Can anyone explain 'Explain' in the LOS

CFA Level III
#1

Hey guys,

Just wondering if anyone can help me with the understanding of LOS’s that say ‘Explain’.

Will we need to know how to do any calculations that help the explanation, or since it doesn’t say ‘calculate’ we can assume we don’t need to know all the equations? The reason I ask is because in Reading 11 - Taxes and Private Wealth Management, it only says that we need to ‘explain’ things like how taxes effect investment risk, so do I need to know the equation for after tax asset standard deviation?

Any help would be awesome!

Best,

Dex

#2

As in SCH

Explain

To give the meaning or significance of; to provide an understanding of; to give the reason for or cause of.

#3

Thanks Rahuls but I was more looking for someone to give me their interpretation as it applies to the CFA specifically - when it says ‘explain’ does that mean, ‘use calculations to help explain’, or since it doesn’t say ‘explain and calculate’, then do we need to know the calculations.

Anyone else?

#4

rahuls’ definition is correct. Schweser gives the definition of each LOS command word as it pertains to CFAI.

#5

usually i think calculate, or demonstrate, are the words where math is involved. Explain would be to write it out in words, AFAIK.

#6

i can see an explain question having a calculation. for example they ask “explain which investment is better a or b?”

they give you items necessary for a sharpe ratio calculation, and the answer will be…"a is better because it has higher sharpe (insert calculated value here)

could be wrong but i feel like doing a calculation will be a better answer…just me though

#7

I would know the formulas for any LOS that says calculate, demonstrate, estimate, explain, forecast, formulate, solve, or evaluate.

The LOS command words list can be found here: http://www.cfainstitute.org/documents/cfa_and_cipm_los_command_words.pdf

Schweser does a good job of putting together a formula sheet at the end of each of their books. I recommend neatly tearing them out to study off of.