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Do you still have access to your CFAI material?S2000magician wrote:
First: can you deduce the correct answer without knowing how to calculate the rate of 13.16%?
There’s a clearer way to explain how to get the exact number, but it’s more important that the candidate know how to get the correct answer to the question, which does not require that you calculate the crossover rate.Harrogath wrote:Through iteration.
I’m sure the book talks about “trial and error”, this is it.
I have the 2016 curriculum sitting on my bookshelf, not six feet from me.kuromusha wrote:
Do you still have access to your CFAI material?S2000magician wrote:First: can you deduce the correct answer without knowing how to calculate the rate of 13.16%?
If not, the solution in the CFAI says the discount rate of 13.16, but does not explain how to calculate it, hence why I posted the question here.
Is this suppose to be a rhetoric question? I don’t know how to deduce the correct choice to the EOC.S2000magician wrote:
I have the 2016 curriculum sitting on my bookshelf, not six feet from me.kuromusha wrote:
Do you still have access to your CFAI material?S2000magician wrote:First: can you deduce the correct answer without knowing how to calculate the rate of 13.16%?
If not, the solution in the CFAI says the discount rate of 13.16, but does not explain how to calculate it, hence why I posted the question here.
Now, please explain how to deduce the correct answer to the EOC question without knowing how to calculate 13.16%.
But we have financial calculator, we don’t need to trail and error to find the exact IRR.Harrogath wrote:
Through iteration.
I’m sure the book talks about “trial and error”, this is it.
It’s not rhetorical. The point of the my question is that you can answer the EOC question without knowing how to calculate the crossover rate. That’s also the point of the EOC question.kuromusha wrote:
Is this suppose to be a rhetoric question? I don’t know how to deduce the correct choice to the EOC.S2000magician wrote:
I have the 2016 curriculum sitting on my bookshelf, not six feet from me.kuromusha wrote:
Do you still have access to your CFAI material?S2000magician wrote:First: can you deduce the correct answer without knowing how to calculate the rate of 13.16%?
If not, the solution in the CFAI says the discount rate of 13.16, but does not explain how to calculate it, hence why I posted the question here.
Now, please explain how to deduce the correct answer to the EOC question without knowing how to calculate 13.16%.
The calculator uses trial and error (sophisticated trial and error, but trial and error nonetheless) to calculate an IRR.kuromusha wrote:
But we have financial calculator, we don’t need to trail and error to find the exact IRR.Harrogath wrote:Through iteration.
I’m sure the book talks about “trial and error”, this is it.
The crossover rate is talked about in BB example 4 & 5, it doesn’t show us on how to find the crossover rate.
Well, technically true, but for practical purposes, I would consider them to be *exact*. Trial and error as indicated in the material meant plugging the rates manually which would take forever.S2000magician wrote:
The calculator uses trial and error (sophisticated trial and error, but trial and error nonetheless) to calculate an IRR.
As in so many other areas, you’re straying off tangents.kuromusha wrote:
Well, technically true, but for practical purposes, I would consider them to be *exact*. Trial and error as indicated in the material meant plugging the rates manually which would take forever.S2000magician wrote:The calculator uses trial and error (sophisticated trial and error, but trial and error nonetheless) to calculate an IRR.
Although we can rule out the interval from 0.00% to 10.00%, this analysis is insufficient. For example, if they had given us an interval from 0.00% to 14.00%, both NPVs would still be positive and unequal, but the crossover rate would be in this interval.studyguy18 wrote:I think you’re a litte on the wrong path with this one. My approach (bear in mind I completed corp finance a few weeks back so memory isn’t perfect here) was something along the lines of:
A) We can immediately count this interval out, as we know that with a discount rate of 10% the NPVs are positive and not equivalent. Per the ‘trial and error’ methodology we need to raise the discount rate to lower the NPV, so choosing something between 0-10% is illogical.