CFA Institute Guideline Answers- Show your calculations

[Graeme520]

Hello all,
When CFA Institute says “Show your calculations”, are you required to write the formula with words and THEN substitue for the variables or can you just use variables immediately?
I.e. do you have to write: E(r)= Rf + b(Rm-Rf)
Where, Rf = risk-free rate
b= beta
Rm= Market return
OR can you jump to (without writing the above): E(r)= 2 + 1.5(5-2)
Therefore, E(r)= 6.5%
The guideline answers on CFA institute’s website seem to be a lot more worded than the Schweser guideline.
Please help.
Thank you.
Graeme

 

[kjames05]

I would start with the formula but leave out the ‘Where…’ If you write the symbol for beta, CFAI knows you’re talking about beta

 

[June06]

I believe having formula, like E(r)= Rf + b(Rm-Rf), could help you get partial credit. Correct me if i’m wrong…

 

[Graeme520]

Thank you

 

[cpk123]

i would do
E(r)= Rf + b(Rm-Rf)
= 2 + 1.5(5-2)
= 6.5%
and do not forget to put the “units of measure”. e.g. USD, % etc. at the end.

 

[June06]

Thanks cpk, we need partial credit……

 

[kjsgbp]

My biggest concern is including the subscripts/ correct notation in the formula, for me the formula is hard enough to remember and I can get by without the exact notation. For example, E(r) for expected return, I just write R… hopefully that wont hurt.

 

[cgy5478]

If you are absolutely sure that you will get the right answer, you DO NOT have to write out the formulas.
I think it’s a waste of time to write out formulas like Sharpe Ratio or Roys safety first ratio, just plug in the numbers and run with it. However, if you can finish the AM in 2 hours, thats another story.

 

[FrankCFA]

I’m willing to invest 10 seconds to buy an insurance in case my calculation is wrong.

 

[kjsgbp]

FrankCFA wrote:
I’m willing to invest 10 seconds to buy an insurance in case my calculation is wrong.

Not a bad way to look at it, I’m OCD though and usually triple check all my answers, this makes me a very slow test taker.