Hello there,
I have a question about the cost of bonus (500) and the 10% transfer from the WP fund to the NP fund.
The question says that this transfer isn't allowed for in the asset figures quoted (50k and 45k).
In the solvency ratio part of the solution it says that:
assets = assets in WP fund + assets in NP fund
= 45,000 + 50,000 = 90,000
But should it not be:
assets = assets in WP fund + assets in NP fund
= (45,000 - 10%*500) + (50,000 + 10%*500)
I appreciate that this makes no difference to the asset value (90,000) calculated but I just want to be sure I'm not missing anything.
As it is presented in the solution, when we calculate the EV as:
EV = PVFP + NA + Transfer
= 21,000 + 5,000 + 50
It seems like the 50 is allowed for somewhere but there's not an equal and opposite allowance elsewhere - i.e., it's made from 'thin-air'.
Thanks,
Matt
I have a question about the cost of bonus (500) and the 10% transfer from the WP fund to the NP fund.
The question says that this transfer isn't allowed for in the asset figures quoted (50k and 45k).
In the solvency ratio part of the solution it says that:
assets = assets in WP fund + assets in NP fund
= 45,000 + 50,000 = 90,000
But should it not be:
assets = assets in WP fund + assets in NP fund
= (45,000 - 10%*500) + (50,000 + 10%*500)
I appreciate that this makes no difference to the asset value (90,000) calculated but I just want to be sure I'm not missing anything.
As it is presented in the solution, when we calculate the EV as:
EV = PVFP + NA + Transfer
= 21,000 + 5,000 + 50
It seems like the 50 is allowed for somewhere but there's not an equal and opposite allowance elsewhere - i.e., it's made from 'thin-air'.
Thanks,
Matt