the infamous 2.4 payback period!

CFA Level I
#21

Yes but if a payback period is 0.4 this doesn’t mean its was paidback in 0 years, it means that it was paidback during the first year. Same logic for 2.4 Milos

#22

still disagree - the question clearly says closest and if an investment is recovered in two months, its neither zero nor 1 year. is simply 2 months

#23

Agree, that was my logic too. I was confused with “closest to”. Milos

#24

this question is really making me throw up in my mouth:)

#25

if the question asked, which year was the payback year - should be 3 if it asked, which year is the closest one - should be 2… i think the question was asked in the second way

#26

given 2.4 i will also round down. “closest to” … is the key

#27

they probably wanted 3 - you havent paid the full amoutn back in 2 years. Based on the answers, the FULL payback would occur in year 3

#28

I rounded down… hope I’m right.

#29

i also chose 3, 4. i re-read the question and it said closest…but the point of payback is when you get it back…so i rounded up.

#30

yeah man what the… i used 2, 3. it sure maked absolute sense to me in the exam. and now after reading this, i feel torn…

#31

I still think 2,3 is correct…if the question had said “in which year is the outlay paid back” it would be a different story

#32

I too looked at it from the “closest to” perspective and marked 2 and 3. I felt it was pretty stupid to ask one to round down 2.4 to 2. 2.01, 1.97 to 2 seems like normal mathematics. 2.4 to 2 sounds pretty retarded! If they wanted one to know the concept of PB and DPB, why should they bother checking whether the person knows what “closest to” means. I mean, I cant go to the CEO and tell “hey dude, the PB of my project is closest to 2”

#33

I picked 2 3, makes sense to me

#34

I remember going back and forth on this. I think they said “closest to” so ended up picking 2 3. It better be right.

#35

Is there anyway to write in and complain about questions? This question was simply ridiculous and everyone knew how to calculate what the question was asking for but nobody could decide on an answer because of how the question was worded.

#36

the way it was worded to me clearly meant 2 and 3. the payback period is closest to 2. the discounted payback period is closest to 3. period. conceptually, however, 3 and 4 makes sense as the years in which recovery of the initial investment takes place.

#37

Are we allowed to talk about “specific” questions? -_-

#38

Another interpretation which makes sense for this kind of a measure is to ask: "in about how many years do you recover your initial capital? Clearly, 2, and 3 are justifiable answers. So, I think CFAI are in trouble if they choose one way or another for this question, because it can clearly be interpreted in more than one logical way.