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# FRM MAY PART 1 2013 Feedback

#### david7s17

##### New Member
i have signed on question book while didn't sign on answer sheet...
I dont know whether I have missed the signature or the signature is not required on answer sheet.
I afraid the GARP wont mark my answer sheet if signature is missed
seem no need to sign on ans sheet

#### mina_no_Tabo

##### New Member
besides the leveraged beta, all stuff can be found in notes

#### FRMVikram

##### New Member
I found paper too lengthy and difficult as well...could handle difficulty but running time created panic when half of the time got over. Cases were too long and if you gave a single reading your 1 minute out of 2.4 min/Q is over ...What do you people say ? Where will be cutoff around 70% ??? I dont know how many answers were correct but I sincerely attempted around 65.

#### FRMVikram

##### New Member
Hi guys
Your first thoughts on the exam part 1
I could recollect some questions
Qn on responsibility of the board....answer seems to be increase in share holder value.
..Var calculations.....3 qns...10 day..1day var..
.simple questions on continuous & discrete compounding...
one question where different rates were give annual..semi annual..quarterly compounding...& was asked which is the highest.
..qn each on EXPECTED LOSS & ADJUSTED EXPOSURE....
straight forward questions on jensens alpha & CAPM
2Qns on binomial trees...1qn..I did not find the correct answer where the strike rate was 40..stock price was 50...American put...2step model 1year...pls let me know the answer if anyone can re collect

garp code of conduct....experienced analyst asked to prepare a model for india & china...the analyst informs the board that he its not aware of the markets so will take time.....
Communication failure qn....in the presentation analyst fails to explain..can't remember
3Fund portfolio graph...4portfolios ...asked which portfolio has all the 3 funds (small/mid/large cap)....efficient portfolio..was confusing
Probability 2 questions ....1 qn...80% both will default....if1 default..70% chance other will default..what is the probability of no default?
correct answer where the strike rate was 40..stock price was 50...American put...2step model 1year Ithink it was $10. #### david7s17 ##### New Member Do you remeber the ans of two binomial tree questions? need to find the option price #### mali_shailesh ##### New Member Is it required to shade your candidate number and GARP ID on Answer sheet. I have just written name and not shaded any circles. I did check with Proctor and he said fine but then another proctor while accepting completed sheet said it may be problem. Not sure .. how can i get this confirmed #### david7s17 ##### New Member Is it required to shade your candidate number and GARP ID on Answer sheet. I have just written name and not shaded any circles. I did check with Proctor and he said fine but then another proctor while accepting completed sheet said it may be problem. Not sure .. how can i get this confirmed Maybe Send a email to grap, i dont know they whether to answer this type of question or not #### kalyan786 ##### New Member correct answer where the strike rate was 40..stock price was 50...American put...2step model 1year Ithink it was$10.
2step model....price after 6 months....is \$10

#### kalyan786

##### New Member
In my personal opinion.....i solved FRM practice papers by Kaplan Shwezer notes..,the two papers.... and I guess it helped me a lot!!!!!!!!

Thanks.

#### kalyan786

##### New Member
Hi guys
Your first thoughts on the exam part 1
I could recollect some questions
Qn on responsibility of the board....answer seems to be increase in share holder value.
..Var calculations.....3 qns...10 day..1day var..
.simple questions on continuous & discrete compounding...
one question where different rates were give annual..semi annual..quarterly compounding...& was asked which is the highest.
..qn each on EXPECTED LOSS & ADJUSTED EXPOSURE....
straight forward questions on jensens alpha & CAPM
2Qns on binomial trees...1qn..I did not find the correct answer where the strike rate was 40..stock price was 50...American put...2step model 1year...pls let me know the answer if anyone can re collect

garp code of conduct....experienced analyst asked to prepare a model for india & china...the analyst informs the board that he its not aware of the markets so will take time.....
Communication failure qn....in the presentation analyst fails to explain..can't remember
3Fund portfolio graph...4portfolios ...asked which portfolio has all the 3 funds (small/mid/large cap)....efficient portfolio..was confusing
Probability 2 questions ....1 qn...80% both will default....if1 default..70% chance other will default..what is the probability of no default?

Thanks MJ for the detailed post. I remember one confusing question over here. One analyst wants to invest in investment grade security. Which of the following combination of rating given by S&P and Moody's will he invest in? The two confusing options were AA/Aa and BBB/Baa....
Any idea?

#### kalyan786

##### New Member
what abt "garp code of conduct....experienced analyst asked to prepare a model for india & china...the analyst informs the board that he its not aware of the markets so will take time....."?? did he violated CoC?
I guess he has not violated Garp code of conduct.

#### FRMVikram

##### New Member
Thanks MJ for the detailed post. I remember one confusing question over here. One analyst wants to invest in investment grade security. Which of the following combination of rating given by S&P and Moody's will he invest in? The two confusing options were AA/Aa and BBB/Baa....
Any idea?
Hi Kalyan,
In this questions it was given that the investment grading should exhibit adequate protection parameters so in my view BBB option was correct.

