# sample exam 2 q21

why did they use 360 days (instead of 365 days) for compounding???

Let me rephrase my question. For this question, the effective annual rate: [(60,000,000+2,400,000)/(60,031,050)]^(360/180) - 1 = 8.05%. My question is why do we raise it to the power of ^(360/180) and not ^(365/180)? I remember in calculating the effective annual rate for an interest rate call and/or interest rate put, Schweser raised it to the power of ^(365/180). How do we get a hang on the convention here? Thanks.

We should be ideally using 365 here…

LaGrandeFinale Wrote: ------------------------------------------------------- > We should be ideally using 365 here… Thanks. Are you there’s a typo on the Sample Exam answer key? I hope this is the case.

It’s definitely a 365-day year convention for the EAR (at least, converting to an annual rate step). I think whatever you’re reading is wrong.

Don’t quote me on it, but I would 100% use 365 on the exam.

I am surprised no one had this question when reviewing the Sample Test.

There is another mistake in that Sample 2. The guideline answer for the GIPS problem show - Sales proceeds for the RE return one. The actually math is correct, but in their picture of the equation it is wrong. I honestly doubt CFAI would make the answers so close that that you wouldn’t feel comfortable choosing the close answer. This really pisses me off how many mistakes keep popping up in the CBOK and samples.

Sponge_Bob_CFA Wrote: ------------------------------------------------------- > There is another mistake in that Sample 2. The > guideline answer for the GIPS problem show - Sales > proceeds for the RE return one. The actually math > is correct, but in their picture of the equation > it is wrong. I honestly doubt CFAI would make the > answers so close that that you wouldn’t feel > comfortable choosing the close answer. > > This really pisses me off how many mistakes keep > popping up in the CBOK and samples. Math isn’t correct too. Capital return should be 15,8%, not "-15,8%’.