CIA MfAD - Discounted LR

StudyStudy
in CIA.MfAD

My question is related to the calculation of InvInc from UPR.
2018 Spring #15b, when calculating the discounted LR for AY 2014, the denominator is EP + InvInc from UPR. Based on my understanding the annual rate needed to calculate the InvInc from UPR should be annual yield of CY2014 instead of CY2017. Does anybody have the clue why they use annual yield of CY 2017?

Comments

  • javidjavid
    edited December 2018

    Good question! I would have to agree with you that if we are calculating the investment income on the UPR for 2014, we should use the investment/yield rate during that year. The CAS actually gives enough information (3rd and 4th triangles) to calculate this yield as

    1855/[(0 + 105986)/2] = 3.5%

    On an exam, to ensure that the CAS follows my steps, I would clearly state that I am using the yield rate for 2014 to calculate the investment income on the UPR.

  • StudyStudy

    Thank you very much, javid. Your explanation is pretty clear.

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