To avoid doing meaningless calculation, ask why you are doing it
By MUNGAI KIHANYA
The Sunday Nation
Nairobi,
13 October 2019
I normally write this
article on Wednesday so, for me, this is a prediction: Eliud Kipchoge
will ran the marathon distance in under two hours. By the time you read
this, we will have known for sure if he did…
I saw a calculation
on the internet purporting to prove that the 1:59 challenge is
impossible. It was done by a person named Collins Otieno and he argued
as follows:
42km is equal to
42,000 metres; 1h59m is 7,140 seconds. Therefore, to beat the challenge,
Eliud Kipchoge needs to maintain an average speed of about 5.8 meters
per second. From this, Collins hinted that it is a “mission impossible”.
The calculations are
correct, but the conclusion is far-fetched, to say the least! Collins
does not know anything about Eliud Kipchoge’s marathon history,
including two very recent facts. First; that he is the current world
record holder having finished the Berlin event in September last year in
2h:1m:39s. Second; that, in May 2017, Eliud missed the 2-hour barrier by
just 25 seconds.
This is a good
illustration of how not to use numbers. It is not right to simply punch
them into the calculator with giving due consideration to what they
represent and what they mean.
Two hours is
equivalent to 7,200 seconds. In his last attempt to break this barrier,
Eliud ran 42km in 7,225. So, this time round, he needs to up his
performance by just 0.346 per cent. That’s why I am very confident that
he has done it.
****
Then he says, if you
invest Sh10,000 at this price, you will get 9,606 units instead of
10,000. He subtracts these numbers and finds that Sh394 is “forfeited”.
He then goes through
some unexplained calculations and finds that the interest earned in the
secondary market is 9.606 per cent. Notice the resemblance of these
digits to the 9,606 units purchased.
In a secondary
calculation, the person finds that the forfeited Sh394 is 3.94 per cent
of Sh10,000. He then subtracts 3.94 from the 10 per cent rate of the
bond and finds 6.06 percent; which he concludes is the interest rate for
the secondary bond.
His question,
therefore, is: which of the two calculations is correct? The one that
yields 9.606 or the one that gives 6.06?
When this landed on
my screen, my immediate answer was that both calculations are wrong, for
the simple reason that none of them takes account of the duration that
the secondary buyer will hold the bond.
The secondary price
of M-Akiba increases each day because the buyer will hold it for one
less day. The maturity date is fixed, so any calculation of interest
rate must include the number of days remaining.
 |
 |