#### kalyan786

##### New Member
Hi guys
Your first thoughts on the exam part 1
I could recollect some questions
Qn on responsibility of the board....answer seems to be increase in share holder value.
..Var calculations.....3 qns...10 day..1day var..
.simple questions on continuous & discrete compounding...
one question where different rates were give annual..semi annual..quarterly compounding...& was asked which is the highest.
..qn each on EXPECTED LOSS & ADJUSTED EXPOSURE....
straight forward questions on jensens alpha & CAPM
2Qns on binomial trees...1qn..I did not find the correct answer where the strike rate was 40..stock price was 50...American put...2step model 1year...pls let me know the answer if anyone can re collect

garp code of conduct....experienced analyst asked to prepare a model for india & china...the analyst informs the board that he its not aware of the markets so will take time.....
Communication failure qn....in the presentation analyst fails to explain..can't remember
3Fund portfolio graph...4portfolios ...asked which portfolio has all the 3 funds (small/mid/large cap)....efficient portfolio..was confusing
Probability 2 questions ....1 qn...80% both will default....if1 default..70% chance other will default..what is the probability of no default?
Any idea what is the answer of the annual, semi annual, quarterly and monthly compounding? Which one would give the maximum return?

#### Tabriz

##### New Member
I also find exam hard. Main problem was time.Even I couldn't have a look to some questions. The worst, there wasn't any watch so you could control your time. I've practiced garp mock, schweser and bionic turtle. I'd say David's questions are much better reflection of real exam than schweser. Even there was question about coskewness (question was like this: which value indicates highest risk. I chose highest positive number). About other questions: roughly :
1. Manager implements different risk models and asked to create a model Indian market. Manger is not familiar with the Indian economy. When asked he told that he will create model but can't guarantee time. I think he violated CoC by creating model without knowledge about economy .
2.Two step binomial model with american put. Despite I know how to do it I couldn't attempt, again because of time.
3. First question was about VaR. you have mean return and s.d calculated over 3 year's period. What is annualized volatility over three years. I could't do it. I think it is not something like dividing by 3^0.5.
4. Long put with strike 40 and long call with strike 60. Also payoff table is given for different prices. Question ask which additional option we need to choose so that our payoff becomes the one shown on the table. I remember one line of table: if price is between 40 and 60 then payoff is zero.
5.On which of following Black-Schole can't be implemened: forward, E. call, A.Put, A. call. I chose A. put
6. Same expected return for two stock. Indexed to the same benchmark. Which one is true? I choose lower beta will have higher Treynor but I think it is wrong.
7. Option has positive convexity. which one is true? I choose if volatility is higher then return will be high.
8. Man sell futures and rolls it. and has losses. Which is the cause? Backwardation or Contango?
9. This question was about black approximation. You have inputs and you need to calculated X(1-e^-r(T-t)).
10. Which incorporates correlation: Factor push or Conditional Scenario.
11. Risk of Sinking fund provision to the investor .I choose reinvestment risk.
12. Which one impact interest rate parity: sovern government spread , inflation. I chose inflation.
13. There were lots of VaR question. Typical one was. you have 1 day 95% VaR. need to calculate 10 day 99% VaR.
14. I don't remember Expected Shortfall question. I also read option strategies a lot but there was only one and even I don't know whether I wrote it right. Investor expects volatility could decrease. which strategy to choose ? Straddle, Short butterly, Short calendar, short bull or bear .
15. One portfolio volatility question. I calculated it three times. I think GARP shouldn't test as with digits. I calculated 10.3 then sow there is also 10.2.
16. Jensen alpha. portfolio return. market return, beta are given over 5 years. you need to calculate jensen alpha. I calculated both way: taking average of 5 year and finding CAPM or taking just last year. In both way I couldn't find exact answer.
17. Leveraged beta. sucks.
18. Gamma hedge.
19. You have annual , semi-annual, quarterly, monthly compounding coupon rates . which one offers highest annualized return
20. Monte Carlo with one path

I'd like to know what other guys think.

#### Tabriz

##### New Member
Option has delta 0.6. You calculate delta normal and Monte Carlo VaR . which one has lower VaR ?

#### Tabriz

##### New Member
Manager uses Libor on Balck-Scholes calculation. What manager needs to understand. I chose. Libor is considered as risk free and these deposits are back by government in most countries

#### Tabriz

##### New Member
Company pays dividend to its common stockholders. But he expects revenue to go down . company could go bankrupt if he doesn't pay to the holders of ?
Floating rate note
Participating bond
Income bond
Common stockholders

#### anand99

##### Member
I found the exam very difficult. The biggest issue was time. I went through the whole 100 questions answering anything I could without spending too much time. When I was done with that I probably still had about 45 or so questions left and I only had about an hour left. I ended up making random guesses on many. I can honestly say that I probably only sincerely answered about half of them and the remaining I was just making my best guess or just simply winging it completely. I found the questions to be very time consuming to grasp. I don't know if anyone else felt that way. Overall I am pretty dissapointed with my performance.

#### EK

##### Member
While the quantitative part seemed to be fairly straightforward (due to BT's help needless to say), I was surprised with a large number of qualitative questions.. with quite ambiguous options.. i wish there'd been more calculations to be honest