Mykenk - and sample vocab question

[ebony]

Thanks for your insights to this exam. Much appreciated...

Does anyone have an example of a vocab question that appeared on the exam this past May? I am wondering how the question was worded...

[MathForMarines]

If I remember right, there were 2, and one was on short sales. As for the wording, you should have asked me 4 months ago.

[td25er]

another one was on immunization

[ebony]

yeah 4 months ago

Do you remember if it was worded something like "Define short sales" then gave choices a - e?

Did you feel the choices were tricky or if you had done the reading and studied the vocab these were easy questions to answer?

[MyKenk]

FWIW, I don't think any questions are going to say "Define xxxx:". The questions are more likely going to describe a scenario, then ask the student to determine which of the 5 choices occured in the scenario.

Another type of theory question they like is testing requirements. For example: "Which of the following is a requirement of immunization?"

Yet another theory type of question I see a lot if the triple-true-false question, where they simply list 3 statements, and then ask which of the statements were true.

There are a large variety of theory questions, and I'll bet that very few of them were simply "Which of the following describes xxxx?", as you're suggesting.

[MyKenk]

Here are the recent examples of the stylings I discussed:

12. Which of the following are characteristics of all perpetuities?
I. The present value is equal to the first payment divided by the annual effective interest rate.
II. Payments continue forever.
III. Each payment is equal to the interest earned on the principal.

19. Which of the following statements about zero-coupon bonds are true?
I. Zero-coupon bonds may be created by separating the coupon payments and redemption values from bonds and selling each of them separately.
II. The yield rates on stripped Treasuries at any point in time provide an immediate reading of the risk-free yield curve.
III. The interest rates on the risk-free yield curve are called forward rates.

21. Which of the following statements about immunization strategies are true?
I. To achieve immunization, the convexity of the assets must equal the convexity of the liabilities.
II. The full immunization technique is designed to work for any change in the interest rate.
III. The theory of immunization was developed to protect against adverse effects created by changes in interest rates.

So, you can see what their favorite thing to do is. This is what I would expect to continue in 2006, maybe someone who sat in May can let us know if this was the styling of the may question?

[jadedteacher]

There was definitely at least one that was like that...I want to say two...

[ebony]

Very helpful! Thank you! I am not finding many practice questions for vocab, but those give me a good idea of what to expect.

[robertminohio]

Originally Posted by mykenk

Here are the recent examples of the stylings I discussed:

12. Which of the following are characteristics of all perpetuities?
I. The present value is equal to the first payment divided by the annual effective interest rate.
II. Payments continue forever.
III. Each payment is equal to the interest earned on the principal.

19. Which of the following statements about zero-coupon bonds are true?
I. Zero-coupon bonds may be created by separating the coupon payments and redemption values from bonds and selling each of them separately.
II. The yield rates on stripped Treasuries at any point in time provide an immediate reading of the risk-free yield curve.
III. The interest rates on the risk-free yield curve are called forward rates.

21. Which of the following statements about immunization strategies are true?
I. To achieve immunization, the convexity of the assets must equal the convexity of the liabilities.
II. The full immunization technique is designed to work for any change in the interest rate.
III. The theory of immunization was developed to protect against adverse effects created by changes in interest rates.

So, you can see what their favorite thing to do is. This is what I would expect to continue in 2006, maybe someone who sat in May can let us know if this was the styling of the may question?

Where do you find study materials like this?

[MyKenk]

I'm not sure what you mean by that. If you want to know where the questions came from, they came from the two released FM Exams. If you want to know what you can study to answer these questions right, then I would suggest a textbook.

However, of those 3 questions, I believe only the second one would require insight further than the ASM manual provides (although I'd have to check to verify this).

The perpetuity question can be easily answered from first principles, and the third question is a very basic immunization question that briefly touches on the basics. The second question might involve a little more insight, for that I would recommend the Kellison book.