Hello! I have 2 formulas that give me the same result but I do not understand why. I want to understand why. I'll use the names of the values that are used in my problem First formula: X = [1 - ((Cost Rate) * (FX Rate) * (EIR/IPR))] Second formula: X = [1 - (((Cost Rate} * (FX Rate) * (EIR)) / (IPR))] Values: - Cost Rate = 100 - FX Rate = 3 - EIR = 2.5 - IPR = 325.25 Both formulas result in - 1.3059 I am mainly confused because in the first formula, only EIR is divided by IPR and then that result is multiplied by cost rate and fx rate. However in the second formula, cost rate, fx rate AND EIR are multiplied and then that entire value is divided by IPR.
Hello! I have 2 formulas that give me the same result but I do not understand why. I want to understand why. I'll use the names of the values that are used in my problem First formula: X = [1 - ((Cost Rate) * (FX Rate) * (EIR/IPR))] Second formula: X = [1 - (((Cost Rate} * (FX Rate) * (EIR)) / (IPR))] Values: - Cost Rate = 100 - FX Rate = 3 - EIR = 2.5 - IPR = 325.25 Both formulas result in - 1.3059 I am mainly confused because in the first formula, only EIR is divided by IPR and then that result is multiplied by cost rate and fx rate. However in the second formula, cost rate, fx rate AND EIR are multiplied and then that entire value is divided by IPR.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Hello! I have 2 formulas that give me the same result but I do not understand why. I want to understand why. I'll use the names of the values that are used in my problem
First formula: X = [1 - ((Cost Rate) * (FX Rate) * (EIR/IPR))]
Second formula: X = [1 - (((Cost Rate} * (FX Rate) * (EIR)) / (IPR))]
Values:
- Cost Rate = 100
- FX Rate = 3
- EIR = 2.5
- IPR = 325.25
Both formulas result in - 1.3059
I am mainly confused because in the first formula, only EIR is divided by IPR and then that result is multiplied by cost rate and fx rate. However in the second formula, cost rate, fx rate AND EIR are multiplied and then that entire value is divided by IPR.
Thank you for your help.
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