- This topic has 4 replies, 3 voices, and was last updated Oct-22 by
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Up1
I have a doubt since the CFAI practice exam and KS notes give a conflicting method. The CFAI suggests the formula is:
Market value of stock – Loan amount / Investor’s own equityThe KS notes suggest:
Market Value of stock – Purchase Price (this numerator is basically capital gain) / Investor’s own equityWhich one is correct?
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Up3
But you get two distinct answers. Since we are subtracting the Market Value of the Stock with only the Loan Amount according to CFAI, the return should be higher this way.
The KS method subtracts Market Value of Stock with the Purchase Price so the return would be higher. -
Up2
It´s both correct and not necessarily different. The first gives the result based upon 1+rate and the second one gives the rate.
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Up0
And which one of the notes it’s better to use: CFAI or KS notes? Or should I take them both into consideration?
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Up0
I’m rather new to the investment market and try to learn as much as possible. It’s not that easy, and I still have Equity Release Bristol to help me with my investments so I don’t commit any grave mistakes. But I need to learn to manage my investments myself. I need to diversify them to ensure I don’t lose everything in case something happens to one of the companies I invested in. it’s my only trust. I need it to be as secure as possible.
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