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In the solution while calculating swap price in terms of FRA why are the time periods takes as 0.25 and 0.75?? Unlike in bond calculation time are 0.333 and 0.833... Which seems more logical to me.

Q. "Companies A and B have been offered the following rates per annum on a $20 million five-year loan: Fixed Rate Company A Floating Rate 5.0% Company B LIBOR+0.1% 6.4% LIBOR+0.6% Company A requires a floating-rate loan; company B requires a fixed-rate loan. Design a...

Thanks a lot @brian.field and @ShaktiRathore Makes it clear.

Can anybody tell me what is difference between Covar(X,Y) and Var(X+Y) and formulas for both of them. If different... Thanks.

That clarifies it perfectly.... Thanks a lot David... For timely response to the doubts. Very helpful. This makes it clear... Choosing BT for FRM study was a great decision for me.:)

Ohh... Got the calculation... But since 30% is volatility per stock should'nt we first do (30%)^2 and then multiply by $100,000 for variance of each stock? Y are we doing ( 100,000*30%)^2?

Sorry for the typo David....I ment Bodie's note. Question 7. I still don't get where $100,000 come from? Note from Nicole: I updated the title from "Boris's notes" to Bodie's notes for search purposes.

I don't understand how this works? "For n = 20 stocks (i.e., long 10 stocks and short 10 stocks) the investor will have a $100,000 position (either long or short) in each stock. Net market exposure is zero, but firm-specific risk has not been fully diversified. The...

My question here is how do we find out each of them? And if not specified which one to use in calculating Information Ratio?

Thanks for this David...at least Its clear that the classification is strained. But now for the sake of Exam...I think I will go with Allen's division.

I agree with you ShaktiRathore but......That there is misreporting too....makes it a bit confusing.

My Question here is How Bankers's trust Case is Classified as Case of "Customer Conduct"...While it is clearly evident from Allen's reading that BT mislead and manipulated P&G and Gibson. Why is it not a case of Misleading Reporting??

Thanks a Lot David..That makes it quite clear.

I do not understand this concept "If the cost to hedge bankruptcy risk is zero risk management creates value because the market will bear the diversifiable risk." How the market will bear the diversifiable risk? Can somebody pls elaborate? Thanks.