Sandy Hood - Wrong Reference to APR
RichardK
Registered Posts: 107 Dedicated contributor 🦉
To those that have looked at the Cash Discount thread by RowanB and I.
Sandy has quoted that our reference to Rowans "annualised interest rate" is incorrect.
In fact this is not the case.
We were referring to the the "Nominal APR" which is the simple-interest rate (for a year).
There is also an annualised rate based on compounded interest which she referred to. However, they are not the same.
There are two types of annualised interest:
1. Based on simple interest also known as Nominal APR
2. Based on compounded interest known as Effective APR
Sandy we would appreciate if you research your opinions in future.
Regards
Richard
Sandy has quoted that our reference to Rowans "annualised interest rate" is incorrect.
In fact this is not the case.
We were referring to the the "Nominal APR" which is the simple-interest rate (for a year).
There is also an annualised rate based on compounded interest which she referred to. However, they are not the same.
There are two types of annualised interest:
1. Based on simple interest also known as Nominal APR
2. Based on compounded interest known as Effective APR
Sandy we would appreciate if you research your opinions in future.
Regards
Richard
0
Comments
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Thank you
The way you describe would be marked correct on the CIMA P7 exam
It would be marked as incorrect on the AAT skills test for Unit 15
The technique is fine, but please take my reference to the unit 15 skills test assessment instructions seriously.
AAT skills tests are marked to a very clear set of guidelines. The Unit 15 skills test requires candidates to use compound interest when calculating the APR.
RichardK you appear to be taking my comments personally, I welcome your contributions, but please bear in mind that I am running 3 courses for Unit 15 at the moment. I have discussed this area of the syllabus with the chief assessor and am quite sure that I know what is needed to pass this part of the skills test.
I know your approach is used, and is the one anyone who took CIMA P7 should have used in November. The approach is fine, but please don't use it on the Unit 15 skills test.Sandy
sandy@sandyhood.com
www.sandyhood.com0 -
Thank you
The way you describe would be marked correct on the CIMA P7 exam
It would be marked as incorrect on the AAT skills test for Unit 15
The technique is fine, but please take my reference to the unit 15 skills test assessment instructions seriously.
AAT skills tests are marked to a very clear set of guidelines. The Unit 15 skills test requires candidates to use compound interest when calculating the APR.
RichardK you appear to be taking my comments personally, I welcome your contributions, but please bear in mind that I am running 3 courses for Unit 15 at the moment. I have discussed this area of the syllabus with the chief assessor and am quite sure that I know what is needed to pass this part of the skills test.
I know your approach is used, and is the one anyone who took CIMA P7 should have used in November. The approach is fine, but please don't use it on the Unit 15 skills test.
Hi,
Please do not take this the wrong way.
You have obviously made a mistake by quoting that our reference to annualised % is wrong.
I have not taken offense to your comments. However, we would appreciate if you could evidence your answers in future considering your standing in this forum.0 -
Hi Richard,
Surely the fact that Sandy Hood has discussed the method to be adopted in unit 15 with the Chief Assessor is enough evidence, is it not?
Kind regards
Steve0 -
And the fact that he's explained that it is right but not the method adopted for this particular paper?0
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Bluewednesday wrote: »And the fact that he's explained that it is right but not the method adopted for this particular paper?
Please refer to the AAT books. Osborne/ Kaplan
The explanation was based on their material as stated in the thread.
We were not suggesting there were not alternatives.
Please read the thread.
Regards0 -
RichardK
You deserve credit where credit is due.
You have identified a method which is fine, and I will add was allowed at one time on AAT simulations.
As part of my preparation for the Webinar on Friday I have been looking at past simulations, but when I look at these I do so in the knowledge of what is acceptable now.
Please look at these three quotes:Task 5
Discount for prompt payment
Company A is considering giving discounts for prompt payment from customers. The average
customer invoice is £2,500 and normal terms of trade are 30 days from the invoice date.
The company is considering giving a two per cent discount for payment within seven days of the
invoice date.
• Calculate the annual percentage cost of this discount, using pages 13–14 of the answer booklet.The model answer provided in the information for assessors booklet
Discount for prompt payment
The effect of giving a discount for early payment is to obtain the cash in seven days and not 30 days.
This means that the company receives £98 for every £100 of sales, effectively losing £2 as an
interest cost for 23 days (30 days less seven days).
The interest rate for the 23 days is £2/£98 = 2.04%.
This rate needs to be converted to an annualised percentage rate using the formula
R = (1+r)^(365/23) – 1
This formula takes account of compound interest and gives an annual rate of 37.8%.
A simple way of estimating the annual cost is to simply multiply the 2.04% by (365/23) giving a rate
of 32.4%. This does not take into account the effect of compound interest and therefore is
technically incorrect, but can be used as a rough and ready measure.
Marking criteria5 Candidates should correctly calculate the cost of the discount. An annual rate of either 32.4% or 37.8% is acceptable.
So at that time both methods were acceptable.
