CT1 – P XS – 13 Series X Solutions ActEd Study Materials: 2013 Examinations Subject CT1 Contents Series X Solutions If you think that any pages are missing from this pack, please contact ActEd’s admin team by email at ActEd@bpp.com. How to use the Series X Solutions Guidance on how and when to use the Series X Solutions is set out in the Study Guide for the 2013 exams.
Important: Copyright Agreement This study material is copyright and is sold for the exclusive use of the purchaser. You may not hire out, lend, give out, sell, store or transmit electronically or photocopy any part of it. You must take care of your material to ensure that it is not used or copied by anybody else. By opening this pack you agree to these conditions. Then the present value of the payments is: 10 1 1 1.08 (2) 2Yv 2 a10| 2Y 12.19154Y . 1.082 d (2)
[1]
where d (2) 2 1 1.08
12
7.5499% . 10, 000 = £820.24 . 12.19154 [1]
Since the investor paid £10,000, Y =
Solution X1.6 A real rate of interest is used when inflation needs to be taken into account. [1]
A money rate of interest is used when inflation does not need to be taken into account. [1] An example for a real rate of interest: A person is saving to go on a round the world trip, which they have calculated will cost £10,000 today. [1] An example for a money rate of interest: A person has a loan of £10,000, which needs to be paid back in full in 5 years’ time. [1] Allow any suitable answers here.
