September 2006

I thought I'd set this up tonight as I've got brainache and don't think I'll learn anything more before 10am tomorrow! How did everyone find it?

 

howdy...


so what did people think of todays exam?

I thought it was mostly OK. I confused myself with the index linked bond, so im hoping ill pick up some marks on the early parts...

also I forgot to work out how much the company should invest in each asset. I solved the simulataneous equations for the PV and Dur to be the same, but didnt do that last step!!

Apart from that though...

 

The option I think I need on the poll is "Great fun - See you in April"

I loved the interest only mortgage question

I was too slow:
I only got half of "Q10 Calc the NPV for the new financial regulations" done. When halfway through it I realised that for the -60, -19, -18, -17 cashflow, I was treating it as annual instead of continuous. For the other 2 cashflows I had so far calculated the NPV for I did treat them as continuous. But when I saw that error and there were only 10 minutes left on the clock I didn't think it was worth continuing with that question.........I'd be better off answering any small parts of Q11 ,12. So I answered the part of Q11 that asked for the characterisitics of an index-linked government bond. I didn't think there were any other small marks to pickup in Q11,12 so I spent the dying seconds continuing Q10.

Q1-9 I felt happy with......that's why I felt it was "Great Fun ".......and i'm sure I'd have been able to answer the others if only I was quicker.

So really I'm hoping that I've got everything right in Q1-9 and the pass mark is something like 60%.........which is why I feel "See you in April"

There was 1 question where a piece of information given I thought was no use to the calcuations. I'm trying to remember which question so that I can ask the rest of you was it needed

 

The NPV one was quite fun i thought.... (fun as in as much fun as these exams are)

as soon as you figured that a_bar_1's would be a factor on most of them, then it seemed quite nice... from memory i got a ~£600m positive NPV...

I bet you did enjoy the interest only loan question, it seemed pretty similar to your question last night hopefully all you did for the accumulation of the extra premiums was add on (5000-1060)s_due_10 to the value you had in (b) it was annoying that Q how it only gave you total marks at the end...

the last part (from memory) i got 7092pa payable monthly in arrears (it wasnt clear on this bit what type of payments, but seeing as the loan charged interst 6% pa in arrears, i figured the repayments would be like that too)

the only other thing with that question was it seemed like there was something missing perhaps a bit more padding out of the question to involve his conversation with the bank manager ala "brand new customers only - nationwide" adverts... (too much to deciper in that Q)

I know i messed up the arbitrage Q but that bit was only 2 marks... i got it should be the same price as A.. (20p) mainly because i didnt think it gave any interest rates... i rushed it but ah well its only 2 marks...

 

i thought the NPV was...

60m in year one... then 19m in year 2... 18 year 3... 17 year 4.... down to 1m in the last year....

not 60million then -19.. -18 -17... arrghhh damn silly mistakes

 

I might not have said that cashflow very clearly

It said the following was a series of costs
60m in year 1....19m in year 2 ..... 18m in year 3 ............1m in last year

So did you treat them as being positive income?
------------------
In the arbitrage question I got that A can be replicated by buying 1.25 units of B. So the price of B should = Price of A / 1.25

 

the costs and benefits were split up into 2 sections so whichever section it was in i did it as a cost/benefit.... im sure that was the costs saved by customers not purchasing the wrong policy... (which is what made my a positive NPV)... need the Qs to see

 

Didn't like that one much. Don't think I was in a very CT1 mood this morning.

The real returns/index linked bond question was messy - no idea if I index linked/un-index linked the right things at the right times.

In the mortgage question, how did people interpret the last part? It said find the "constant annual instalment" or something like that. Did that mean it was now being paid annually rather than monthly? And in arrear like the loan interest, or in advance like the investment?

I seem to recall I got a negative NPV (or positive cost) in the financial regs qn. Not that that's anything to go by, I always seem to get the numbers wrong somewhere with these things.

 

i think everyone got confused with the index linked part... i know i inflated all the values as to what he would actually receive at each point.. but then i was a bit lost of how to move on...

i assumed the loan part read..

"if he istead would of paid the loan off by level installments of captial and interest.. what would this be.. " it DEFINITELY didnt specify in the last part, but in a way it did earlier on because it said that the loan charged interest 6% monthly in arrear, which would imply that you paid it back monthly in arrear..!?!?!?

grrrr a few people i spoke to got a negative NPV, but i was soooo sure of that question...

there were 3 costs listed and then 2 benefits.....
the 3rd cost being 0.2* the first cost (i.e 10m not 50m increasing at 3% per annumn)

the first benefit was the 60m, 19,18,17..... 1 im sure, (which had high PV)?!? mannnn

 

i cant remember the question so im just speculating...

 

Dunno. There was definitely mention of "level annual instalment" and the instalment didn't have an "s" on. I think you're probably right that it matched the loan interest, otherwise there was extraneous info in the loan interest. In the event I dithered then went for annual on the grounds that it was trouble enough to find the actual interest rate being charged. (It was 6% convertible something wasn't it? Or am I thinking of another q?) Never mind, there weren't too many marks on that bit I think...

Similarly on the just speculating. For what it's worth, the numbers you quote sound familiar. Hopefully will have succeeded in forgetting all about it before the papers are published!

 

yeah ... its only a few marks here and there... as long as you had a good stab at everything

is this your first sitting? where did you sit it

 

I think it went alright...made a mess of the Index-linked Inflation question tho towards the end.

For what it's worth, I got a negative NPV on the Project question too. Not that you should read anything into that!!

 

well the papers are out.... i now also get a negative NPV... maybe i just added up wrong on the day...