GH-FV Fall 2020

Anyone here sitting for FV this fall?
I just found out that I passed DP… thankfully I had already started studying for FV last month.
I am now through all the material (read: TIA videos) and have started practice problems and flash cards.

I have no accounting background whatsoever (can’t remember anything from my VEE finance class from years ago), and therefore feel a bit overwhelmed with the accounting related topics. I started watching Khan Academy videos on income statements and balance sheets… Yikes :frowning:
If anyone has any helpful thoughts or resources, I would be very appreciative.

Can someone please explain “in English” what is implicit vs. explicit debt recognition?

I’m ready to discuss FVA and FVC.

what LO are you in?

There’s implicit vs explicit debt recognition in EV cost of capital formulas, is that what you were referring to?

Implicit is when the rdr already includes debt, see the wacc with debt in it. Explicit is when debt is not included in the rdr and you have to account for cost of debt separately.

Felt so much better about these exams than the July sitting and I was a 5/5 in July. Felt like i nailed most of FV-C and improved slightly on FV-A.

Nice! I was borderline in July myself. I definitely think I did better this sitting than July one. I feel the opposite, I feel more confident about FVA. FVC had too little math for my liking.

Yeah, I took a gamble on FV-C and focused like 85% of my time this past weekend on memorizing the lists and assumed the math would be 1)simple 2)minimal and it definitely worked out.

FVA problems:

  1. Stochastic models, no math.

    no particular order:

some standard reserving questions, both words and math
the DAC question
some PDR
LTC and ASOP23 all words no math

  1. EV, one words question and one math question.
  2. Mergers and Acquisitions, no math.

Wow that worked out for you

My experience is OPEB so I felt confident i could generally do most of the OPEB math easily enough and doing the practice exams&questions plus numerical videos on TIA let me feel confident that the math Q’s on FV-C would be straight forward enough that I could get good partial credit on everything as long as I knew the lists.

What did you get for the NPPBC max error?

For #6 the EV

the word question- I wrote something, I’m not confident in its veracity.

For the math: I did know the alternative method to EV, and I’m pretty sure I mostly kept it together for this problem. I may have made minor errors like projecting an extra year. I possibly discounted the final release of capital an extra year due to how I set it up

Nothing confident haha :). As confident as I felt for OPEB questions, the SOA threw me a curveball, I 100% did not expect a question like that. I just info dumped so many different concepts related to the NPPBC and ended up with a $700K ish number. I broke it down to explain how the IC would be affected by the SC & the increase in DR and the SC would be changed by the different service to FE. I could stuck on two items:
1)how to reflect the change in annuity factor (if that mattered)
2)how the service to FE could be different but the APBO was unchanged.

I don’t remember the word question.
For the math, I set it up the way TIA did but messed up the PV Profit stream calc. I blanked on how to carve out the 4% pre tax interest rate out of the 16% profit and I missed something on the PVCoC. I did the EV math correctly based on my incorrect inputs thought.

Hmm I hope I got it right. I mean I believe I did.

Since there are no amortizations and the APBO was given to be correct, the maximum error would be if NPBBC is composed entirely of the interest cost.

So I backsolved to the expression inside the parenthesis in the interest cost formula, and tested the 2 different interest rates. So I got +/- 6%

I’m not a TIA person. I used MATE plus source materials. I set it up as close to source material as I could remember…

The word question was difference between market-consistent EV and EV I think.

So you held that despite the Service to FE issue, the SC was likely correct and would be $0?

AH yeah, I just threw down the minimal stuff I remembered about MCEV.

No, my point was that the maximum error would be if it was only interest cost in the NPPBC formula. It made sense at the time lol.

edit: since APBO was given as correct I figured service cost error would be minimal at most

ah FE is final eligibility, it took me a minute. That’s not a super common acronym if you’re not a post retirement benefits person

Got it. I guess i might have over thought it then. I feel confident I got a good amount of partial credit based on my analysis of it at least.