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Sept 2022 - Paper B - Q4(ii)

D

DK2

Member
In the solution for this why does the Profit vector add the bid/offer spread while QX5.10 (Assignment X) doesn't add the bid/offer spread to the non-unit cashflows? Trying to understand when bid/offer spread should be included or excluded from the profit vector calculations.

Thanks in advance!
 
Hi,

I think you've highlighted the wrong question here. There was no Q4 on September 2022 Paper B.

Could you recheck and get back to me?

Thanks
Joe
 
Hi,

It looks like in Paper B Sept 2021 Q4(ii), the bid-offer spread is treated separately (ie it has it's own column). Whereas in Assignment X5.10, it is combined with the allocation rate and hence included within the 'Cost of allocation' and hence 'Premium less cost of allocation' columns. So it is being used for the calculation in both questions, but it is just presented slightly differently.

I hope this helps,
Richie
 
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