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Prospective and Retrospective loan valuing

R

RichardBlower

Member
Hello,
Can anyone confirm whether the method you use to calculate the remaining capital, for instance, matters? I often get different answers to those provided in solutions and this is because I favour the retrospective method whereas the solutions use the prospective method. If I get a slightly different answer in the exam because of this will I be marked incorrectly?
For example, question 2.20 part 2 of the q&a bank gives 83759.97 as the answer but I get 83760.62 and for part 3 of the same question I get 82269.63 as the remaining capital at the end of the 5th year but the solution gives 82269.02.
Many thanks.
Richard
 
no it doesn't matter - as long as you do it correctly you'll be fine. Accuracy to around 4 or 5 significant figures is fine. If you round the repayment to the nearest pence then the methods can soon drift apart over many months and years.
 
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