Comparing metrics (higher, lower, the same)

if you calculated a value that comes out to 13.89 and the you’re asked to compared what you calculated to something from an Exhibit which is for example 13.8.

Do you say it’s the same? Or higher? If you round 13.89 to 13.9, then 13.9 is higher than 13.8

I was thinking yesterday to post such topic. For me if one figure is 13.8 and the other 13.85 they are not the same but most often this was the wrong answer. I’m curious to learn what should be accepted for “the same”.

I have had this thought too. I would HOPE that the CFAI wouldn’t be so cruel as to punish us for a subjective guess as to what they deem higher or lower within a tight band. I would HOPE that if they asked such a question they would make the two answers far enough apart that this thought process wouldn’t be an issue.

My money is on this not being an issue, but if something is within one/two decimal places of another then perhaps the same??

Aaaah I don’t know…

someone please tell me this is not a real thread - please

I think this is a relatively legitimate question. If you change “higher/lower/the same” to “over/under/fairly valued” then you could at least imagine the situation where a justified P/E ratio comes out as say 12.4 and the actual ratio is 12.6.

Does that then mean the stock is “over valued” as it’s P/E ratio is 0.2 higher. I mean in the real world, obviously not - but in crazy CFAI lala land who the hell knows.

As I said, I beleive the CFAI would do their utmost to avoid a subjective decision like this - but then where do you draw the line (unless it is explicitly stated in the question that Mr X considers a stock to be mispriced if there is an 5% discrepancy for example).

Is 12.7, 12.8, 12.9 over valued?

Or cost of debt 6.9 vs 6.95 or even 6.91. This will result in millions difference for medium bank not to speak for the large ones.

There should be enough space between the answers.

Besides, by the way questions are set, the other ‘wrong’ answers are actually ‘right’ answers using other methods of calculation, but incorrect to that specific question. This is why you can get an accurate answer for one of the questions judging by the choices, but turn out to be wrong.

Learned friends - there is bigger fish to fry. This won’t matter. I’m happy to write you a call option on the number of questions it will be a problem in. What strike do you want it on?

Haha mate, it’s commonly referred to as “last minute freak outs”… :wink: