Question 13

[wheez17]

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?

[yashi911]

why would it be defective?

[tgadd]

Already being discussed here

http://www.actuarialoutpost.com/actu...d.php?t=204378

[levenzaha]

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?

[Actuarie2010]

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

[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

[levenzaha]

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

[lonlyman0813]

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 ~~

[spencerhs5]

pretty sure i solved it and got -1 as the asnwer, which was an answer choice, still think the exam was bollocks though

[levenzaha]

-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