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April 2020 Paper 2

R

rlsrachaellouisesmith

Ton up Member
Good afternoon,

I have just completed my first attempt at a Paper 2.
General questions
Is it normal to find the commentary on results and conclusions the hardest bit to complete?
How would you suggest splitting the time over the Methodology/Commentary on results and conclusions/Next steps?
If we copy a spreadsheet when making updates to the model, is it important to dynamically link any of the cells that are not being changed in the model?

Specific questions
Why is finding the method of adjusting the guarantee charge/level applied to make the expected fund value equal the no guarantee option a way of measuring the value of the guarantee? Intuitively it makes sense but I cannot figure out the mathematical reason this makes sense? Would it have been just as appropriate to adjust the guarantee level for the annual guarantee option or the initial charge for the overall guarantee option?

Thank you,

Rachael
 
Hi Rachel

Yes - many students find the results and conclusions the hardest section!

It's hard to say a definite time split, you may generate ideas for the results and conclusions and next steps as you read the question and look at the spreadsheet. Make sure you capture these ideas when you think of them to try and save some time later. The important thing is to make sure you do everything so that you maximise your score (don't miss the next steps at the expense of the results).

Anything that isn't changed in the model should be left as it is. You shouldn't need to change any links.

It is saying that in order to give the same return as when there is no guarantee (which is higher) the charge would need to be reduced to 1.09%. So, anything taken above that, is acting to reduce the investors return and increase the providers profits (the 'value' of the guarantee). Your alternatives would have been fine, however as we are asked to adjust the charge/level in the question this is what we should use in the solution. There wouldn't be any extra marks for adding more calculations, and these results would be unlikely to score in the marking schedule. If you didn't mention that it was a way of measuring the value, and just discussed the result, that would have been fine (although you would obviously have missed a few available marks).

Sarah
 
Good morning,

I am just reviewing this paper and the modelling completed by a colleague includes use of the function CHISQ.TEST, would we be able to use this if asked to complete a Chi square test?

Thank you
 
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