skipped it and didn't have time to do it again.

NPV Question:
Was ok, but thought the fact it started 9 months prior to now was a bit sneaky!

Forward Rates Question:
Seemed ok, but hope I didn't make any mistakes!

Capital Gains test question:
Definately made a mistake on the second part by assuming redemption as late as possibble for the second investor!

MWRR, TWRR Question:
Think I'm ok but probably got the MWRR wrong. Would have been nicer if the period in question was 2 years or 3 years instead of 2.5 years.

Probability Question:
Worked out ok, answers made sense at the time!

After the exam I thought I had passed, but not so sure anymore

 

After doing the first page in the natural order I then started cherry picking.

I thought the forward rate question didn't look as nice as past paper term structure questions so left that until the end and didn't get round to it in the end.

There's another question worth about 8 points that I didn't get far with...can't remember which at the moment. So that's already about 20 points I haven't got.

I'm glad you've reminded me Joxer about the loans question. I too spent a while doubting that capital outstanding could now be greater but trusted it in the end.

On the Log-normal question I'm not sure whether I messed up my pluses/minuses somewhere. I got that the woman had to invest 240kish if she wants that fund to have a 98% chance of leaving her with enough money to buy the 120k ish annuity (rough recollection of figures). At first I thought surely it must be wrong if I'm getting that she needs to invest more now than she needs in the future. But the next part asking you to explain your result made me think there is a chance that I'm right and there's a risk of the value of her funds going down to even below the annuity cost.

Did anyone else get this result or did I go completely wrong?

Why was that wrong? It was still the borrower that had the option of when to redeem so why would they change from redeeming it as late as possible?

These went fine I think
MWRR, TWRR Question
DMT
NPV Question
That sneaky business of starting 9 months prior to now I was better prepared for thanks to making a mistake with this trick in a bond practice question a few days ago.


When is the paper available to see on the website? Only because I'm keen to recall what that other question was that I messed up on. I don't think it was DPP

 

Hi Phil,

Got the same as you on the log normal question (its cause the variance is huge compared to the mean, so probability of negative returns is distinct).

I too having read your post about the bond practice question was well wide for the NPV question. ty!!!

On the capital gains test question, the second investor actually makes a capital loss, so should assume redemption as early as possibble, I wouldnt mind but I started to do the CGT then scribbled it out and just said they also make a capital gain, in hindsight I have no idea why I did this!

Do you remember if you got quite high numers for the MWRR and TWRR (>10% p.a.)?

The only other question I can think of was the value of the forward contract.

 

I don't think I did the usual (1-t)D/R vs i(p) capital gains test for the second investor because you know it was redeemed at something like £110 per £100 nominal and you calculated the price the second investor paid in in part ii (which I think was somewhere between £100 and £110). So from that I thought it was a capital gain still

It was definitely >10% that I got for MWRR, TWRR

 

didn't like it ...

Paper was much touger than past quest papers! . I agree with Hamilton! and the calculations were long.. That capital gains quest was rubbish! I surely got that wrong and I didnt have time to finish the NPV! Made a silly error in the log-normal! error carried fwd?? ah well

 

I thought the paper was booby trapped with sneaky questions.

 

Someone's just reminded me of the other question that I hated the look of and so left it til the end but ran out of time

Yes it was the DPP question. I didn't like how the rate of income was given as "forces of income" .

 

Me neither. Ran out of time while in the middle of it and think I was going wrong anyway!

CGT question I believe first investor made a capital gain, whereas second investor made a capital loss due to the absence of tax, hence to calculate a minimum yield we assume the worst case scenario i.e. as early as possible.

I'm pretty sure my TWRR and MWRR were around 13% too.

Also got a high value for the log normal question, but I think this makes sense though due to the high standard deviation meaning negative returns were possible and the high probability required.

 

Worst exam ever

It was terribly unfair exam. The questions were very sneaky and in big chunks, you cud either do the question or you couldn't!!!
I hated the DPP question had no idea wot it required me to do, so thats a whole 8 marks lost !!!!Question 6 on the NPV was also tricky as the increases were every threee years, i probably messed up on that as well!!
Most of the other questions were alright but on the whole, yes, it was the hardest exam i have sat in my student career........

Good luck with any other exams and exam results come July.