CFAI R29 PP #2A - language and R28 PP#5 - collars

[AlmostDoneIII]

CFAI Reading 28 Practice Problem #5.
How come this problem is the only one that includes the cost of stock price while the other problem don’t assume you own the underlying asset? Did I miss some key word in the question?
CFAI Reading 29 Practice Problem #2A
is it wrong for me to use language that’s a little more plain… “to increase duration you need to simulate purchasing a bond, by recieving fixed payments you do that” I didn’t use the phrase “inversely related to interest rates”
thanks,

 

[OMGMileyCyrus]

Hey AlmostDoneIII - could you please elaborate on your comment for Reading 29 PP #2? I’m having trouble understanding why increasing duration would cause one to pay fixed and receive floating in a swap transaction. Thanks!

 

[pablosdad]

OMGMileyCyrus, a pay-fixed receive-floating swap is like issuing a fixed rate bond, and then using the proceeds to purchase a floating rate bond. So I think what AlmostDoneIII is saying is that if you buy bond, you effectively will increase the duration.
What AlmostDoneIII said makes sense to me, as I was puzzled by the wording in the answer too. Just dont’ know if it’s necessary to word it as the answer does. It confuses me.

 

[AlmostDoneIII]

Pablosdad, you are correct on what i meant. thanks for the feedback. If others don’t understand me then most likely the test examiners won’t either.