Poorly Worded Questions

Discussion in 'SP5' started by Jon Bowden, Apr 17, 2011.

  1. Jon Bowden

    Jon Bowden Member

    OK so maybe I'm being a bit moany (is that a word?) but I have come across a few examples of poorly worded questions and I'm after some general advice.

    Take S08 Q6 parts (iv) & (v). It's the block before these last two parts and it says:

    "the investor... takes out a 3-month call option on the stock at a price which is 5% below...50p"​

    Which price are they referring to??? Options have a strike price and an actual-price price (ct). The question doesn't say it's either. I first thought they meant the strike but then thought 'they haven't said it's the strike price they've said "a price" so it must be the option price. Yes and in part (v) they ask you to talk about the movement of the option price which is sort of a Black-Scholes question' But they meant strike! Why can't they just say that? :confused:

    My solution didn't actually differ that much because even without knowledge of the strike price you arrive at the same conclusion (sort of) and I assume if I'd made it clear what I was doing in the exam I would have got credit (I assume!). It just made it harder to get my head round.

    But sometimes it won't work out, what if we get an ambiguous question in the next paper, what do we do?

    OK we can write "assuming you mean this..." but what if we don't get credit for it? I want to make sure I get the marks but I don't think it's entirely fair that the exmainers aren't actually asking the question properly.

    Mostly venting, but actual suggestions welcome...
     
    Jon Bowden, Apr 17, 2011
    #1
  2. Colin McKee

    Colin McKee ActEd Tutor Staff Member

    wording

    Yes I can see what you mean. I suppose the clue was that the "price" being 5% below the shares price would imply that the strike was an extremely small number. It would not make much sense buying an option with such a small strike because its essentially the same as buying the share. But I appreciate that in an exam situation, when you are checking every word like Sherlock Holmes it can be confusing. This looks like a loosely worded question whih can occur anywhere really. But fingers crossed there will be no ambiguities in the coming exam.
    :)
     
    Colin McKee, Apr 18, 2011
    #2
  3. VikingAlv

    VikingAlv Member

    fingers crossed no mistakes but be aware as the last two times has not been very good! a blatant mistake in the wording on question 7 last time and then some ridculous calculations that no one would do with a pen and paper anymore the time before. A little bit bitter as failed but it would be nice to have things made clear and obvious so there are less things for us to stress about.

    Good luck though!
     
    VikingAlv, Apr 18, 2011
    #3
  4. Jon Bowden

    Jon Bowden Member

    Thanks all, I guess it's out of our control I suppose there's no perfect approach - just do the best we can.

    *sigh*
     
    Jon Bowden, Apr 18, 2011
    #4
  5. Sauny Bean

    Sauny Bean Member

    A good idea to have a strategy in place as to what you might do... from memory, there was information missing in a property question in September 2009 and some people thought there was ambiguity in a tax Question in September 2010. Must be something about the September papers!

    One thing I've learnt is that once you know everything you need to know, you are in the best position to deal with things like this.
     
    Sauny Bean, Apr 19, 2011
    #5

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