CP2 Paper 1 Sept 2022

[Darragh Kelly]

Hi,

I've done my chi-square test a little different to the IFoA's sol. So I did the same in terms of separating into 10 equal bands and worked out the increment to calculate the ranges eg -17.2% to -13.5%, -13.5% to -9.8% etc. When calculating the expected frequency I use the following formula for say the expected frequency from -17.2% to -13.5%: =[(NORM.DIST(-13.5%, 0%, 2.4%, TRUE))-(NORM.DIST(-17.2%, 0%, 2.4%, TRUE))]*2135. Basically the P(-17.2%<X<-13.5%)*total number. I continue this for the rest of the bands. My numbers each time are v similar to the solution just off eg 340.10 vs 341.85 or 1263.35 vs 1262.64 etc. Finally I sum (A-E)^2/E for all bands and check this against =CHIINV(95%, degrees of freedom =band nr-1).

Does my approach seem ok?

Thanks,

Darragh

 

[Sarah Byrne]

Hi Darragh

Your approach seems reasonable to me and would have been fine in the exam.

Worth noting here that you didn't have to do a chi-square test, producing a graph of the returns or comparing mean/standard deviation of the data and the proposed distribution would have scored the same marks. Your method was fine (and in other questions you may have to do a chi-square test so definitely worth being really familiar with these), just if you found it tricky other approaches were possible here

Have a look at the marking schedule in the Examiners' Report for more details.

Thanks
Sarah

 

[Darragh Kelly]

Thanks for your help on this.

Darragh