Entry 11 – Phase 4 complete and the start of (the final) Phase 5

I feel as though I’m getting close to where I want to be for when my week off of work starts before the exam. I am booked in for the 7city Mock on Sunday 30th May and would like to have done all portal questions, hurdle tests, readings and workshops on all of the study sessions by then.

This weekend I finished the two hurdle tests and workshop associated with Phase 4, and finished the portal questions for Derivatives, which is the start of phase 5. That therefore means I have 2 evenings and a Saturday to do the portal questions for Economics, read the CFAI textbooks and do the associated CFAI questions for Ethics, do the 7city portal questions for Ethics, do the workshop for phase 5 and do the last remaining hurdles tests for phase 5.

I will now provide you with a quick overview of my weekend’s study (most of which was carried out outside to try and enjoy the terrifically hot weather).

Workshop #5 – Study sessions 13, 14, 3 & 12 (Equity, Quants and PM) = 83%

Pleasing score. Watching the workshop recording, I leant:

That a low Beta stock, or any beta stock for that matter, relates to systematic RISK, not RETURNS.

Whilst I’m very comfortable with Equity Valuation questions not to be arrogant so as to avoid a silly mistake

It would be worth going back to the wordy stuff I Study Session 13

Hurdle Test #7: Equity and Portfolio Theory (Study sessions 12, 13 & 14) = 84%

Pleasing score. From the 7city explanations, I leant:

That I could do with spending more time on Indices
HPR can appear anywhere!
It would be worth reading more about Free Cash Flow too…
It would be worth reading more about the results of the studies regarding EMH

Hurdle Test #8: Quants and Portfolio Theory (Study sessions 12, & 3) = 71%

Annoyingly, my internet crashed as I came close to finishing this, which skewed my result downwards. But I still learnt:

That I need to be reminded that when calculating Beta we use Variance of the Market, not standard deviation.

That I’m still a little confused as to what happens with the two risky asset portfolio standard deviation formula when one of the assets is the risk-free asset. A new way of thinking about normal distribution testing

Reading 67: Derivative Markets and Instruments, SS17 Qs = 66%

There were only 6 questions so the result is a little skewed, but from the two I got wrong, one was a silly mistake and the other was due to a lack of detailed reading in Schweser about the study conclusion why there has been a recent substantial growth in Derivatives contracts.

Reading 68: Forward Markets and Contracts, SS17 Qs = 60%

Again there were only 5 questions so the result was a little skewed. However It did raise that I was unclear about discounting at the end of a FRA calculation, and despite a question appearing a complex calculation don’t forget the result will be different for a forward than it would be for a future.

Reading 69: Futures Markets and Contracts, SS17 Qs = 75%
The main two things I was unsure of here were what is meant by ‘the futures price’ as I didn’t think that there was a cost to enter into a future, and specified quantity vs. standard quantity: I thought futures were different from forward in this sense in that they’re not bespoke, so must be standard.

Reading 70: Option Markets and Contracts, SS17 Qs = 94%

Fell very comfortable here. In silly mistake made by not reading the question properly.

Reading 71: Swap Markets and Contracts, SS17 Qs = 50%

Problem area. I think mainly caused by my inability to set up the mechanics correctly from the question. But I did learn that at termination in a currency swap the actual returns of principal are required, regardless of the exchange rate.

Reading 72: Risk Management Applications of Option Strategies, SS17 Qs = 90%

Similarly to the other Options reading I was happily sailing through questions and made 1 silly mistake. I like options.