AFM*** ACCA Paper AFM December 2019 Exam was.. Instant Poll and comments ***

Oh wow. Preparing for march diet and decided to check the poll. What questions were asked

question 3 really threw me off. Thought question 2 was okay, hopefully picked up lots of marks there. Question 1 I don’t think was hard, I just couldn’t remember and I’m so annoyed at myself! Hopefully done okay on the interest part but the hedging bit the for payment, know I screwed up. Think I’ll be resitting March :(

Fair exam but time pressured. Som many sub questions and requirements that you will barely get time to read and analyze the information given. I did question 1 last and did not have time to write the report.I attempted the profit centre ,multilateral netting, currenecy and interest rate hedging and the 5 marks on the rational of hedging in perfect and imperfect market. There was 7 marks Gama and delta question which i saw last minute and did not have the time write anything about. I also left out the report as I run out of time. Does any know how many marks the report is worth besides the 4 professional marks? Q2 was much better. I got positive NPV and the sensitivity analyze I got +25% on investment and another rate above 10% which was the benchmark. After VAR I stil got positive NPV. I think it was 2m. Therefore the project should go ahead. Q3. Was tricky in my opinion. I made lots of incorrect assumptions to keep moving. E.g the value of the 30 units disposed I calculated as operating loss less the 0.89 for the 30 divide by operation loss then by the NCA. Also profit increase of 10% after restructuring. How do you get the profit to calculate interest cover? That was bad Not sure I got enough marks from q3. But hopefuly I did enough

feel better about the exam then i did this morning which is an achievement itself, attempted everything. what the difference between a profit and cost treasury? i made 5 points of pure educated guesses to try pick up 2-3 mark, compltely forgot what gamma was too.

Options has come for section A 50 marks, currency, interest rate and multilateral netting, question 2 was NPV. And restructuring for question 3 . I feel the exam was tricky and time bounded especially question 3 what was asked is more for the time we have .

@waising said: Hard. Question 3 was a disaster for me. Will be lucky to get 8 out of 25

Same feelings here. It felt like there were such little marks available for the work we had to do? 2 marks for the cashflow and 4 marks to redo the forecast?? Q3 was a big disaster. For the $45m loan did anyone divide 45 by the present value of the 7% annuity to get amounts payable per year? I also added on 7% interest on the loan, took off the yearly int payment and the figure was the opening figure for year two. Did anyone do this and how many marks would this give? This is the only bit about Q3 I feel good about. Q1 was good except for the profit/cost centre and gamma/delta discussion. I have to be honest I didn't study these areas at all. Money market hedge you had to work backwards to see how much USD it would cost. Futures were better for me. Multilateral netting also came up and so did currency options and futures. Q3 was a small npv question, with VAR and sensitivity analysis... Can't believe the exam skipped so many core areas like FCF, WACC, projects betas etc.

Q1: Cost centre vs profit centre required some form of mental gymnastics that escaped me on this occasion. Wrote some words. Found it hard to imagine how you would run a treasury department as a profit centre, as you wouldn't expect it to generate income as such, based on my understanding of what a treasury department does. Multilateral netting - did well. Nice way to ease into the calcs, providing you know how to do it. Had to use my driving licence as a ruler, having forgotten my ruler. that was a bit annoying. MMH - Wrote an answer that made some sense, but probably got the borrowing and depositing the wrong way round. FX futures - had to think about the best way to trend the futures price, having forgotten the method. Think what i did made sense. Recommendation favoured the futures. Interest rate FRA - Easy. Nothing to do except choose the right one. Interest rate options - All the questions I had done previously required calculation of diminishing basis, whereas on this one they did it for you. Whilst that made it easier, it actually threw me a bit. I suppose one gets used to following a method. I think I did it OK, although the APR it came out with were quite high. Recommendation was the FRA. Bank offering OTC options to protect against delta and gamma risk - don't know much about delta and gamma beyond the basics of what they represent, so made a few informed guesses based on that. Last bit about the cost/benefit of risk management from the perspective of diversified investor - ran out of time, didn't do it. Thought 90 minutes of writing time had passed, which they had. Felt OK at this point, like I'd probably scored around half marks so far., evn without doing the last bit. Got confused about time because the exam started at 10.15. Decided I was actually 15 minutes behind. Things went downhill from here onwards. Q2: NPV was OK. Ended up with +1.25. Forgot how to do the sensitivity analysis but had a go. 8% was in there somewhere. Think I got the VAR calculation right. Missed out part b to save time. Can't remember what it was about. Part c was about questioning the CEO's opinions about strategic options, and it not being worth considering their value. Wrote some OK points. Time realigned itself in my mind. Entered Q3 with 43 minutes left. Felt things were getting away from me but maybe a chance remained... Q3: No chance remained. First bit about forecasting cash effect of restructure looked like it should be easy, and was only worth 2 marks, so should be done in less than 6 minutes I suppose. It took me about 20 minutes I think. Too much information to process in that time, and it was hard to assign a sensible value to the 10% improvement in operating profit for restaurants that will stay open. Made a forecast balance sheet that didn't balance. No time to assess whether they would breach covenants. Wrote some words in the last bit about whether the arrangement would be acceptable to providers of finance. Overall, I found it quite frustrating.

