A Discounting Shortcut for your CII R02 Exam

Previously, we looked at compounding and a shortcut to working it out on a manual calculator – in this article, we’ll cover discounting.  This comes up in CII R02, AF4 and J10.

A newer version of this article can be found here.

Let’s continue with our investor, Georgia:

Georgia made an investment 5 years ago which has grown by 5% per annum and is now worth £12,763.  How much did she originally invest?

As we said last week, you can, of course, use your scientific calculator but if, like many of us, you just have your manual, there are just four easy steps to remember:

Step 1 = enter the future value of £12,763 into your calculator.
Step 2 = press (divide) once or twice depending on your calculator (experiment to see what works).
Step 3 = enter interest rate as a decimal plus 1 – ie 1.05.
Step 4 = press the = button the number of times that matches the number of time periods  ie 5.
The answer is £10,000.

Grab the resources you need!

If you’re studying for your CII R02 exam, and you’re worried about 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!

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

Over to You…

Did you find this helpful? Let us know in the comments!