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# FRM MAY PART 1 2013 Feedback

#### noalv4

##### Member
When D > K * (1 - r ^ (T-t)), which essentially means, dividends are greater than the interest you would earn on the money if you save it till the end.

Thanks. Do you remember what is the correct answer? Early excercise?

#### MJ2013

##### Member
the question that include long straddle and butterfly.....was it about high volatility or low volatility?
it was mentioned downside volatility as far as i remember

#### nabil1234

##### Member
it was mentioned downside volatility as far as i remember
I remebr that about big change in price so we are talk about upside volatility? really I am confused.

#### Tabriz

##### New Member
Thanks. Do you remember what is the correct answer? Early excercise?
Yes, I think that is right answer. It is Black approximation. Answer should be B)

#### nabil1234

##### Member
Yes, I think that is right answer. It is Black approximation. Answer should be B)

#### noalv4

##### Member
Yes, I think that is right answer. It is Black approximation. Answer should be B)

I don't remember... was B the answer that the option should be excercise before the ex-dividend? I am not sure if I marked B or C...

#### Tabriz

You're given information about american call option. You have certain dividend, probably it was 4$. And you're asked to determine whether it is optimal to exercise this american dividend paying stock. Generally american dividend paying option is only optimal to exercise if D > K * (1 - r ^ (T-t)) condition met. Even you didn't need to calculate as long as you knew the equation for this. #### nabil1234 ##### Member You're given information about american call option. You have certain dividend, probably it was 4$. And you're asked to determine whether it is optimal to exercise this american dividend paying stock. Generally american dividend paying option is only optimal to exercise if D > K * (1 - r ^ (T-t)) condition met. Even you didn't need to calculate as long as you knew the equation for this.
really I dont remeber well this question or my answer.
really I feel disapointed from my performance in the exam despite I prepaired well
may be I will turn to study PRM or change the field and go for CMA or PMP or stop studying any thing

#### Tabriz

##### New Member
It is same for me . I don't know why I got so anxious during exam. Actually I began with great energy. But when I asked for time they told me that it is 11 am. I got shock. They didn't informed me that yes it is 11 but you began exam at 36 minutes later, so you are not going to finish at 12 but rather at 12.36. As a result I tried to randomly guess. I could see now how many questions I've skipped. That is the lesson I learned. I'll take watch at any time that I go to the exam.

#### nabil1234

##### Member
You're given information about american call option. You have certain dividend, probably it was 4\$. And you're asked to determine whether it is optimal to exercise this american dividend paying stock. Generally american dividend paying option is only optimal to exercise if D > K * (1 - r ^ (T-t)) condition met. Even you didn't need to calculate as long as you knew the equation for this.
I think my answer was it is optimal to exercise

#### pambansang

##### New Member
I think C is appropriate answer
the prob is 12.5
Hi, may i know what was the portfolio being referred to in letter "c" of the efficient portfolio question?

#### nabil1234

##### Member
Hi, may i know what was the portfolio being referred to in letter "c" of the efficient portfolio question?
I remeber this question was about efficient fronter and u should to chose a portfolio from 4 portfolios, I remebr my answer was portfolio C

#### pambansang

##### New Member
I remeber this question was about efficient fronter and u should to chose a portfolio from 4 portfolios, I remebr my answer was portfolio C
Was it the leftmost point or the rightmost. Sorry i forgot what the choices were. Thanks.

#### noalv4

##### Member
Can someone write what he/she believe are the correct answers to the following questions?

1. BLR, is it 17.5 Million?
2. What is part of Risk assesment?
3. The role of a Management?
4. Short FWD EUR/USD of 50 million EUR. is it a gain of 1.584 million?
5. Lower duration with zero coupon?
6. MC simulation, what is the correct answer?
7. Data Quality, somthing with Consistency, currency and more...
8. Probability of A for undergrade. is it 7.5%?
9. Binomial Europian call. is it 0.68 USD?
10. FWD=Future -1/2 convexity with vol of 0.001 t1*t2 act 365. is it 3.03%?
11. Converting VaR from 95% to 99% 10 days. My answer was 12.5. Is it correct?
12. The price of Future contract is 108? (conviniance yield=3.3%, c=5.5% r=don't remember)
13. The bank and the law suit, is the correct answer is the scenarios?
14. CTD, is it BOND B (the lowest loss)?
15. What is the correct answer with the CAPM calculation? mine was 8%. Is it correct?
16. The lowest VaR, is it MC VaR?
17. Another question with data quality... that I don't quite remember... somthing with units... what is the correct answer?
18. Future commodity... doea the correct answer is that the exchange determeine the grade of the commodity at the beggining?
19. What is the Efficiant portfolio? I compered the rates and the SD, and choose the one that seems to have the highest rate with the lowest SD compare to the others. correct?
20. Options with convexity???
21. The question with communication....
22. What is the correct answer to the volatility of portfolio? I think I got somthing as 4.4% which was one of the posibilities...

BY THE WAY, DOES ANYONE KNOW WHAT IS THE PASS SCORE??

#### pambansang

##### New Member
I remeber this question was about efficient fronter and u should to chose a portfolio from 4 portfolios, I remebr my answer was portfolio C
Was it the leftmost point or the rightmost. Sorry i forgot what the choices were. Thanks.

#### nabil1234

##### Member
Was it the leftmost point or the rightmost. Sorry i forgot what the choices were. Thanks.
my answer was portfolio C and it was not on the efficient fronter, it was to the left of efficient fronter

#### pambansang

##### New Member
my answer was portfolio C and it was not on the efficient fronter, it was to the left of efficient fronter
Shouldnt the answer be the one that lies within the new efficient frontier combining the three funds. I recall now, the closest to the three drawn efficient frontiers is either portfolio b or d. I.e., when i drew a curve encompassing the previously drawn curves i ended up with b but the curve i drew tend to intersect the curve combining fund 1 and 2. When i readjusted, i was able to hit d. Now im wondering where c was... If it was the leftmost point, then it couldnt be included in the new efficient frontier. The fourth point i think lies below the three drawn curves so it cant be the answer either.

#### Uchica__Itachi

##### New Member
My drawing is TERRIBLE but if I remember correctly C was within the frontier and B was outside to the left a bit. The new frontier with all 3 assets should move to the left a bit so B in the attached (you have to forgive the shodiness of the graph) should be the answer (IMO).

#### Attachments

• Frontier question.pdf
79.1 KB · Views: 38

#### noalv4

##### Member
My drawing is TERRIBLE but if I remember correctly C was within the frontier and B was outside to the left a bit. The new frontier with all 3 assets should move to the left a bit so B in the attached (you have to forgive the shodiness of the graph) should be the answer (IMO).

I remember the drowing different:

All the files were to the left of C.
One file was a little bit higher above C (same vol, higher return), which in my opinion excluded C ( I think it was Portfolio B).

To me, I looked at the return of each portfolio, compared to it's Vol, and then compered to the other portfolio. I choose the portfolios that gave the highest return vs. vol. I chose Portfolio D, which had the highest return vs. risk.

Hope that I'm correct...

#### pambansang

##### New Member
My drawing is TERRIBLE but if I remember correctly C was within the frontier and B was outside to the left a bit. The new frontier with all 3 assets should move to the left a bit so B in the attached (you have to forgive the shodiness of the graph) should be the answer (IMO).
I think we did not have the same graph as given. There were three points to the left of the curve connecting mid a and mid c. Portfolio d was also on the left of said curve. it was situated in between but a bit below a and b.

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