Hi, How do they get the $1,209 for the value of the fund at December 2007 for monthly investment of £100?
If you invest £100 per month into the fund at the quoted unit prices you end up with 7.12 units, each worth £169.85, ie a total of £1209.
Hi, How is this different to the second question whose solution shows the growth of 100 punds every month to be $1,217 at the end of 31 December 2007?
Question 2 assumes the first payment is made one month earlier, hence the slight difference. Either approach would be acceptable as the key message is the same either way.
Hi, Sorry, but how do we know that the first question has monthly payments one month earlier than the second question? I know you said that it doesn't matter, but I would still like to clarify. The second question talks about payments being made at the start of each month in 2007. So if you say that the payments for question 1 are made one month earlier (than in question 2), then this means that the payments are being made at the end of each month of 2007? How do we know this? Thanks
No problem. We don't know. In Q1 we are told that payments start in January. In Q2 it is up to us what period we choose to illustrate our point. You will have gained marks for any sensible example showing the relative performance of the two funds. Unfortunately you will not always be given perfect information or told exactly what you need to do in the exam. Being able to choose the right data and make some sensible assumptions in order to support an argument is one of the key skills you need to demonstrate in CA3.
