2012 Morning Mock Question #82 however, concerning, understand, all, 2012

ShooterMcCFA

Hi all,
Please help me with this little math concept.
On 2012 Official Mock Morning Question #82 concerning with calculating justified PE.
I understand the whole concept however I dont understand why n = 3 instead of 4.
Compound earning growth = 2.5 (1 + x) ^ 3 = 3.2
Please help me out here.
Tks

Kapie

Nah you’re overthinking it a bit, TVM questions always messed with my head in this regard during univeristy too.  You’ve gotta think of it as Jan. 1 ‘08 to Jan. 1 ‘11, which gives you the three years.

Mechanic

I know that. But base on what you are saying, we are only counting from 2008 to 2010.
The question specifically stating “Over relevant period from 2008 to 2011”, so it actually means from beginning of 2008 to ending 2010?
See, from
beginning 2008 to ending 2008 —-1
beginning 2009 to ending 2009 —-1
beginning 2010 to ending 2010 —-1
beginning 2011 to ending 2011—–1
Total —————————————-4

Colum

Because 2008 to 2009 is one year, 2009 to 2010 is one year, 2010 to 2011 is one year.  All in all that’s 3 years. Hope that makes sense