Controversial Question, use days as 360 or 365

CFA Level I Quant
#1

For a lump sum investment of ¥250,000 invested at a stated annual rate of 3% compounded daily, the number of months needed to grow the sum to ¥1,000,000 is closest to:

A)555

B)563

C)576

I will show this question have 2 answers depending if you do it with 360 and 365 and I need to know the correct answer…

PV = 250.000 CHS

FV = 1.000.000

I = 3/360

PMT = 0

N = 16.637 days

16.637/30 = 554,56 = 555 months = answer A

PV = 250.000 CHS

FV = 1.000.000

I = 3/365

PMT = 0

N = 16.868 days

16.868/30 = 562 months = answer B

I should use days as 360 or 365 and why?

#2

I’d use 365 days, but I honestly cannot imagine seeing a question such as this on the real exam.

The point of the exam _ isn’t _ to test whether you can guess correctly whether to use 360 or 365.

Where did you get this question?

#3

This question is the question 15 from the end of reading 6 of quantitative methods of the official CFA material June 2020.

And I got the right answer using 360 actually, because the answer is 555 months.

Here`s how is solved in the book (without a financial calculator):

https://gyazo.com/0b4ecf485b21fa812ac0ecbc841555f4

https://gyazo.com/133306b0fff6e735219d0160e12ebbbf

I know the point of test is not to test to guess if It`s right to use 360 or 365, but I have been seen a lot of questions that can generate a doubt (in this end of reading 6 practice questions)

#4

I/Y = 3/365

PV = -250

FV = 1000

Pmt = 0

CPT N

N/365*12 = 554.5 = 555 months

Alternatively you could use I/y = 3/360

CPT N/30 = 554.5 = 555 months.

The B)563 answer is the one they’re definitely not trying to catch you out with, which you arrive at through the miscalculation you outlined above. The question does not have two correct answers.

Hope this helps…

#5

That made alot of sense now, I through I could divide the days by 30 that I would have the number of months…

But than I would be considering the year have 360 days instead of 365

You actually need to take the days that you get and divide by the number of days a full year have (365 as you stated above), after that you would have the number in years, than you just have to multiply by 12 to see how many months is it.