Hi Guys,
When I was going through the curriculum for the Level III Exam, I maintained a log of topics I found difficult/had a hard time remembering. Below are notes that I took for my own reference - uncensored, unedited. Some of you may have other topics that you have trouble with and it’s helpful to revisit them in this manner. Page numbers are from last year’s curriculum.
Volume 2 Page 263 Blended tax environment. Question 6. Uses r* and T*. Tricky tricky tricky. Stay on your toes.
Have a hard time recalling parentheses in the Wealth tax formula and annual accrual formula. Volume 2. Page 264 Q 12
When dealing with taxable account, need to add back taxes paid on basis in the forumla. Don’t need to do so in a tax deferred account. See Q15 in Volume 2 Page 265.
Watch for words like “inflation-adjusted”. That means don’t increase the annual spending every year. Discount using REAL risk-free rate.
Volume 2 Page 353 Example 5 - very good detail of Mismatch of character in case of employee stock options hedged with a collar.
Volume 2 Page 423 Question 3 - important example because it incorprates behavioral aspects of equity trader in the HC FC debate asset allocation.
Volume 2 Page 424 Question 4 part iv. ) GOT ME. The bequest motive has a strong effect on insurance demand but LITTLE EFFECT ON OPTIMAL ASSET ALLOCATION.
There is minimal change in the proportional allocation to the risk-free asset at different strengths of bequest motive. The result indicates
that asset allocation is primarily driven by Risk Tolerance, Returns on the risk-free and risky assets, and Human Capital.
Young Investors with equity-like human capital should be invested predominantly in fixed-income assets.
Volume 2 Page 469 Example 13. In the case of endowment and foundation, when saying inflation-adjusted return
to meet annual spending, inflation may be education/general/healthcare. Make sure it is indexed against the right benchmark.
Volume 2 Page 503 Q 2. Answers B ii and iv. Note if IPS doesn’t explicitly mention RR LLTTU. Need to address individually. If not a concern,
should still talk about it and say not a concern.
Volume 2 Page 508 Q9. In bank portfolios. primarily loan driven. rest is put into securities portfolio. Have to manage through securities portfolio
if you want to adjust the asset/liability duration. Securities portfolio is mainly comprised of fixed income bond securities.
When I was going through the curriculum for the Level III Exam, I maintained a log of topics I found difficult/had a hard time remembering. Below are notes that I took for my own reference - uncensored, unedited. Some of you may have other topics that you have trouble with and it’s helpful to revisit them in this manner. Page numbers are from last year’s curriculum.
Volume 2 Page 263 Blended tax environment. Question 6. Uses r* and T*. Tricky tricky tricky. Stay on your toes.
Have a hard time recalling parentheses in the Wealth tax formula and annual accrual formula. Volume 2. Page 264 Q 12
When dealing with taxable account, need to add back taxes paid on basis in the forumla. Don’t need to do so in a tax deferred account. See Q15 in Volume 2 Page 265.
Watch for words like “inflation-adjusted”. That means don’t increase the annual spending every year. Discount using REAL risk-free rate.
Volume 2 Page 353 Example 5 - very good detail of Mismatch of character in case of employee stock options hedged with a collar.
Volume 2 Page 423 Question 3 - important example because it incorprates behavioral aspects of equity trader in the HC FC debate asset allocation.
Volume 2 Page 424 Question 4 part iv. ) GOT ME. The bequest motive has a strong effect on insurance demand but LITTLE EFFECT ON OPTIMAL ASSET ALLOCATION.
There is minimal change in the proportional allocation to the risk-free asset at different strengths of bequest motive. The result indicates
that asset allocation is primarily driven by Risk Tolerance, Returns on the risk-free and risky assets, and Human Capital.
Young Investors with equity-like human capital should be invested predominantly in fixed-income assets.
Volume 2 Page 469 Example 13. In the case of endowment and foundation, when saying inflation-adjusted return
to meet annual spending, inflation may be education/general/healthcare. Make sure it is indexed against the right benchmark.
Volume 2 Page 503 Q 2. Answers B ii and iv. Note if IPS doesn’t explicitly mention RR LLTTU. Need to address individually. If not a concern,
should still talk about it and say not a concern.
Volume 2 Page 508 Q9. In bank portfolios. primarily loan driven. rest is put into securities portfolio. Have to manage through securities portfolio
if you want to adjust the asset/liability duration. Securities portfolio is mainly comprised of fixed income bond securities.