Sep 2016 Q7 i

Discussion in 'SP5' started by dimitris13, Jan 11, 2020.

  1. dimitris13

    dimitris13 Ton up Member

    hi
    i cannot understand why we put the last table in the solution where we show the value added forvexample equities (0.72) when in the previous table we show for equities 0.07. whta confuses me is that before both tables the solutuon mentions

    " the table shows the value added by sector asset alloc decisions"

    in addition i dont get at which point we are asked to give both tables?
    1st and 2nd bullet table 3 in solution
    4th bullet 2nd table and answer 0.59
    3rd bullet: 4th or 5th table?
     
  2. Colin McKee

    Colin McKee ActEd Tutor Staff Member

    Hi. The question does not ask for a number of tables as such, but ActEd have broken the ASET solution down into a number of tables in order to separate the main areas of sector selection and stock selection.
    The reason the two numbers differ as you say, is because one has been calculated using "method 1" and the other using "method 2". We mention at the start of the solution that there are two ways of approaching this question:
    At this stage in the calculations you can group the asset allocations and returns into three categories: equities, bonds and cash. This will minimise the calculations you need to perform, and is described as Method 1 below.

    Alternatively, you could adopt Method 2, which involves performing calculations for all six asset classes separately and then combining figures at the end. This involves more calculations, which may be more time-consuming in the exam.

    The results of your analysis will be affected by the method you adopt, but we believe either approach would have scored full marks in the exam. Indeed, the Examiners’ Report notes that there were a number of potential solutions and it was possible to gain full marks irrespective of the method used.

    I hope this helps.
     
  3. dimitris13

    dimitris13 Ton up Member

    what i am trying to understand is where the solution ends at revision notes ? i think the last table is not requested from the solution as it has already been answered in the previous one.
     
  4. Colin McKee

    Colin McKee ActEd Tutor Staff Member

    I think the revision notes have accidentally included the final table from method 2 at the end of the solution. The main solution uses method 1, so the final table should not be in there. Well spotted. I will remove this at the next update.
     
    dimitris13 likes this.
  5. dimitris13

    dimitris13 Ton up Member

    thanks. this was my understanding.
     

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