2012 CFAI Exam - Q8 A ii

CFA Level III Derivatives
#1

What I did?

  1. Increase the bond allocation by $28 mio(but raise the modified duration to 6)

  2. Decrease the duration of 98 mio to 6.

I got 64 contracts as the answer

What solution did?

  1. Increase the bond allocation by $28 mio(but raise the modified duration to 7.2)

  2. Decrease the duration of 126 mio to 6.

And it got 63 contracts as the answer

I know the discrepancy is becasue of rounding, but what to do on the exam day?

Thanks!

#2

Don’t worry about it … I doubt that they’ll penalize you for such a rounding issue especially in the morning session since you’re methodology of calculation shows how you derived your answer however you should be better off in the PM session if this occurs while calculating number of contracts.