Company will see revenue growth that is 10% faster than U.S. output growth (2%)

CFA Level II Equities
#1

Does this mean

  • 2% + 10% = 12% OR

  • (2%)*(1+10%) = 2.2% ?

#2

10% faster than output growth of 2% = your second one… ie, 0.02 * 1.1 = 2.2% revenue growth

#3

Isn’t any calculation example over there in the book?

I don’t know why but I think the question is meaning a 12% revenue growth (2% + 10%). Check it again please.

#4

Depending on the question, you can see both. In your example, the forecast is in relative terms. If GDP is expected to grow at 2%, and the company’s revenue is expected to grow at a 10% faster rate, the the forecasted percent change in revenue would be = .02(1.1) = .022 or 2.2%. Growth can also be quoted in absolute terms, the language would be something like the company’s revenue is expected to grow 20 basis points above the nominal GDP growth rate, or 0.2 percentage points above the nominal GDP growth rate.

You have to look at the wording… can be tricky.