1. 

   Jenil Mehta Made first post

   Hi, in the audit trail for Paper 1 of CP2 April 2022, the formula for estimated total deposit is given as:
   Estimated total deposit = Monthly deposit * 12 * Deposit Term * (1+i)^(Deposit term/2)
   
   Can you please explain the reason for dividing the deposit term by 2.

    

   Jenil Mehta, Sep 4, 2023

   #1
2. 

   Dave Johnson ActEd Tutor Staff Member

   Hi Jenil
   
   The reason for dividing the term by 2 in the approximation is because on average each dollar paid in to the accumulation fund is only invested for half the term. This is because the deposit is paid in regular instalments over the whole term.
   
   Hope that helps.
   
   Dave

    

   Dave Johnson, Sep 4, 2023

   #2

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