标题: calculation logic for the Tree Diagram [打印本页] 作者: toocfatoo 时间: 2011-7-13 14:58 标题: calculation logic for the Tree Diagram
I understand the purpose for creating a tree diagram, but I am unclear about how the numbers are derived.
I am unable to paste the diagram here, but one can be viewed either on page 338 (Reading 8- Figure 2 BankCorp's Forecasted EPS) on the CFAI book or page 202 (Reading 8: Figure 3: A Tree Diagram) on the Schweser book.
Question: how are the forecasted EPS numbers (total of 4) on the right derived from the one expected EPS on the left?
Steps for the calculations would help....thanks!作者: sdada 时间: 2011-7-13 14:58
You'll have to gimme some time on this one.. I dont have the text on me right now作者: bapswarrior 时间: 2011-7-13 14:58
From your question, I think you are wondering how the 4 EPS figures are derived, not how the associated probabilities are calculated.
The four EPS figures (e.g. $2.60, $2.45 etc on pg 338 of the TB) are just assumptions. They are not deriving them. What they are deriving is the probability of each of the 4 possible EPS actually occurring. For example, the probability of an EPS of $2.60 is 0.60*0.25 = 0.15作者: kamara5 时间: 2011-7-13 14:59
Thank you Beat The CFA.
Your explanation makes sense to me. Just to confirm my understanding though the 4 EPS on the right could then be any number as long as the percentage total (prob * EPS) adds up to $2.34? And I suppose the logic they are using for their artificial number from highest of $2.60 to low of $2.00 is purely based on the circumstantial change of interest rates - declining interest rates triggering a possible initial boom in the economy and the stable interest rates possibly causing the economy to cool down...作者: JPSem 时间: 2011-7-13 14:59
I think you've got it.
The total all of the four PROBABILITIES on the right should equal 1 (0.15+0.45+0.24+0.16).
The EPS numbers just illustrate how the company's earnings would be affected by the different interest rate scenarios.
