How can I stop sucking so bad on FRA?

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dsjn358

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Hey guys, just been trough FRA, written some notes, watched the videos and read the books. Its taken around 3,5) weeks to cover the material (I work full time). At the end of each reading I’m doing the CFA I questions I was scoring around 70-90% (I did the Schweser ones in April when I just did a quick gloss over it) all good right??

Well I took the end of topic revision for fra on schweser (the one that’s at the back of the book) I got 58%, my memory retention is terrible, especially on the little details. My question is: how can you get better at FRA? Is it worth while reading the chapter again? Or just doing the Q bank, and just read over my notes?? I know I have to keep moving as well as I need to cover the other chapters (equity, fixed income, derros etc)
 
DO Q-BANK, Read why the answer was right, learn why the answer was wrong…I was even worste than you but after doing so many practice problems, I got at leat 10% better
 
I had a hard time with FRAs and interest rate swaps as well. I found it helpful to remember the level II Schweser notes the insight that at the outset, fixed payer side and floating payer side are equal. Putting that in practice was a little tough. Maybe it would help if you go by first principles - the fixed payer will pay F, F, F, … F+1 $ for period P1, P2, P3, …, Pn. So he borrows $1 at the beginning at an interest rate of F per period, and pays the interest every period, and pays the interest and the principal at the end. Then discount each payment to its present value, e.g. F/(1+R1), F/(1+R2), …, (F+1)/(1+Rn) where each R is the per-period forward rate at that time. For example, if each period is 30 days, then the 30-day forward rate 150 days from now is (1+R180)/(1+R150) unannualized. The floating payer has an easier job, his present obligation is his current interest payment per $ + $1, discounted to today from when it’s due.
At level II you have a formula for swaps - C = (1 - Z4) / (Z1 + Z2 + Z3 + Z4) where for a one-year agreement, C = quarterly fixed interest rate computed using Z1 through Z4 which are present value factors (1/(1+R)) based on R1…R4 = forward rates for Q1…Q4. It sounds complicated till you realize that you can rearrange it as CZ1 + CZ2 + CZ3 + CZ4 + Z4 = 1; all the CZs are PV of interest payments while Z4 is the PV of $1 principal, which should equal $1 at the outset to make your money back with interest.
At least that’s what I remember from memory :) Doubtless, Schweser or the CFA curriculum has much better explanation.
 
Oh sorry dude when I mean FRA- i mean Finacial Reporting Analysis.
 
yeah i had no idea what he was talking about and i dont think i want to
 
The best way to do FRA is to PRACTISE. No point reading and reading and watching videos. Yes you need to do it once, after that you got to practise.
FRA doesnt have any logics (well mostly), so you just need to remember how something is done - the best way to do it is by practising.
Also when you get a problem, think what if this was under GAAP, what if this was under IFRS - always do this. This is the best way to retain.. Hope this helps.
ATB for your results guys/gals!
 
I appreciate the effort from Irecho …
@pdub: He was trying to explain Forward Rate Agreements.
Now for dsjn358 : In Financial reporting and analysis, as there too many concepts, I reckon you should spent more time on recollecting and reorganising than just reading or solving questions. for ex : read about Inventories and then try to map mentally the appropriate accounting treatment to appropriate item or method. Solving questions definitely helps but there can be too many questions that could be created for FRA.
But if you wish to do well in exams, what i feel is that 50 % questions would be numericals in FRA which can be easily solved if you have solved End-of-chapter question in Schweser or CFA curriculum. Hope that helps.
 
pdub - whether you want to or not, you will have to :-)
Damn TLAs!
 
@OP - I was kinda curious why it took you 3.5 weeks to learn one formula! Mystery solved.
 
pdub wrote:
yeah i had no idea what he was talking about and i dont think i want to
Click to expand...
haha.. i feel sorry for him.. it was a long post indeed!
 
1recho wrote:
@OP - I was kinda curious why it took you 3.5 weeks to learn one formula! Mystery solved.
Click to expand...
haha.. it happens bro!
Too bad the result mystery is still lurking!
 
If you have never studied accounting before the CFAI text I would suggest you learn the basics. That’s what I had to do. Go to the library and borrow an introductory textbook on Accounting or go on Amazon read the reviews of a really great introductory book and buy it.
Understand debits and credits, the purpose and uses for all the different types of statements and how they flow together to show you the bigger picture. If you are a visual learner try to find videos on YouTube and PowerPoint slides on the web. They will help.
Also Australian IFRS may have some differences from the European IFRS and US GAAP. I can’t remember how well you need to know the differences at Level I but you will have to know the difference between general IFRS and US GAAP for Level 2. You should try to learn it properly now because you won’t pass Level 2 without understanding accounting.
 
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