• Investors have the same expectations about return and asset class risk premiums. • Investors pay the same tax rate, or equivalently, there is no tax. • Investments can be divided and traded without cost . 65
CAIA Level I Workbook, September 2018 Applications INTRODUCTION This workbook discusses the solutions to the applications in the 3 rd Edition CAIA Level I: Alternative Investments using the Texas Instruments BA II Plus Professional calculator. 1. The calculator keystroke instructions are very detailed. Users should note that concepts such as using the financial functions and using the calculator memories are detailed in solutions to the applications (especially in Chapter 3) but are not repeated each time the concepts are used. Therefore, readers with limited knowledge of the TI BA II Plus calculator might benefit from working through the applications in the order in which they appear in the workbook. 2. Before we begin solving these applications, we need to set the calculator to the decimal free format as well as P/Y = 1. Follow these steps: Press 2nd → Format → 9 → Enter → CE/C Press 2nd → P/Y = 1 → Enter → CE/C 3. Clearing values from previous calculations is critical. Turning the calculator off and on, or hitting CE/C clears the screen but it does not clear the financial registers. There are two special ways to clear the financial registers of the calculator. First, to clear the values in the second row of keys: Press CF → 2nd → CE/C [clear work] Second, to clear the values in the third row of keys: Press 2nd → FV Failure to clear the financial registers is likely to lead to errors when the financial functions of the calculator are used in subsequent problems.