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Hasnain says

Dear sir, why have you taken the interest rate as 0.00014 while calculating the spread? where the interest rate in the question is 5.11%.

John Moffat says

The interest rate is 5.11% per year. We need the interest rate per day, so divide 5.11% by 365. The original examiners question actually also said that the interest rate per day was 0.014% (i.e. 0.00014), although your revision kit may have left out that bit!

rehan1o1 says

Sir, while calculating the contribution why the old figure of sales (6M) is used instead of 6.3M. Clearly when the incremental contribution should be a percentage of the new increased sales?

John Moffat says

Incremental means extra, and the extra contribution is the difference between the contribution on the new sales and the contribution on the old sales!

I don’t understand why you say that the incremental contribution is clearly a % of the new sales – they are already generated a contribution and we need to know the extra.

Kemi says

Why the the $1000 per day standard deviation square? Why are we using 1million in the calculation?

John Moffat says

Because the formula requires the variance, and the variance is the standard deviation squared.

Kemi says

Thank you for the quick reply. Kind reply.

ronkeg says

Too fast start of question but good