# Domestic return shortcut

Just posted this on another thread, but figured I’d also post a new topic: At the schweser 3 day the prof showed us a great shortcut to calc the domestic return…just chain link the local and spot returns. For example, if you had a 6% local gain, and the currency appreciated 5.66%, domestic return would be 12%: (1.0566 * 1.06 = 1.12)-1 = 12% same as .056 + .06 + .056(.06)=12% - granted that’s not too hard either, but this is a good double check at least.

Good one!

Cool. Thanks I always use this one: R(g) + R©[1 + R(g)]

i wonder why they didn’t just tell us to chain link them in the first place?

because the first formula separates the return into components - which in my opinion is easier to understand

There is a question in CFAI mock or sample exam. If you use this approach, even though more appropriate, you got the wrong answer. If you use CFAI’s published shortcut, you got the correct one. So …

CFAMonster Wrote: ------------------------------------------------------- > There is a question in CFAI mock or sample exam. > If you use this approach, even though more > appropriate, you got the wrong answer. If you use > CFAI’s published shortcut, you got the correct > one. So … Please elaborate w/ actual calcs.

It is the same formula though so you should get the correct answer. (1 + Rg)(1 + Rc) - 1 = 1 + Rc + Rg +RgRc -1 =Rc + Rg + RgRc = Rg + Rc(1 + Rg) So it shouldnt matter which one you use, as long as it is intuitive for you to remember. CFAI sometimes drops the crossproduct though on the grounds that it is usally small