Why I would have failed CA3 Sept 05

Ok so I didn't sit this exam but if I had I probably would have failed!

Yet again I am absolutely astounded by the incompetance shown in the writing of an exam question.

Q1 Sept 2005 - Asks if the 10.6% apr figure is correct. Examiners report says it was correct - reading the question you can probably guess it's correct before you even check it.

One problem though: IT IS NOT CORRECT !

The actual figure is definately 10.5% which I have verified by use of excel s/s:

I = 0.105127849
I(12) / 12 = 0.008364877 Sum = 13500.00

Month X PV
1 477.5 473.54
2 337.5 331.92
3 337.5 329.17
4 337.5 326.44
5 337.5 323.73
6 337.5 321.05
7 337.5 318.38
8 337.5 315.74
9 337.5 313.12
10 337.5 310.53
11 337.5 307.95
12 337.5 305.39
13 337.5 302.86
14 337.5 300.35
15 337.5 297.86
16 337.5 295.39
17 337.5 292.94
18 337.5 290.51
19 337.5 288.10
20 337.5 285.71
21 337.5 283.34
22 337.5 280.99
23 337.5 278.65
24 337.5 276.34
25 337.5 274.05
26 337.5 271.78
27 337.5 269.52
28 337.5 267.29
29 337.5 265.07
30 337.5 262.87
31 337.5 260.69
32 337.5 258.53
33 337.5 256.38
34 337.5 254.26
35 337.5 252.15
36 337.5 250.06
37 337.5 247.98
38 337.5 245.92
39 337.5 243.88
40 337.5 241.86
41 337.5 239.85
42 337.5 237.86
43 337.5 235.89
44 337.5 233.93
45 337.5 231.99
46 337.5 230.07
47 337.5 228.16
48 432.5 289.96


As you can see in order to equate the pv's of the payments to the loan amount you would have needed to charge an apr of 10.5%.

Big deal you may say, it's only 0.1% out. Well I say that it is a big deal! Imagine you are in the exam, you have a very good grasp of compound interest and everytime you do the correct verification (which can be done by an eqn without excel fairly easily) your answer is over £20 out - you may think you were doing something wrong and spend too long trying to work out where you have made a mistake. Only it's not you who's made the mistake, it's the examiner.

So thanks a lot examiner for once again failing to correctly apply one of the most remedial actuarial principles. Thanks a lot

Thanks for writing such a bad question that I have to have an alcoholic drink 2 days before my exam to try and calm down. Please will someone regulate our examiners!!!!

 

On several occasions I've become stumped in an exam as to exactly what was required. The when the report comes out, you think, well if that's what you'd wanted, why didn't you rephrase it so it read [slightly differently] ... And then they say in the examiner's report that it was surprisingly badly answered.

The Acted tutors would be in the ideal position of verifying exam questions, or suggesting minor wording revisions, but they're probably perceived as being too close to the students. Ant then there's the danger that attendees at tutorials might get a clue as to what's on the paper.

Fortunately have this paper though. Good luck.

Let's see what this session brings...

 

this is completely normal and intentional. remember the institute _want_　you to fail! (keeps average salaries high)

 

Good point.