This exam was extremely long! There was just so much to do. In Q3 we had to prepare a revised balance sheet [which for me didn't balance] and that was very unexpected. It was hard to evaluate without being certain about the numbers. Reading the comments, I realised that I forgot to calculate the annualised interest and just put in a total cost of the loan - I think I got really confused due to having to do so many claculations; i.e. money market, futures, options and FRAs all in one question. I don't think the level was that high - not the toughest exam for AFM I have taken - but definitely extremely time constrained which pretty much is the same if you can't even take time to think and have to spend most of your time using the calculator or writing!

The total loss for 30 centers 30*0.89=26.7, i decreased 20x5 years operating loss by this amount and increased the result (21m) by 10% for both years.

Q2 had a small bit where it was asked why the NPV could be underestimated. Something to do with an option to expand and option to delay. Waffled on a bit there but wrote one or two sensible points such as the co should wait 6 months for new info regarding the election is known. However management dismissed these options as the cashflows were very unknown. After doing the multi lateral question and parts of the hedging, I had a smile on my face. Said smile turned into a faint one after finishing Q2, and after Q3, the smile was no more!

Q3 reconstruction was a real stinger into the mix. Be lucky to get 5/25. Q2 theory bits were a bit strange to me for the marks allocated, but maybe that's just exam mode pressuring the brain. Hard to get sufficient points down for the marks. Also failed to give comments for part a after calculating npv and var etc. So probably lost some easy marks there as had been asked to "evaluate". Anyone agree?

This was a simple exam technically except for Q.3 but was unnecessarily time pressured with very few marl allocation!It seems this examiner has missed point of setting this particular exam because he seems more inclined to testing time management rather than the skills.Even in offices,you need time to think and analyze the problem and organize your solution before writing it out.In this exam,this was missed out instead questions were designed with so much details but with little time to assemble the information.I HAVE SERIOUS RESERVATIONS WITH MARK ALLOCATIONS IN THIS SITTING.TOO MUCH QUESTION REQUIREMENTS WITH MASSIVE INFORMATION WITH VERY FEW MARKS.LOOK AT Q.3 a)2 marks to calculate the net cash flow from restructuring,4marks to construct a Revised statement of Financial position following the Restructuring.!This paper was unnecessary time- pressured for no good cause!If the examiner has run out of good technical questions,he/she should step aside and leave a new examiner to take over the setting.THIS PAPER WAS PURE EXAGGERATION OF TIME PRESSURE.Candidates should be tested on a reasonable balance between technical aspect and time management.I will fail this paper not because of lacking knowledge but the reasonable time pressure created by the examiner asking too many small questions which require a lot of information for little marks.The examiner missed the point here.By the way,who is the current examiner for AFM?

Missed out the point and unreasonable time pressure.

Hi, I think that the paper was not so hard, but I am not sure if I will pass it. Q1 > I did skip completely part A and C for a total of 16 Marks. Then part B was a report about Multilateral Netting (6 marks > ok), FX Futures and Capital Market (7 marks > ok), interest rate options and futures if interest raises and falls (8 marks > ok), writing about delta and gamma (7 marks > maybe I got 3 marks) + professional marks (4 marks > 3 marks) and advise (5 marks > 3 marks). Q2 > A was about NPV, sensitivity analysis (btw i got one of the 2 ratios less than 10%) and VAR (14 marks > I think was ok for me). B was about something related to NPV and the policy the company was using (5 marks > not done). C was about NPV and real option (6 marks > 4 marks) Q3 > strangely was the hardest for me and the way they allocated the marks was strange. The text was long to read with a lot of information and I spent a lot of time on it and getting few points. A was about net cash (2 marks > OK) B was about SFP (4 marks) I did a lot of mistakes here.. C was about to check if interest cover and D/E was achieved in the next 2 years and write about it (9 marks). I know that my answer is wrong here but at least I think I got it right about the annual payment of the loan (capital + interest). If I am lucky I could get 3 points. Part D was to comment if investors will accept the reconstructing (10 marks > not done). I see other comments about Q3 and it's a "relief" to see that I am not the only one to find it difficult and a bit odd. Good luck to everyone.

