So much confusion with this morning session

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cofeyniy

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Apologize, if I repeat someone’s topic
Does anyone know, how CFA scores morning session? I mean does it have some definitive answers and if candidate’s answer is different, then the answer doesn’t get any point?
I am asking because there are number of questions that can have different answers with different reasonings. So, if I respond not in a way defined by CFA, but will have valid reasoning, will I get any point?
For example:
Due to losses in the recent past portfolio did not generate sufficient returns to meet pre-specified spending objective. Moreover, donations have declined.
two options how to decrease the volatility of funding of spending expenses:
1) adopt a rolling three-year average spending rule, based on the beginning-of-year market value for the last three years;
2) decreaase the spending rate.
I have choosen option 2 with the following reasoning:
contraction of porfolio value (due to losses in recent past) coupled with the reduction in donations leads to reduction in risk tolerance and as a result to decrease in expected returns. With the descrease of spending rate liquidity needs will be reduced, commensurate with the new risk tolenace thus making it more realistic to to meet potfolio’s spending objective.
While in CFA states that option 1 is the correct answer.
So, is there a chance to get any points for my initial answer?
thanks
 
I had the same answer but I convinced by the CFA answer. Option1 looks more logic because spending volatility will decrease but the other option still has a rate linked to the volatility of the ending value of the foundation.
 
Another question:
In one of the cases, there is a questions that asks only to calculate GDP using Cobb Douglas prosuction function, which I have actually done and my result corresponds to the one provided in “guideline answer”.
However, in “guideline answer’ besides calculation itself there is also a long explanation to CDPF which I did not provide.
Will I receive fewer points because I did not provide that explanation (however, the question itself did not ask for any explanations)?
 
I agree that CFA’s answer is certainely valid. But the question is will I receive any points for my answer that is different from CFA’s answer, if I have valid reasoning?
 
The grading I guess is based on key words Not necessarily have to be the same as the guidance.
 
If your reasoing is valid then you may gain points as long as not contradict with the answer. This is what I guess. Say for example you have chosen one method which is wrong but the reasons are right anyway you may have some points.
 
I base it on what the command word is and how much time is allocated to the question. If its something like “Identify” or “Calculate” then I don’t worry about defining any terms. If its something like a “Discuss” or “Describe” then I do try and define as much as I can, time permitting of course.
That Cobb-Douglas question is a tricky one. I don’t think you would get extra points for describing the function but it wouldn’t surprise me if there was a mark allocated to showing that the percentage change formula is an extension to the basic form.
 
Glue85 wrote:If your reasoing is valid then you may gain points as long as not contradict with the answer. This is what I guess. Say for example you have chosen one method which is wrong but the reasons are right anyway you may have some points.
Click to expand...
This is a common misconception. If the question asks you to circle an answer and then justify it… you will receive **NO CREDIT** if you initially choose the wrong/less preferred choice even if you give an A+ explanation or reasoning. So in order to get any points, you must get the first part of the Q correct in order to get the second part of the same question graded.
For instance, if you’re given 3 choices and unsure if the correct answer is “A” or “B”, you might choose “A” but give a justification for “B”. If the correct answer is “A” then you will receive partial credit for getting the first part of the Q correct. And if the correct answer is “B”, then you will receive zero points (even if your justification is a perfect answer for “B”) because you got the first part of the question wrong.
I believe this hierarchy for grading is to prevent people from hedging their answers.
 
Exactly what I wanted to know. Thanks. So, as I understand, if I circle wrong answer, they will not even read my justification.
 
Tozret do you have any reference on what you said ? I see some answers in the guidance where you could pick up either of two choices and explain the reasons.
 
Two reasons why A is correct. 1) The question asks how to reduce the volatility of spending. Reducing spending may not reduce the volatility. 2) The foundation/endowment may already be spending at their minimum rate in order to keep their tax exempt status.
 
cofeyniy wrote:
Exactly what I wanted to know. Thanks. So, as I understand, if I circle wrong answer, they will not even read my justification.
Click to expand...
Correct.
 
Glue85 wrote:Tozret do you have any reference on what you said ? I see some answers in the guidance where you could pick up either of two choices and explain the reasons.
Click to expand...
Marc LeFebvre explained this at one of his bootcamps, several years ago.
If you happen to see a question with more than one correct answer, this is a rare exception – most likely due to the fact that when grading the answer for the umpteenth, CFAI realized that an alternative answer is also reasonable based upon “WXYZ” that lots of test takers had given as an answer, and they hadn’t considered before. <– personal theory
So now you can select “answer 1” based upon “ABCD” OR “answer 2” based upon “WXYZ” and receive full credit.
 
What if solving a question who need a multiple steps to arrive too. Say in order to chose one bond that will satisfy the portfolio dollar duration you must first to compute its weight in the portfolio and blah blah. You done all steps right except your summing was wrong and leads you to chose different answer. Will this be graded with zero minutes ?
 
^I can’t say for sure, but I believe you would get nothing/zero/zilch/nada.
 
cofeyniy wrote:
For example:
Due to losses in the recent past portfolio did not generate sufficient returns to meet pre-specified spending objective. Moreover, donations have declined.
two options how to decrease the volatility of funding of spending expenses:
1) adopt a rolling three-year average spending rule, based on the beginning-of-year market value for the last three years;
2) decreaase the spending rate.
I have choosen option 2 with the following reasoning:
contraction of porfolio value (due to losses in recent past) coupled with the reduction in donations leads to reduction in risk tolerance and as a result to decrease in expected returns. With the descrease of spending rate liquidity needs will be reduced, commensurate with the new risk tolenace thus making it more realistic to to meet potfolio’s spending objective.
While in CFA states that option 1 is the correct answer.
So, is there a chance to get any points for my initial answer?
thanks
Click to expand...
you know that most foundations (except for community foundations) have legal spending requirements that they need to meet, so I just don’t see how you could pick the second option. You would probably get no points for your answer.
 
the key with the AM session is answering the question that is asked. it’s a misconception to think you will get credit for writing out what you know about a topic without specifically answering what the CFAI is asking - WRONG, waste of time.
if a question asks, “which bias does Jones suffer from. JUSTIFY with one example” ….you need to 1) circle the correct bias, then 2) JUSTIFY JUSTIFY JUSTIFY. you will not receive 100% credit for that question if you just write “Self Control. Jones doesnt do a good job saving enough for retirement.” This is not enough. Explain what self control bias is and how not saving enough exhibits that bias…that is justifying your answer.
The question could ask, EXPLAIN, or DESCRIBE. it is key to notice these words and to structure your answer accordingly.
 
thanks for the link! It has really clarified certain critical points to me
 
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