To me the problem is that we’re trying to resolve a discrepancy between a prior year CFA mock and the current year text. We don’t know how the material was presented in 2009 nor do we even have the full vigenette (or the errata). If someone were to ask CFAI how to properly solve the problem, I think they would tell us to rely on the 2012 text for an answer.
Even if you referred to this year’s text - there is no specifics on how to solve the problem. (Other than the mention of the 1 statement you so kindly bolded).
Reading is Don Chance - and he has not changed his reading forever, and that portion in the CFAI material has also not changed.
There is nothing in the vignette that talks about how to solve it differently, and they provide the answer without using the beta.
So go figure.
Question that has been asked before: (These are the only options you have).
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If this were an AM session question - what would you do?
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If this were a PM session question (like it was on the mock) and both answers were provided - which one would you choose?
Mock exams have lots of errors, so on the live exam, I would follow what I learned in the text. If I wasn’t given the choice, I would work with what I am given.
Apparently, this topic consumed quite a bit of time in 2009 and I think people just basically gave up (as I think we should too):
http://www.analystforum.com/forums/cfa-forums/cfa-level-iii-forum/9987365
Synthetic = do not use betas
that is all you need to remember
I am confused, most of you state that when creating a synthetic cash position you don’t have to take into account the betas. CFA curriculum tells me the same. But Schweser 2014 book 4 page 145 shows an example where betas ARE taken into account? I’m so confused…
This is the worst thread to read the night before the exam! No resolution, ultimate confusion!
Omg. I had to read thru , I am puzZled big time. Cash has a beta of 0. Where is it ever mentioned hedging is reqd. The guy just wants to have an equity position syntheticÀlly that all
Whats the final answer man?