View Full Version : 8F Case Study

10-24-2002, 09:00 PM
I've read it over a few times, played with some of the numbers, looked at the past few years questions, and thought about some aspects of the paper (employee incentive options, etc.). Now what? Anyone want to discuss possible questions? It seems there is a chunk of points dedicated to the case study, but sometimes they give you so much new info that the case study itself becomes mostly irrelevant. What's the thought out there? Thanks for your help!

10-25-2002, 12:11 AM
1) Given a set of assumptions, calculate the leverage adjusted cost of capital for each product line and comment on its return. Maybe you can ignore taxes.

2) Name specific actions you would take to avoid a downgrade.

3) The company is considering acquiring something or selling something it has never sold before. Evaluate the risks (much like the SPDA question from one of the old exams).

4) Company wants to hedge something (the VUL line, foreign exchange risk). Describe some # of strategies and recommend one. Justify your choice.

I also agree that they seem to add lots of extra info. and ask questions not totally pertaining to the case study as given. But what really drives me nuts is some of the other questions and given answers on past exams.
They didn't use those answers to grade the exams did they?

10-25-2002, 05:42 PM
Thanks boilermaker - I'll take a crack at those q's you posted and see what I can BS. I have some other thoughts I'll post later, too (when I have the CS in front of me).

I agree with some of the answers they provide. Don't they have a key answer to grade with? Why don't they just give us those instead of giving us what a student who got full credit gave. I'd rather have the full, correct answer with everything they were looking for even if you don't need all that for full credit. Oh well. Hopefully it won't matter much soon. Almost there...

10-25-2002, 06:56 PM
I would love to help you out but that's my first shot at 8F and I haven't looked at the case study yet! I just finished an extensive "jam-that-shiat-in-da-head" of the whole material. Currently at 280 hours, review the blury stuff this week-end, look at case study, numerical examples/problems, cross figers and write BS on Thursday.

10-27-2002, 10:05 AM
1) Given a set of assumptions, calculate the leverage adjusted cost of capital for each product line and comment on its return. Maybe you can ignore taxes.

These are the kind of questions that always get me. I haven't seen any examples. For the equity CoC, I suppose you would need a market return, a risk-free rate of return, and a Beta. Do you suppose these would all be given, or did I miss them in the case study? And what did you mean by leverage adjusted?

10-27-2002, 11:07 AM
I think the leverage-adjusted CoC is what's described as theta^k in SN317. I think they'd have to give a lot of assumptions, though, to be able to calculate this (ie theta^a, theta^d, theta^s, FVL, etc.). But, with questions more than a page long, they can do just about anything!

Joe Actuary
10-27-2002, 02:18 PM
I haven't really given the case study a strong looking at either, but last year's exam questions were so generic anyway, I don't think it requires too much effort (besides we have 15 minutes to look at it anyway at the beginning of the exam).

I wish everyone the best on Thursday, and I'll be seeing half of you next year!