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#1
11-11-2010, 12:47 PM
 wheez17 Member Join Date: Oct 2010 Posts: 58
Question 13

E(S^3)/F(S^3) . Did anyone think they got this question correct? What are the odds it is defective/ did anyone appeal it?
#2
11-11-2010, 01:12 PM
 yashi911 Member Join Date: Feb 2010 College: post graduate Posts: 1,514

why would it be defective?
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#3
11-11-2010, 01:21 PM
 tgadd Member SOA Join Date: Oct 2009 Location: Boston Studying for C Favorite beer: Bourbon Posts: 11,814

http://www.actuarialoutpost.com/actu...d.php?t=204378
#4
11-13-2010, 07:37 PM
 levenzaha Member Join Date: Oct 2010 Favorite beer: Actuarial Brew Posts: 441

Quote:
 Originally Posted by yashi911 why would it be defective?
The answer seems to have not been on the page. you had a numerator with a negative exponent and a denominator with a positive exponent, which should lead to an answer less than 1 yet all the options were greater. my guess - they asked for the reciprocal by accident.

I to wonder if any one has appealed?
#5
11-13-2010, 07:49 PM
 Actuarie2010 Join Date: Nov 2010 College: Graduated on 2007 Posts: 11

I've already sent an e mail to the CAS Office to let them know, i think you'd rather do the same, with this good explanation, it will be a valuable information for them to take account off.

Actuarie2010
#6
11-13-2010, 10:15 PM
 lonlyman0813 Member Join Date: Apr 2008 Posts: 167

this is non-dividend
E[S(1)^3]=S(0)^3(e^[3(alpha)+0.5*3(3-1)*sigma^2])
pre-paid F[S(1)^3]=S(0)^3(e^[3(risk free rate)+0.5*3*(3-1)*sigma^2])e^[-(risk free rate)]
I got the answer more than 1 , and choosed C if the answer is #13
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Last edited by lonlyman0813; 11-13-2010 at 10:19 PM..
#7
11-14-2010, 03:27 PM
 levenzaha Member Join Date: Oct 2010 Favorite beer: Actuarial Brew Posts: 441

Quote:
 Originally Posted by lonlyman0813 this is non-dividend E[S(1)^3]=S(0)^3(e^[3(alpha)+0.5*3(3-1)*sigma^2]) pre-paid F[S(1)^3]=S(0)^3(e^[3(risk free rate)+0.5*3*(3-1)*sigma^2])e^[-(risk free rate)] I got the answer more than 1 , and choosed C if the answer is #13
All good and dandy.

Except it was Expected over forward correct?

and alpha was given as a negative number.

So your the sigma^2 term goes away when u subtract the exponent terms, which leaves negative alpha minus r, thus negative.

or... lets say that 3*(3-1)*sigma^2 = x

E[S^3]/F(S^3) = e^(3(alpha) + x) / e^(3r-r + x)

alpha was given as negative, so the numerator is less than the denominator making the ratio less than 1.

Unless there is something I'm not seeing?

edit* someone please tell me if im saying too much

Last edited by levenzaha; 11-14-2010 at 09:56 PM..
#8
11-15-2010, 12:10 AM
 lonlyman0813 Member Join Date: Apr 2008 Posts: 167

Quote:
 Originally Posted by levenzaha All good and dandy. Except it was Expected over forward correct? and alpha was given as a negative number.
hope you're right ~~
__________________
P FM MLC MFE C VEE IA FA

Taiwan is not China ~
Chines say we are brothers ~NO WAY!
Taiwan is a country that stresses on independence and freedom.

#9
11-15-2010, 07:53 AM
 spencerhs5 Member Join Date: Jan 2007 Posts: 1,048

pretty sure i solved it and got -1 as the asnwer, which was an answer choice, still think the exam was bollocks though
#10
11-15-2010, 05:38 PM
 levenzaha Member Join Date: Oct 2010 Favorite beer: Actuarial Brew Posts: 441

-1??

umh...you are dividing e^(something) by e^(something else) and you got a negative number?

maybe you are thinking of wrong problem. Besides the point none of the choices were negative, it is impossible

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