Now the simple interest method is no longer accepted as competent for the skills test.
I can't say more than that.Sandy
sandy@sandyhood.com
www.sandyhood.com0 -
But what Sandy is saying that one method would be marked wrong in a skills test, although technically correct, he is suggesting a method which would be more appropriate - see I did read the thread!
I think as you have said - students can make their own mind up, once they have read the whole thread0 -
RichardK
You deserve credit where credit is due.
You have identified a method which is fine, and I will add was allowed at one time on AAT simulations.
As part of my preparation for the Webinar on Friday I have been looking at past simulations, but when I look at these I do so in the knowledge of what is acceptable now.
Please look at these three quotes:
So at that time both methods were acceptable.
Now the simple interest method is no longer accepted as competent for the skills test.
I can't say more than that.
Hi,
thank you,
you were saying that our references to "annualised interest rates" were incorrect.
Please research your opinions before making these sort of comments.
Regards
Richard0 -
If an apology will help. I apologise.
But as far as annualised percentage rates on the AAT Unit 15 paper is concerned, only compounded rates are considered competent.Sandy
sandy@sandyhood.com
www.sandyhood.com0 -
Bluewednesday wrote: »But what Sandy is saying that one method would be marked wrong in a skills test, although technically correct, he is suggesting a method which would be more appropriate - see I did read the thread!
I think as you have said - students can make their own mind up
Hi,
thank you.
Yes you are making a fair point which I have not disagreed with. Please look at this original thread.0 -
As you keep editing I have to re read the thread every time!0
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Sorry all but can i make a suggestion that this be taken elsewhere for instance an accounting web forum, you may be all correct but this will only confuse a lot of students whom are taking this unit - fortunatley i have already completed this element and glad to as i am already confused.
Vic0 -
RichardK, are you an AAT Full Member?
It's just that it's not clear from your posts. Perhaps you should make reference to it.0 -
Bluewednesday wrote: »As you keep editing I have to re read the thread every time!
Hahahaha!0 -
Hi everyone,
I am not going to make any futher comments.
I have taken on board all comments and respect your opinions.
thank you all for your time0 -
To those that have looked at the Cash Discount thread by RowanB and I.
Sandy has quoted that our reference to Rowans "annualised interest rate" is incorrect.
In fact this is not the case.
We were referring to the the "Nominal APR" which is the simple-interest rate (for a year).
There is also an annualised rate based on compounded interest which she referred to. However, they are not the same.
There are two types of annualised interest:
1. Based on simple interest also known as Nominal APR
You're right Richard! So actually my reference to annualised percentage rate was valid, although I didn't specify that it was a nominal annualised percentage rate.
I think the important point Sandy's making is that we won't be asked for the nominal annualised percentage rate. We'll be asked for the effective annualised percentage rate calculated by the compound interest formula in the Unit 15 simulation.
'Annualised percentage rate' was valid though!
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You're right Richard! So actually my reference to annualised percentage rate was valid, although I didn't specify that it was a nominal annualised percentage rate.
I think the important point Sandy's making is that we won't be asked for the nominal annualised percentage rate. We'll be asked for the effective annualised percentage rate calculated by the compound interest formula in the Unit 15 simulation.
'Annualised percentage rate' was valid though!
Glad to see one of you understands what Sandy is saying
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Please, please stop this annualised percentage malarky! As a student who is currently studying unit 15 it means that when you search for a valid helpful post on discounting you get all this waffle about RichardK and RowanB having to have the last word! The vast majority of us on here are doing AAT not CIMA so we will take Sandy's explanation as that is relevant to the qualification we are studying!0
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Please, please stop this annualised percentage malarky! As a student who is currently studying unit 15 it means that when you search for a valid helpful post on discounting you get all this waffle about RichardK and RowanB having to have the last word! The vast majority of us on here are doing AAT not CIMA so we will take Sandy's explanation as that is relevant to the qualification we are studying!
Well said!0 -
I don't care about having the last word....... As long as no-one else posts on this thread from now. 0
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When? Now?0
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How about....now?0
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Please read my latest thread on which formula to use, which is based on a phone call to Osborne today.
You will see that Sandy is wrong on this too.
I spoke to Osborne books today.
They have comfirmed that their formula is correct, current and relevant.
They have not been notified of any change to the AAT guidelines on this bearing in mind they are in close contact with the AAT.
Just go by what the Osborne/ Kaplan books are saying.0 -
Please read my latest thread on which formula to use, which is based on a phone call to Osborne today.
You will see that Sandy is wrong on this too.
I spoke to Osborne books today.
They have comfirmed that their formula is correct, current and relevant.
They have not been notified of any change to the AAT guidelines on this bearing in mind they are in close contact with the AAT.
Just go by what the Osborne/ Kaplan books are saying.
Just go by your own opinion, or your tutors 0 -
MessedUp. You are so childish trying to get the last word all the time.0
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Rachey, don't joke...this is ver serious stuff LOL0
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lol. It was a joke. I'm sure it'll be blown out of proportion though.0
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