Exam was not in anyway difficult however what is the story with the amount of reading I had to do question 3 without reading it basically. I could do almost everything on the paper but still hadn’t time to complete. If I fail it most certainly is not lack of knowledge and I think that is unfair are we accountants not typist basically In summary 1) went with money hedge, and fra. 2) netting straight forward Theory ok, profit Centre just blah blah 2) Npv with sensitivity Positive npv 1.43 10% investment 4.3% sales ( or other thing he called it) discounted sales revenue Reject npv Weakness as should factor in real options as they add value to npv Could reject npv that is profitable Part c basically repeat of b 3) cash 8m Sofp wouldn’t balance so just messed with it and stupidly reserves as a balancing figure no sense Debt covenant not met year 1 41% 2 36% however I guessed profits would increase 21 and 22 so no marks for that but did do the debt as annuity so finance 3.18 or 2.97 As no time to think about this God help the examiner reading the answer to the last part couldn’t even read it myself

Can anyone fadom a guess of how many of the 14 marks for Q2 a were for a narrative/discussion on the result of NPv, Sensitivity analysis and Var? I did the calculations only and moved on.. ?

I wouldn’t imagine too many as part b and c covered the options and rejected it when it could be positive but that what b and c about

Ye hopefully. Despite calculating a positive NPv and a sales sensitivity below 10% which meant therefore the project being rejected, I somehow didn't mention this as a shortcoming in their risk policies ie rejecting positive NPVs. Seems like a shortcoming in my exam brain..

Can someone confirm how much marks Q1 (c) carried?

If that was the thing on delta and gamma, I think 6 or 7 marks If it was on risk diversification, 5 marks

i guess 6-7 marks of 14 were for sensitivity ,var and analysis, probably rest for the npv,working cap,wda etc. i put in the var formula but completely forgot how to calculate the figure,hopefully get 1 mark for the attempt. anyone figure out yet what a profit centre does or was it some myth to scare the bejesus out of everyone as conviently it was 1a?

VAR .035 * 2 by 1.645 Or am I missing something Agree @rommark 7 what a horrible question for 7 marks like seriously Then the 2 marks for cash flow wow

i know seems that they tested alot of stuff that the majority would just tend to skim over such as that and delta/gamma for 14 marks, funny thing is that i knew the variables of rho theta delta and vega but of course they asked gamma

I think: 1.65 x (value of standard deviation given, can't remember it) x (square root 4 as 4 year project) .. but I could easily be wrong You know I'd be very relaxed about failing and repeating were it not for the move to CBE exams from March, which sound like a load of crap and from doing one for F7 it was indeed a MASSIVE pain. Using excel with zero functionality and having to view the quesiton in "parts" on screen instead of having a paper version in full in front of you

Very frustrating due to time pressure. This is not the fair way of testing our knowledge. There were a lot of calculations with few marks which were time consumming and when I got to the highly marked requirements I could not focus due to time pressure. Regarding changes needed for profit centre treasury departement I have written about specialized highly prepared employees to hedge against forex and interest rate risk and to invest the company's cash. The gains from hedging and cash investments to be considered as incomes. This is the only thing that came to my mind.

Ireland is the first to do CBE for professional exams that is what the guys told me today so it bit like unfair that couldn’t be right you’d think It only 7 marks for the gamma delta Ya that is what I did but 1.65 is technically wrong as per tables it is 1.645 I think I’ll let them know lols The sales percentage was that sales then discount then divide by npv

Ireland along with few set others are starting CBEs in March for STrategic Pro papers... If it comes to it, I may even jump over to London to repeat in March if I really dont fancy CBE, cross that bridge if and when haha

Hi Q1 I felt calculations went ok. 1a I was a bit lost and wrote some waffle around costs and profits and information needed. Gamma and delta, waffled about risks but don’t think I would have scored any marks completely forget what they meant. Did anyone write anything about the customised hedging from the bank? The directors opinion, I said something about no need to diversify etc. Q2 found ok although forgot how to do value at risk, and maybe scrapped a mark for sensitive analysis. The question I felt was repetitive in theory in regards to not using the real options and to criticise the investment appraisal procedures. Q3 think I done ok on the Calcs, had to use a balance figure for cash though. The 10 mark at the end I didn’t do any calculations for, nothing to compare in the event of liquidation just didn’t have time. Felt like it wasn’t an extremely hard exam just wasn’t my most practiced areas.. nothing on betas or apv, ungearing regearing which I practiced a lot. Wasn’t a lot of marks for calculations either. On q2 the WC the decrease each year was this 12% of the decrease I couldn’t really understand that part?! I think I got +NPV of 3.5 or something. Hoping to scrape by.

For question 1, should we use 5.20% or 5.20% (+/-0.8)? in the final outcome for FRA and the options? Because the question said to use 5.20% if interest rate increases or decreases. If i’m not mistaken. Kinda confusing

2-7 FRA