CFAI 2008 Mock 1D

[sharky7]

Question says:
Investment portfolio is 10,200,000 BRL, and they want a value of 15,000,000 BRL in 5 years, having a 55,000 BRL outflow each year to pay mortgage.
Compute after-tax nominal return.
I’ve done a simple found I/Y with the calculator, and then added inflation (4%) to calculate nominal rate. However, CFAI Guidelines don’t add inflation. Why?

 

[MrSmart]

You’ve already got the nominal rate when you computed the I/Y from the FV and PV.

 

[cpk123]

55000 is the mortgage payment, if I remember right - and that is in nominal terms - does not change year on year. (not inflation adjusted).

 

[sharky7]

Got it… Went straightaway to follow usual path of adding inflation when asked for nominal rate.
I hate CFAI