A really tough question!!!

mwvt9 Wrote:
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> The return objective in an IPS should only be for
> the first time horizon. There are multiple time
> horizons in this question.
I agree with this, the IPS and portfolio should be oriented towards the initial horizon. The IPS could also mention future stages and the need for reassessment as those stages approach, but I really don’t think they should be rolled together like this unless the question clearly stated the portfolio would be self amortizing (very unlikely). For instance, in a multi-staged non-amortizing portfolio with high early liquidity requirements and a focus towards principal protection, using a compounded rate would run a high risk of liquidity shortfall.
 
i got 5.58% too. this question is BS and not at all how CFAI likes to test the subject. they aren’t about PV games, a L1 objective.
and considering taxes aren’t even part of the equation, especially have a tough time with this vignette. individuals always care about taxes, especially in retirement.
 
I would say B, I multipled my 5.5 x 1.3 to adjust for pretax vs. after-tax returns, but there’s no tax rate information in the question
this question is odd, more like a level 2 question with the PV stuff you guys are doing, forget about this
 
Sorry, but a really stupid question - where is the F0 key (to repeat CF for multiple years)on the HP12C? Understand the math, but have never done these type (with many recurring years of same CF) of IRR calcs on HP12C. Thanks.
 
Sure. You may have to use it for calculating a MWR, but HIGHLY unlikely.
 
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