10-10 rule: discount?
The 10-10 rules problems in the wiki come with this note:
Note that these practice problems on the 10-10 rule involve discounting, but most of the old exam problems on the 10-10 rule do not have a discounting component.
When given a 10-10 calculation problem where a discount rate is also given, should we discount or not discount? I'm leaning towards not discounting since the source doesn't mention to take NPV of the reinsurer loss like it does with the ERD rule. In addition, the battle cards seems to not like the examiners report, but the examiner report's solution to F18 25c has "Considers time value of money" and "Allows for discounting" for the top 2 responses, implying that 10-10 rule does not discount. Is there an indicator that we should or shouldn't discount for 10-10?
Appreciate the help!
Comments
Just a follow up, I understand that incorporating time value of money is possible with 10-10, but it seems like F18 25c (and any other problem referring to the 10-10 rule) was referring to the simple version of the 10-10 rule mentioned in the text (that doesn't involve discounting). Past problems such as S15 25a also didn't seem to accept solutions where loss was discounted, despite a risk-free rate (3%) and a time horizon (1.5 years) given in the problem
If given payment dates and a discount rate, I would apply discounting, even for the 10-10 rule. 15.S.25a sample answer does not apply discounting, but the report does not say answers that used discounting were not accepted.