Table 87, ACF Calculation
In this table, why do Sch. BA Assets in the Equity section have a charge of .05? Shouldn't that be .2?
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In this table, why do Sch. BA Assets in the Equity section have a charge of .05? Shouldn't that be .2?
Comments
I don't think so. What made you think it's 0.2 rather than 0.05?
Per the source (pg. 255 in the Odomirok text), the charge for Sch. BA Assets is: "0.200 times the book value for other long-term invested assets (Annual Statement Schedule BA assets) other than collateral loans"
Ok, I see. That was very observant of you. There is definitely an inconsistency with the source text. I checked the Errata for Odomirok and they don't mention this. Also, the value of the BA assets in table 87 is 0, so you can't check the calculation because the additional RBC charge would be 0 whether the factor is 0.05 or 0.2.
So there is no way to know which is correct using just the source text. If you really wanted to, you could probably locate that information online which might be an interesting side project. I think however they should provide the factors within the exam question. I know that one year they didn't and you had to have memorized the factors, which I thought was really unfair. If they did that again, they should accept either 0.05 or 0.2, provided the graders are aware of the discrepancy. In that case, I would recommend sending an email to the CAS notifying them of a defective question.