Hello tutor IN Apr2012,Q1 they say that The Guaranteed annuity amount is calculated for each simulation as the maturity proceeds multiplied by guaranteed annuity rate multiplied by option take up rate. In my view bold part is wrong given in answer. (it should be divided by) According to me, Guarantted annuity amount would be (Maturity proceeds / Guaranteed annuity rate)* Option take up rate Please tell me whether i am right or wrong. (if i am wrong then do explain me with the help of an example)
Hi Kamal Please can you tell me where you saw this comment. I can't see this in the examiners report. If you can give me the source including a page reference that would be helpful. Thanks Mark
Hi Kamal - to save Mark having to find this reference, annuity rates are normally expressed in the form 'amount of annuity you will receive per X fund', where X could be 1 or 1,000 or 100,000 or whatever. The rate might instead be expressed as a %. If the annuity rate is say 5,000 per 100,000 fund, ie the rate is 5% or 0.05, then to get the annuity amount we need to multiply this annuity rate by the available fund.
