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MA2 Kaplan Kit Q. No. 333

Forums › FIA Forums › MA2 Managing Costs and Finance Forums › MA2 Kaplan Kit Q. No. 333

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Ken Garrett.
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  • Author
    Posts
  • March 4, 2021 at 1:59 am #613180
    ncell
    Participant
    • Topics: 17
    • Replies: 3
    • ☆

    Q333
    A UK local authority, which is governed by The Local Government Act 2003, want to make an investment of surplus funds in a non-approved investment.

    The level of the proceeds from the investment that have to be set aside as provision for credit liabilities (PCL) is ______%

    Answer in the book:
    The level of the proceeds from the investment that have to be set aside as provision for credit liabilities (PCL) is 75%.

    Doubt:
    I am unable to understand this. Sir, please explain this with the help of a suitable example.

    March 5, 2021 at 8:23 am #613465
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10197
    • ☆☆☆☆☆

    Public sector organisations, like a UK local authority, are subject to investment rules to safeguard the public funds they are entrusted with. Eg a certain minimum proportion has to be invested in very safe ways. The remainder can be invested in more risky ways ie into non-approved funds.

    I don’t think the syllabus requires any more knowledge that – certainly not the provisions of The Local Government Act 2003, a very piece of UK law. The Kaplan syllabus make no reference to this act and I think the question has got into the bank by mistake.

    Ignore it!

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