Discount margin / required margin (for the @CFA Level 1 exam) walks you through the computation of required margin on a floating rate security which is currently trading away from its par value.
My question is that at the end when you deducted 1.5% (3-month EURIBOR) from annual Yield . So why did we use annualized yield and not the Quarterly , as Euribor used is quarterly rate? It is (Annual yield - Quarterly EURIBOR)and not annual - annual
A bit curious as to why you didn't deduct the 0.8% as well, as in the note is paying EURIBOR rate + 0.80% so I thought the margin should be: 3.355% - (1.5%+0.8%)
Well the required margin is simply what investors require above the reference rate (in this case Euribor), so it does not relate to the original margin as such.
Shouldn't you annualize 0.8388 which was your Quarterly YTM instead of just multiplying it by 4? It won't change much but, in the exam, there could be answer with multiplied by 4 and annualized it could be wrong then. Thought of this while solving the practice questions
When I was recording this video, the then current version of the Curriculum suggested annualizing the result in this way. I need to check whether they have changed the relevant reading but somethimes you get inconsistencies, especially between Fixed Income and Quantitative methods reading suggesting different apporaches. In the exam, it should not make much of a difference.
I see, so probably you are in a country where google/ RU-vid does not have this feature enabled. Please check this list: support.google.com/youtube/answer/6307365?hl=en#zippy=%2Cpremium-memberships-available-locations
@@letmeexplaincfa Hello, I have taken the premium membership as per the link; however, the 'join' button is still not coming. And I am so much interested to join your channel. Hope you will kindly suggest me again.
I have confirmed with RU-vid. In Tanzania, the join access is not permitted. So sad news for me. Your teachings are so smooth and wonderful. Just amazing. Please keep doing the great work.
