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Hi @taunk, In this problem, n = 16, sample standard deviation s(x) = 9 bps = 0.09%, and sample mean = 40 bps = 0.4%. We use the t-statistic to compute the CI for the "true" population mean (mu) overnight rate. CI = upper limit - lower limit The CI is: Sample mean - critical t value (99%...

Hi David, Yes, totally agree. I don't like the choices either. It is in the 2015 GARP Sample Exam for 'Financial Markets and Products' Thanks:) Jayanthi

That's great @Deepak Chitnis - very clear:) Jayanthi

Hi David, #11 above is as follows: A homeowner has a 30-year, 5% fixed rate mortgage with a current balance of USD 250,000. Mortgage rates have been decreasing. Which of the following is closest to the amount that the homeowner would save in monthly mortgage payments if the existing mortgage...

Thanks a lot Nicole - appreciate it:) You can let the $15 accrue towards the FRM Part II package! Jayanthi

Hi @Shazam023, The feedback from FRM Candidates from the May 2015 Part I Exam was that Stress Testing was tested. Hope that answers your query:) Thanks!

Hi @RiskGuy, It is clearly stated on the Admission ticket that no erasers are allowed. I guess they expect you to get the right answer in one shot:rolleyes: Thanks!

Hi @taunk, The par rate is that coupon rate (C) that causes the bond price to sell at par. That is, it is that coupon rate such that Bond Price = Par. The Swap rates are all par rates. Using the formula given: C/2*[d(0.5) + d(1.0) + d(1.5)] + d(1.5) = 1 C/2*[0.99700 + 0.98510 + 0.96460] +...

Hi @Namrata2001, You need to calculate in the same fashion as @Deepak Chitnis and David have calculated above: 5X + 8(1-X) = 4.5 X = 1.66667 1 - X = -0.66667 In this situation, the long 5% coupon plus short 8% coupon replicate the 4.5% coupon. However, the price is: 1.6666*$97.5 +...

Hi David, In your study notes as referenced above, I don't understand how you get Years from last coupon = 2.5 years in your example. Would be grateful if you would elaborate:) Thanks! Jayanthi

Thanks a lot Nicole - I was just explaining Alan's solution to him - did not know that he was an unpaid member. Jayanthi

Hi @Deepak Chitnis , I like your approach of creating a barbell portfolio of 5% coupon at $97.5 and 8% coupon at 103.2, to equate the bullet. Infact, this was what crossed my mind in approaching this problem. However, I was not very sure. However, the thing I don't understand in your TVM...

Hi @Jogarmenina and @Almondchoco - I could easily open the link. Maybe it has something to do with your browser settings.

Hi @arkabose, Please ignore my earlier message: Got it: E(X^2) = 55^2*0.4 + 45^2*0.6 = 2425, E(X) = (55*0.4 + 45*6) = 49. Therefore E(X)^2= 49^2 = 2401 and the rest follows. Thanks:)

Hi @arkabose, How did you get the value of E(X^2) - E(X)^2 = 2425 -2401 = 24. I have to brush up the binomial distribution. Thanks:)

Thanks for taking the time to search it out for me, David - appreciate it:) Thanks Nicole for pointing me out to the screenshot and the browser link:) Jayanthi

Hi Nicole, The link on Page 5, PQ set, Saunders Reading 22 is not working. I did do a search for it but could not find it. Would be grateful if you would fix it. Thanks a tonne:) Jayanthi

Thanks a lot, Nicole - appreciate it:) You can let it accrue towards my FRM II package. Jayanthi

Thanks David - appreciate it:) Jayanthi

Hi David, Two more questions regarding the above: (1) How do you get the 10.25% forward semi-annual? I get it by: (1 + r/2)^0.5 = e^(.10*0.25) (1 + r/2)^0.5 = e^0.025 = 1.02532 (1 + r/2) = 1.02532^2 = 1.05127 r/2 = 1.05127 - 1 = .05127 r = .05127*2 = .10254 = 10.254% However, I am not very...