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Dear Tutor,
In Example 12 of Chapter 15 (THE VALUATION OF SECURITIES –
THEORETICAL APPROACH) in the OpenTuition FM textbook,I used $110.25 (20*4.5*1.07^3) as the conversion value to solve and got $102.7 as the market value of the debt.
The market value of the debt of the solution at the back of the book is $102.51.QUESTION:
If it was a ‘fill in the blank’ MCQ and the instruction was “round to one decimal place” would I get it wrong?NOTE:
If I round my answer to 1dp it will be $102.7
If, however, I round the answer in the textbook to 1dp, it will be $102.5
$102.5 ? $102.7P.S.: This problem is more prevalent in Investment Appraisal when discounting annuities and perpetuities.
Someone once told me that each MCQ of this “type” has a RANGE of CORRECT answers.
I am very oblivious. Please help.Good question
Usually it is a range of answers so something between 102.5 and 102.7 for example
Or 102.45 and 102.75 could be another range.Real exam questions will clearly tell you to one, or two decimal places or another could say rounded to the nearest whole number.
If there is scope for a range of numbers then the answer will accept such a range.Text books are produced by various writers and unfortunately without a standard format of answers. Don’t get too worried about textbook answers please.
I hope this puts your mind at rest.
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