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Hi Oliver, personally, I think either approach would generally be considered to be reasonable. The different methods of calculation are explored...

Hi Oliver As a broad principle I think it is always good to see what can be done with numbers given in the question because it may gain credit....

Hi Greg This is a challenging question. I tackled it this way: We are told in the question that the marginal propensity to consume goods and...

Hi Greg Broadly speaking, a dominant strategy for a firm is one which is the best response, no matter what its rivals do. So, if we think about...

Hi Dominic Some parts of this question rely on quite a lot of UK specific detail, some of which has been removed from the Core Reading. In...

Hi Ben I think the issues mentioned in Justine's post of February 2023 still look very relevant. We've seen developments in some of these areas...

Acronyms of Subject SP4 material for the 2024 exams are attached to this post. Although these can be useful for your studies do pay careful...

Hi That (1.015/1.026)^15 is not a basis change, it is to allow for the fact that, in the question, we are told those who accept the TV offer are,...

Hi At the time of the Sept 2021 exam, the Core Reading didn't specify how plan events should be treated for accounting purposes. Therefore, we...

Hi, I think Justine's post from February still looks pretty current, but it would be good to hear other people's thoughts, eg any other topical...

Hi In summary, when we roll forward accrued liabilities, the pension increases or salary increases are already in the liability figure, so we...

Hi Ben I agree that a commutation factor is essentially the present value of £1 pa of pension given up, ie an annuity. The annuity is going to...

Hi Thomas Yes the liabilities for DPs and pensioners should be the same under each funding method. In the approximate formulae you have given,...

Hi Dominic I think that inter-generational fairness between members is an issue that needs to be considered in many DB pensions schemes, whether...

Hi Just to add to a.begdai’s post (thank you for that!) An early retirement pension can be calculated by multiplying the pension projected to...

Hi, thanks for your post, I'm glad you find the cross reference grid in ASET useful. However, the grid in the current ASET covers the last 10...

Hi Dom Good question! Part (i) asks us for the actuarial gain / loss over the intervaluation period in relation to active member liabilities....

Hi I think 'do nothing' could be considered in both part (i) and (ii). In each case, I would want to talk about what might make this...

Hi I think the Examiners Report (and the solution in ASET) focuses on higher level actions or issues, eg the need to review the investment and...

Acronyms of Subject SP4 material for the 2023 exams are attached to this post. Although these can be useful for your studies do pay careful...

Hi there, although sources of surplus and analysis of experience is covered in SP4 (Chapters 20 and 21), full analysis of experience including the...

Hi lyndon46 I don't think you've done anything wrong here, arguably you've taken a more accurate approach than ASET I think you've essentially...

Hi, Colin's not working at present, but I think you are on the right lines here. Gap analysis looks at the difference between the level of...

Hi AGB, apologies for the delay in reply. I think the topics in Justine's two most recent posts continue to capture current issues very well. In...

Hi Irwin Collective DC schemes (CDC schemes) are a form of risk-sharing arrangement. In the UK, legislation has only recently come into force to...

Hi Lucy, hopefully others with more practical experience in this area will contribute their thoughts. But I think trustees of a DB pension scheme...

Hi Lucy, I think it would be unusual for a scheme to allow pensioners to transfer out whenever they wished because it would expose the scheme to...

Hi Lucy Someone with more practical experience may be able to provide further information, but I reckon you are on the right lines here. Process...

Hi Lucy There are different ways of doing analysis of surplus calcs, but I don't think you can use the 65m actual benefit outgo to assess the...

Hi Bharti Yes, when people talk about an age-related contribution rate, they are saying that the contribution rate (as a percentage of the...

Hi Bharti This point answers the other element of the question, ie to outline other restrictions likely to be applied to early retirement...

A key reason for the differences in the solutions is differences in the questions. For example, in the Ch 6 question we are told that the DC...

