Cash management question - help!

RosieJane

From Osborne workbook, practice exam 1.Task 8, e.

I can't understand the logic behind this one. Can anybody explain?

Calculate the gross return in interest to the following investment accounts (ignoring any compounding of interest)
£30,000 invested for 4 years at 4.00% pa. A rate which includes a first six months bonus of 1%

I would have done 6 months at 1% on top of the 4 years at 4% to get interest of £4950 (30000*4%*4 plus 30000*1%/2)

The answer is £3750 i.e. £600 + £450 (yr1) + £2700 (yr2-4)

SandyHood

Dear Rosie
I disagree with the answer.
If the rate was 3% pa with a 1% bonus for the first 6 months I would work it out as:
First 6 months 30,000 x 0.5 x 4% = £600
Second 6 months 30,000 x 0.5 x 3% = £450
Year 2 30,000 x 3% = £900
Year 3 30,000 x 3% = £900
Year 4 30,000 x 3% = £900

This gives the answer £3,750

But it doesn't
The rate is 4% pa with a 1% bonus for the first 6 months I would work it out as:
First 6 months 30,000 x 0.5 x 5% = £750
Second 6 months 30,000 x 0.5 x 4% = £600
Year 2 30,000 x 4% = £1,200
Year 3 30,000 x 4% = £1,200
Year 4 30,000 x 4% = £1,200

I agree with you that the answer should be £4,950

Yours
Sandy

j1994

hi I have my cash management exam next week and cant get my head round these two questions from the aat 2013 assessment 1 . task 1 and task 3b

SandyHood

j1994
I do not have access to either question. There may be other discussion forumites with access able to help.
Are you at a complete loss as far as the task subject content is concerned?
Or is it just the wording of these two specific questions?
Yours
Sandy

j1994

I've tried going over them I think it's the wording but yes completely lost