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Use this Compounding Shortcut to Help with the CII R02 Exam

Use this Compounding Shortcut to Help with the CII R02 Exam

If you are taking R02 and struggling with Chapter 4  (equally helpful for AF4), then here’s a short cut for compounding you may or may not be aware of.

A newer version of this article can be found here.

Question:

Georgia invests £10,000.  The investment grows at 5% per annum.  How much is it worth after 5 years?

This is a very common exam question.  You can, of course, use your scientific calculator – if you have one – but if, like a lot of us, you just have your old faithful manual one, here’s four easy steps to working this through:

Step 1 = enter the interest rate as a decimal plus 1 – so 1.05.
Step 2 = press the multiplication key (once or twice depending on your calculator, you will need to experiment).
Step 3 = enter present value £10,000.
Step 4 = press the = button the number of times that matches the number of time periods.
The answer is £12,763.

Chapter 4 may only be worth a few points in R02, but why not ensure you get them by using this quick method?

Grab the resources you need!

If you’re studying for your CII R02 exam, and you’re wondering how you’ll manage to pull off a pass on exam day, grab our free taster to try out one of Brand Financial Training’s mock exam papers for yourself.  Click the link to download the R02 mock exam taster now!

Click here to download our free taster mock paper for CII R02

Alternatively, you can download the taster for AF4 if that exam is causing you to worry.

Over to You…

Do you have any tips or shortcuts to share?

 

3 Comments

  1. Dan 2 years ago

    Do you know which financial calculators may be permitted in the R02 exam? I use a Texas Instruments BAII Plus which is permitted in CFA exams and wanted to know if this is okay?

  2. Author
    Catriona Standingford 2 years ago

    Hi Dan,

    The CII’s FAQ page has an entry with regards calculators at http://www.cii.co.uk/about/faqs/exams/

    I hope that helps!

    Catriona.

  3. Todd 2 years ago

    Wow, extremely useful. This is my biggest concern with this exam as calculations can make my head hurt. I shall definitely be using this one!

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