Hi, I have some doubts about 08 AM Question 4, is there anybody can help me? The guideline answer to PART A shows, ‘Given Thurlow’s return requirement of 9.4%…’. In the passage, it shows ‘Earn an average annual return of 8.7% plus management and administration fees of 0.7%’. My question is, is it required to use 8.7%+0.7% = 9.4% to calculate the return? Is it okay to use 1.087*1.007 - 1 = 9.46% to calculate it? Why?(The Guideline Answer didn’t show this calculation, so i think it may be wrong to use the multiply, but not sure) . Thank you.
Both way shall be OK.