Kickin’ it back to the old school- 2001 CFA AM test, Q 2A. So UK inflation predicted to be “substantially higher over the next 3 yrs than the board’s forecast”. Question then asks if recommendations are correct/incorrect. Here’s the first one:
1. Revise the IPS of the pension plan to take into account a change in the forecast for inflation in the UK.
Answer: INCORRECT- the IPS considers client circumstances (time, liq, etc). It does consider return req & that may change over the long term if the inflation outlook has changed over the LT. A change in the ST, such as this question, would NOT necessitate a change in the return portion or any other aspect of the IPS.
really? 3 yrs is short term? I think we’re living in a different world now. But does the CFA have some guideline in terms of inflation on what is long and short term in the text? Curious… b/c I just banged this answer as you should change the IPS to reflect this macro consideration. Wrong-o says 2001 CFAI… actually AIMR back then.