transaction costs investment, return, problem, initial, practice

wildrose

CFAI vol 5, pg 37 practice problem 2,3

Initial transaction costs are subtracted from final return, and also added in the initial investment.

Isnt this recounting the transaction cost twice in the calculation?

Can anyone explain this

homie

yep, becos theres two transactions, buying and selling.

lc26mizzou

ahhhh i see what you mean. yes that is very strange, have you checked the errata?

is that exactly what the textbook does by the way?
would make sense if it was taking 100 off the denominator also, that way its like saying yoiu buy 5000 of stock, but 100 is the transaction cost so you only get 4900 worth of stock.