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David Harper, CFA, FRM, CIPM Why have you taken .014*70(Hypothesized mean) and not 0.014*0.73(sample mean). I understand that 1.4% is population std. dev

Dear David Harper, CFA, FRM, CIPM I came across the following questions and don't think the answer is correctly calculated A headset making company claims that the resistance of their new headset is 70 ohms. A dealer wants to test this hypothesis before placing the order. He knows that the...

Hi ShaktiRathore Thanks for the prompt response. As you know the FRM is approaching, so I am asking a lot of questions. Hope your don't mind :) On another note, I think the solution to the problem is flawed. The 6-month interest rates in Switzerland and the United States are 6% and 8%...

Thanks Shakti There is a question which actually looks simple but if I go by the calculation gives me an incorrect answer. Please read below Assuming the 92 day and 274 day interest rate is 8% (act/360, money market yield) compute the 182 day forward rate starting in 92 days (act/360, money...

Dear David Harper, CFA, FRM, CIPM ShaktiRathore I cam across an interesting question with a rather uninteresting answer. I am sure you could throw some light to it. Your Board of Directors wants a comprehensive review of each business units’ operational risk activities. As the head of the...

Hi ShaktiRathore Would you mind anaylzing this question too ;) A bronze producer will sell 1,000 mt (metric tons) of bronze in three months at the prevailing market price at that time. The standard deviation of the price of bronze over a three-month period is 2.6%. The company decides to use...

FRM L1 hovering over !!

Thanks for the prompt response ShaktiRathore

Dear David, I cam across this question on a forum and can't make much of it. It looks a fairly simple question but the options make me clueless. Please note. P(0,T) is the price at date 0 of a zero-coupon bond that pays $1 at date T. Given zero-coupon bond prices: |P(0,4)|= |.8386|...

Dear David, Binomial pricing model is quite commonplace in the syllabus for non-dividend paying stocks. However if we were to have dividend paying stock we will use P(u) (Probability of up movt) = (exp^(r-q)*t - D)/(U-D) This is pretty clear, however when we calculate payoffs(multiplied by...

Thanks now lets suppose we have a 10 year zero coupon bond and a 10 year coupon paying bond(semi-annual payments). Now we know that zero coupon bond has higher interest rate risk as it is more affected by rate movements, but we say that Zero coupon HAS HIGHER CONVEXITY according to which Zero...

Dear David, Please note the following question. I have doubts on the options. I believe the question is flawed as incomplete information is given. Kindly confim Kris, FRM® is analyzing the sales growth of a Two Wheelers launched two years ago Suzuki. Majorly 3 factors contributes to sales...

Dear David, I read in Hull that higher the coupon payments, greater is the convexity of Bonds as it immunizes against movement in the market yields. Correspondingly bonds with payments centered around a single time (like Zero coupon bonds) have lower convexity. Key insight: Zero coupon bonds...

Thanks a lot Shakti. Could you help me in some tricky Quant questions via mail? ;)

Dear David, I went through the question and found it quite challenging as no possible solution approach was coming to my mind. Could you kindly help me get the solution? Thanks Consider the following linear regression model: Y = a + b*X + e. Suppose a = 0.05, b = 1.2, Std(Y) = 0.26, Std(e) =...