🔎 Rounding Intermediate Calculations

🙋 If a question says that we should round a preliminary result when we enter it, should we use the rounded version or the unrounded version if we use the same number to calculate other answers. My inclination is to not round intermediate calculations and instead to use all decimal points but I wanted to verify that my interpretation is correct.

✔ You are correct! Rounding intermediate calculations decreases the accuracy of your answer, so you should never do it in Bruce’s classes.

In Finance, precision is important, so it’s important to have the most accurate number that you can. As an illustration, a friend works for a bank that had multi-million dollar finds for rounding error type discrepancies in the fees it charged its customers. The PR damage from the press coverage likely was valued by management as more of a problem than the monetary finds.

Connect does allow for a small amount of rounding error, but rounding an intermediate calculation to just two digits can introduce a significant amount of rounding error, so you will want to avoid it. I generally do my calculations in a spreadsheet using cell references to avoid rounding error, but if I do any calculations on paper, I generally write out intermediate numbers to at least 4 digits.