Hi Bharti [To anyone viewing this thread: these posts relate to X1.4 in the 2021 X Assignments. The question and solution have been updated in...

Hi Bharti The two questions are worth similar numbers of marks, but Q13.2 doesn't contain much information so we need to be quite high-level....

Hi Bharti Re the assignment question: I don't think we've seen an SP4 exam question using this term recently, but I would expect you to be able...

Hi Bharti I think you are looking at the assignments for the 2021 exams here (or possibly earlier)? I agree that if I were asked to "outline...

Acronyms of Subject SP4 material for the 2022 exams are attached to this post. Although these can be useful for your studies do pay careful...

Hi Bharti The 'maturity' of a scheme refers to the proportion of the scheme's liabilities that are pensioners. So an immature scheme has a...

Hi! I can't give a definitive answer to this question, but maybe someone with more experience of wind ups will be able to confirm or correct my...

Thanks Rajat! RACING CAR is a good example of an acronym of SP4 material that, as you say, is useful for SA4. I'd encourage anyone sitting SA4 to...

Hi Rebecca, the bottom row of the big table in the question gives the PV of total current salaries as £0.5m. In the calculations we divide this...

Hi Mayowa The Core Reading here is referring primarily to the statutory priority order that may apply when a scheme starts to wind up. For...

Hi Rajat Please accept my apologies, this section of the solution appears to be inconsistent with the current question. Thank you for bringing...

Hi Rajat Apologies, there is an error in the question / solution to this question. A correction can be found in our corrections document here:...

Hi Helen, one additional thought to add to this discussion: Do you know anyone else who is sitting SP4 this session? If so, I recommend forming a...

Hi Bharti, I'd use the definition on p471 of the textbook, writing it in my own words.

Hi Bharti I think 'change in demand' as a cause of structural unemployment is referring to a change in demand for the products of a particular...

Crowding out arises when an increase in government spending leads to an increase in interest rates, which in turn results in a decrease in...

Each time a bank receives deposits from savers it holds a proportion as a reserve and loans the rest of the deposit out to borrowers. By doing so...

We need to use the Aggregate Demand-Aggregate Supply (AD-AS) model here. The aggregate demand schedule is plotted on a graph of price vs national...

Hi ominming A monopoly typically faces a downward-sloping demand curve (due to the law of diminishing marginal utility). This means that it...

Hi Shreyansh The wording of this question is slightly ambiguous. I think the examiners intended candidates to state the elasticity of the demand...

Hi ominming This is covered in detail in ASET, however in summary, a sales tax can be represented by an upward shift in the supply curve. In this...

Hi Rajat Pension fund trustees or scheme managers will often be prepared to take more risk in the scheme's investment strategy with assets that...

Hi Mukul, thanks for raising this. I think the sentence "The amount of pension commuted will increase when interest rates are high" is assuming...

Yes, I think it could do. Eg there could be a situation where the payoff from an option is based on an index and that index might not give you...

Hi Pxliang Injections and withdrawals; this terminology is normally used in the context of the circular flow of income model where I, G and X are...

Hi Justin I would not expect you to have to produce a graph in your answer booklet / MS Word doc. The IFoA's frequently asked questions page on...

Hi Yogesh Although basis risk and cross hedging risk are described in Chapter 12 in the context of futures, you are right that they may be...

Hi Pxliang if the price elasticity of demand is -1 throughout the length of the curve, then the demand curve will be a rectangular hyperbola and...

Hi, I think you have done the hard work here I agree with 5.4/1.055 + 105.4/(1+x)^2 = 100 So, 105.4/(1+x)^2 = 100 - 5.4/1.055 = 105.4/(1+x)^2 =...

Hi Batsirai I've struggled to find information on this, but I think FTSE UK indices are calculated and quoted in two different currencies - GBP...

Hi Subject SP5 builds on material covered in earlier subjects such as subjects CB1 and CP1 and so in theory material covered in these earlier...

