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.
Thoughts?
I think there was a regime change since this question was posted.
Studying With
3yrs is short term tho …………i would consider long term esp in economics term to be at least 5yrs and greater
Hope this helps