Why does the realized P/L formula divided by the decision price and not the benchmark price of GBP 12.24?
In the CFAI text, realized P/L formula is [(execution price - decision price) / benchmark price]*% of filled order. However, in the 2014 answer sheet, it’s divided by the decision price. Anyone know what’s the correct formula?
Ask Audacious… he fipped out over this.
See bottom of page 25 of volume 6 - clearly uses decision price in the denominator.
Decision price is the benchmark price if the order is filled on the day that the original order is placed.
Decision price will be different if the original order is not filled on the first day, and subsequently filled the next day. Then you need to use the previous closing as decision price, and the day before’s closing as benchmark.
Decision price in the numerator is the modified decision price. The one in the denominator is the original decision price. If not modified, then they’re the same (eg when the decision is taken during the trade day not after closing).
understood, thanks all