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@lakeside you will only lose 1 mark because macauly was the way to solve it, so you did well 🙂
Yeah, i used inflation to calculate future spot rate – couldnt find an alternative!
I didnt even look. Q4 so did q3 but. Whats the possible reasons for q3 b and answer for q3 c.can anyone tell me?
Q3 was a killer. Organisation reconstruction and business valuation all rolled into one! 😐
That was my third attempt, was easily the most fair out of the 3
Q1, pretty straight forward. Did a forward rate, Futures market and the options hedge, wrote about the diffrerent choices, ie options was more costly due to the premium, but was a choice so could benefit from positive rate movements etc…
Q2. Re-calculated the NPV using inflated and adjusted cashflows, cap allowances etc…Used 12 % as a Cost of equity and managed to get a positive NPV, i know that was wrong but didnt have time to review, so just launched into the APV calc and messed that up, completely forgot what elements there were, so did the issue cost and tax shield, then waffled about APV etc..
Q3. Did the written elements about growth etc.. then did some garbled calc on a valuation, determined a value for the spin off co using FCFE calc, then valued the remaining part using EPS / PE etc…
Overall the paper was fair, I answered it all with time to spare and felt the most confident out of all, I dont doubt that I have no end of mistakes, but hope that I will pick up enough marks for being along the right lines
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How do these duration calculations look?
Yr1 Yr2 Yr3 Yr4 Yr5
1.2 1.2 1.2 1.2 61.2
@2% .980 .961 .942 .923 .905PV 1.176 1.153 1.130 1.108 55.386
% of MV 0.020 0.019 0.019 0.018 0.923
*yrs 1 2 3 4 50.020 0.038 0.057 0.072 4.615
Duration = 4.802 years
MV = 59.953
I got a 0.4% benefit each for the swap
I got a difference of 1.2% if a swap took place, then deducted the fee
@oisin10 i think the load was being repaid equally in 4 installments so its 15000 each year not like what you said. you redeemed it fully as a lump sum at the end of year 4
I got swap gain 1.2 and deduct 20 basis point bank fee. Both party got 0.5 gain ……half n half
Question 1 was fairly done except for some problem in the Mcauley Duration part, the Memo to the Board was the easiest part available in the exam
Question 2 was also done averagely the Ke was 12% , some people had a positive APV and some had a Negative
Question 3 was a disaster for me… In part a i expect full 4 marks where as part b was average
in part c I totally lost due to the amount of information and the time left, was only able to value T co using the FCF methodIf i had attempted Q4 i would be more confident about passing
still hoping for the bestBest of Luck to All 🙂
Duration was 60 m divided by 3.808 annuity factor of 2% for 4 years.got 15575. And did rest duration part…..
Guys, for question 1 part a) was it a call option or put option for forex risk management?
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Please can people confirm if it was a put option in q1. We needed to pay dollars so sell Swiss currency to buy dollars?
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Great. I was worried, as markers apparently ignore part of that question if you make wrong choice!
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I don’t recall seeing sensitivity?! Unless it was q5 which I didn’t read
It was about duration @williams1977 where it asked about duration and sensitivity of interest rates
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beta this was the most tricky paper i have faced in my acca lifeline…. 🙁 it was simply mind boggling….
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Put option , Right to sell
@elvericia it can be said for question 3 & 4
However the best part was that derivatives were tested in the compulsory question and not the optionals which was a surprise
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