Hello tutors, I hope you are doing fine. I want to understand how in the answers did the solutions arrive to calculate whether the reserves are keeping pace with inflation.
Hi Darshan Thank you for your post, can I just check the reference you've given ... can you point out which bit in solution of this Mock is causing particular issue. This Mock is really about TWRR vs MWRR rather than reserving? Many thanks Helen
Hi Helen, Thanks for your prompt reply. I am sorry, it was with reference to Mock 1 rather than Mock 2.
Hi Darshan That's fine. We need to work out the cumulative impact of inflation over the period: So for first year = (1.02)*(1.017)-1= 3.73% and then carrying that forward ... for the second year = (1.0373)*(1.015) -1 = 5.28% ... etc until for the last year (1.072)*(1.007) -1 =7.95%
