When I need to enter formula values, which are given in percentage(e.g. 3%), I always almost enter them in decimal (e.g. 0.03), which has worked but I do feel that at times I can just enter values in percentages and dont have to do the extra effort of first converting the input values to decimal and then convert the answer back to percentage.
Is there a rule of thumb, when we should enter values in formula in percentage vs decimal?
sorry to disagree. you are right in most places it makes no difference.
but there is one formula
UA = RA - 0.005 * Risk Aversion Coeff * sigma^2
where sigma has to be as 10 for 10% not 0.1.
I seriously hope that CFAI doesn’t care whether I write my answer as 0.1, 10% or 1000 bps.
Too hard for me to remember when not to use decimals, so I turn the utility formula into:
UA = RA - .5 * Risk Aversion Coeff * sigma^2
would not work …
why don’t you try?
RA=10%, risk coeff = 2, sigma=10
Original = 10 - 0.005 * 2 * 10^2 = 9
Your version = 10 - 0.5 * 2 * 0.1^2 = 9.99
Make the return and sigma decimals.
.1 - (.5 * 2 * .1^2) = .09
Yes , I don’t like the decimals , so mentally convert back and forth .
Only use decimals ( not percentages ) except when enterin I/Y into the BAII Plus
as long as you keep it consistent and hit the right answer i don’t think they will care.
.
+1
You could do any formula in either percents or decimals. They are the same.
incorrect. try H-Model with %. If other numbers in an equation are numerical ie. Price…you must use decimal.