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#1
02-26-2018, 11:52 AM
 Alaska Join Date: May 2009 Posts: 14

I'm really confused about the wording in Task 6. "Addressing the general direction and magnitude are sufficient; you do not need to recalculate the tax." How am I supposed to address "magnitude" without recalculating? In my first submission I said "significant increase", but I'm thinking that didn't satisfy their "magnitude" question.
#2
02-26-2018, 12:54 PM
 ao fan Member Join Date: Apr 2007 Location: hating the ao Studying for EA-2L Posts: 105,944 Blog Entries: 1

I dont think it's possible to recalculate it precicely with the information given iirc, but I did recalculate it and gave an approximation in percentage increase
#3
02-26-2018, 02:43 PM
 Sir Issac Member SOA Join Date: Jun 2014 Posts: 409

Based on the direction that all of the assumptions have changed, will the change in tax rate be small or big. Is it going to be higher/lower just a little bit or more than that?

#4
02-27-2018, 09:37 AM
 sungx88 Member SOA Join Date: Mar 2017 Favorite beer: magic hat #9 Posts: 51

You can look at the results of your sensitivity testing to get an idea of the magnitude.
#5
02-27-2018, 11:22 AM
 master_a00 SOA Join Date: Mar 2017 College: University of Waterloo, Alumni Posts: 7

Besides using sensitivity testing, do you think it is sufficient to change one assumption at a time in the model and see how that impacts the tax rate that is needed to fund over 30 years for the asset mix you chosen, or any asset mix (asset mix probably won't effect magnitude and direction)?

I understand you will be looking at time zero instead of time 5. But it should give a reasonable direction and magnitude.
#6
02-27-2018, 11:25 AM
 ao fan Member Join Date: Apr 2007 Location: hating the ao Studying for EA-2L Posts: 105,944 Blog Entries: 1

Quote:
 Originally Posted by master_a00 Besides using sensitivity testing, do you think it is sufficient to change one assumption at a time in the model and see how that impacts the tax rate that is needed to fund over 30 years for the asset mix you chosen, or any asset mix (asset mix probably won't effect magnitude and direction)? I understand you will be looking at time zero instead of time 5. But it should give a reasonable direction and magnitude.
That's kind of what I did to estimate the percentage change
#7
03-05-2018, 12:40 AM
 prh Member SOA Join Date: May 2005 Studying for FAP Posts: 51

For task6, did anyone recommend changes to the economic assumption in the original model?

In my first attempt, I thought the actual investment return tanked at year 3 compared to the expected, only to realize after I failed that the expected return I referred to was the result of a single scenario. (1000th scenario in the spreadsheet)

So I'm guessing there is no good way to find what the total expected return for the expected and therefore I'm confined to only mentionining demographic assumptions of actual over expected...am I on the right track this time?
#8
03-05-2018, 10:05 AM
 actually actuary Member CAS SOA AAA Join Date: Jul 2006 Location: Austin Studying for Nothing! Posts: 64

Quote:
 Originally Posted by prh For task6, did anyone recommend changes to the economic assumption in the original model? In my first attempt, I thought the actual investment return tanked at year 3 compared to the expected, only to realize after I failed that the expected return I referred to was the result of a single scenario. (1000th scenario in the spreadsheet) So I'm guessing there is no good way to find what the total expected return for the expected and therefore I'm confined to only mentionining demographic assumptions of actual over expected...am I on the right track this time?
Sort of. I think you're on the right track as far as not being able to compare to the expected return. You can still briefly comment on the investment return by year, though. Based on the actual 5 year results I was given, I didn't think the investment committee chose investments that were anywhere close to the target allocation I determined.
#9
03-05-2018, 10:11 AM
 arto83 Member SOA Join Date: May 2005 Location: New York College: Brooklyn College Alum Posts: 544

Quote:
 Originally Posted by actually actuary Sort of. I think you're on the right track as far as not being able to compare to the expected return. You can still briefly comment on the investment return by year, though. Based on the actual 5 year results I was given, I didn't think the investment committee chose investments that were anywhere close to the target allocation I determined.
Agreed. And the tax was way too low as well.
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#10
03-05-2018, 11:10 AM
 prh Member SOA Join Date: May 2005 Studying for FAP Posts: 51

Thanks for rerouting me! I know what to write now.

Quote:
 Originally Posted by actually actuary Sort of. I think you're on the right track as far as not being able to compare to the expected return. You can still briefly comment on the investment return by year, though. Based on the actual 5 year results I was given, I didn't think the investment committee chose investments that were anywhere close to the target allocation I determined.