I haven't seen m(any) past exam questions on instantaneous forward rates, but I think that is a reasonable approach, which attempts to use a...

As a fund manager, one reason for being sacked is if you underperform your peers. So, arguably, fund managers may be concerned about their job...

Hi Yogesh, I haven't looked at the underlying research, but I think that Core Reading statement could well be correct. If sentiment is low,...

Hi Yogesh So one example might be where a company has several divisions, each in a different country and each performing a different role. Eg...

Hi Yogesh Did you mean Q12.3 (v)? I don't think these solutions are contradictory. Neither question contains sufficient information to use the...

The current Core Reading calls it the primary effect, so I would go for that term in the exam. The term 'primacy' is also used in other...

Hi, I'm glad that helped I think X Assignment question X3.3 is a good one about swaps to have a go at. I suspect the examiners would have given...

Hi, this is a difficult exam question! Taking your queries in order: 1) 1/2 year interest rate = number of days in period / 360 x annual forward...

I think the examiners are simply saying increase the returns on the money ChocCo invests. Eg imagine the US Co costs $1,000m and produces a...

Hi Yogesh I don't believe small stocks are the same as value stocks. As you say, small stocks are mentioned on p14 of Chapter 7. The Core...

Hi The question tells us this is a global equity fund ie it selects from and invests in stocks around the world. The examiners answer to part...

Crossing is a process whereby a large institution (eg an investment bank) that has many large clients (eg fund managers), talks to a selection of...

Hi Yogesh Re Q1: I agree that if bond yields fall the price of the bonds will rise. However, investor B may still wish to hedge risk eg because,...

Hi Yogesh I agree they do seem similar. I think different texts explain these biases in different ways but my take on these biases is as follows:...

Yes, the delta of a put option is negative (as the price of the underlying asset falls, a put option becomes more valuable)

Hi Batsirai I suspect a wide range of approaches are possible here. But in essence, risk budgeting allows you to to take a holistic view of risk...

H Himagg, we (ActEd) recommend that you use the approach on pages 16-17, ie with a notional fund based on the actual sector split and benchmark...

A simple formula which may help is that the bank deposits multiplier = 1/ liquidity ratio (page 574)

An increase in prices will increase the demand for money under the transactions motive (people need more money to buy the same things)

The money multiplier and bank deposits multiplier are described in detail on pages 574-578 of the textbook

Recall that firms in perfect comp are price takers, they can't choose to increase or decrease price. Eg if price increases it is because firms...

If firms expect prices to rise in future, they are likely to reduce supply now in order to be able to supply more later, at the higher price. So...

We don't know the impact of imposing the price floor eg if the % change in price is greater than the % reduction in quantity sold then producers'...

Hi I don't have any practical experience of this I'm afraid so I'm hoping that someone else will be willing to contribute. However, thinking...

For Fund A The individual annual returns for the fund are: 5%, 10% and 0.6536% giving an annualised return of 5.15%, and the benchmark returns...

Hi Nimisha Personally I can see rationales for using either the close of Day 1 or close of Day 2 index figures as the denominator. You are...

Sorry Brian, I'm struggling to see exactly what you are asking here. It sounds as though you understand what the examiners have done and so,...

MWRR calc for Fund A: 100 x 133/100 + 8 x 133/90 + 5 x 133/114 + 2 = 152.656

Hi Nimisha TWRR: This is considered in detail in ASET We are given unit prices: the price of a unitised fund will automatically give us a time...

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Actual money invested: We are told in the question that the money is invested in line with the benchmark, which is 10% in dom eq and 25% in o/s...

Hi Nimisha / Rebecca We have to work at sector level - consider the benchmark allocations/returns and actual allocations/returns for each sector...

The futures position was taken to hedge a risk and the risk disappears once the coffee is sold, so at that point the position can be closed out

Hi dimitris13 This is just because we are told in the question (just before part (iv) that the spot price in two months' time turns out to be...