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Hello, Sir
I have attempted p4 three times.I flunked the exam thrice. First time I got 45, then again 45 and in the previous attempt I scored 47 marks.
1)can you please guide me what I should do to clear the exam.
2) This time I did so well, shall I go for exam review as well.
your help will highly be appreciated.
Thank you so much sir
Hi @Saline,
Please, please, please don’t go for exam review. It will not convert a fail into a pass unfortunately. Don’t give up, don’t donate to ACCA, and read the examiner’s report on the latest exam sitting.
The consequence of making the assumption that debt is risk free is tht the formula tend to overstate the finavcial risk in a geared compamy and to undestand the business risk in geared and ungeared comapnies by compensating amount.
This is what written in the bpp on page 16. Revision- CAPM topic under the heading of weaknesses in the formula:
can any one explain what does this line means.
@saline said:
The consequence of making the assumption that debt is risk free is tht the formula tend to overstate the finavcial risk in a geared compamy and to undestand the business risk in geared and ungeared comapnies by compensating amount.This is what written in the bpp on page 16. Revision- CAPM topic under the heading of weaknesses in the formula:
can any one explain what does this line means.
What they are getting at is this:
If you look at the formula for gearing/ungearing betas (Ba = ……..), then we usually assume that Bd in the formula is zero (that debt is risk free). In practice debt is not risk free and so Bd will not equal zero.
If you have a geared company and you know the gearing and you know the asset beta (Ba) then you can calculate the beta of the share (Be) using the formula.
Make up some figures yourself for the gearing and for the asset B. If you then calculate Be assuming Bd = 0, and then calculate Be again assuming Bd = (say) 0.1, then you will find that it is higher when debt is risk free then when debt is not risk free. This is why they are saying that assuming risk free overstates the financial risk in a geared company.
Thanks a lot sir, I did what you said and yeah I found out that the Be is higher when Bd=0 and is lower when Bd=o.1
Does it means that the shares are more risky when Bd=0 and less risky when Bd=1?
If it means that so what is the interpretation of this 🙂Thank you so much sir.
Sir I want to ask that in CAPM revision in the book of p4. They are talking something about APM (Arbitrage Pricing Model)
With the APM, the CAPM’s problem of identifying the market portfolio is avoided, but this replaced with the problem of identifying the macroeconomic factor and their risk sesnsitivities.What does this mean and the formula
E(rj)=rf+ B1 (r1-rf) + B2 (r2-rf)…
is representing what sir..
Your reply will be highly appreciated.
Thank you so much 🙂
In normal CAPM the beta is measuring the riskiness due to general economic factors (for example the effect of change in exchange rate, the effect of changes in the rate of inflation etc..). What APM is suggesting is that because each of these factors can affect companies differently then maybe there should be separate betas for each economic factor (instead of just one overall beta).
However, although the idea is sensible, it has not been developed and so you cannot be asked numbers on it – you can just be expected to mention it.Pls Sir, What can I do to have pass mark in this paper? I got 41 in June diet. Regards
Assuming you have been through the text book, then it really has to be practice and practice.
Make sure that you do not just concentrate on the calculations, but also the written parts of questions (the best is to learn from the examiners answers to past exam questions).
Make sure in the calculation parts that you state your assumptions – for many questions there is no one answer. It depends on assumptions and if they are sensible you will get the marks.
One of the compulsory questions is almost always asking for a report. Make sure you set it out properly and get the professional marks.hello.
i know all the ACCA papers are equally important.can you kindly advise me as to which combination of papers should i go for in order for me to complete acca.am left wit 2 papers between P7,P5 OR P4.i have written P7 three times and P4 once before.Am now a confused man
hello.
i know all the ACCA papers are equally important.can you kindly advise me as to which combination of papers should i go for in order for me to complete acca.am left wit 2 papers between P7,P5 OR P4.i have written P7 three times and P4 once before.Am now a confused man
It is very difficult to advise, because P4, P5 and P7 are all difficult in different ways, and there is not really any best combination.
Because you have failed P7 three times, it might be worth thinking about P5 instead. All I can suggest is that you look at a few recent P5 exams and see what you think. There is a lot of writing in P5, but much of it is on things you would have learned for P3. A lot of the arithmetic in P5 is from topics that were in F5.
Have a look and see what you think. However it will obviously mean extra work for you – at least with P7 you have already been studying.Sorry I cannot be of more help.
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