Now that I realize I have made mistakes in both calculations. What were the minutes assigned to the return calculations? Was it like 12 minutes for the first one and like 6 for the second one?
s23dino Wrote:
——————————————————-
> hezagenius Wrote:
> ————————————————–
> —–
> > 5major Wrote:
> >
> ————————————————–
>
> > —–
> > > I adjusted the second answer for inflation. I
> > had
> > > 8.48% and then multiplied times 4% for
> > inflation.
> > > They said to protect for inflation. I got
> like
> > > 1.0848*1.04=12.8%, something like that. I
> know
> > > thats a high return requirement. But without
> > the
> > > inflation adjustment, the purchasing power is
> > not
> > > maintained even if you want a target amount
> of
> > > $15M. At least thats what I think.
> >
> >
> > Someone mentioned a footnote that said the
> future
> > amount they needed was already
> inflation-adjusted.
> > I don’t recall seeing it but I’m sure it was
> > there.
>
> There is no way there was a footnote stating this,
> can anyone confirm this? If so that unbelievable,
> mention it in the case they have all this other
> cr@p in there.
s23dino Wrote:
——————————————————-
> There is no way there was a footnote stating this,
> can anyone confirm this? If so that unbelievable,
> mention it in the case they have all this other
> cr@p in there.
Somewhere early in the long AM thread, it is mentioned. Maybe they were talking about a footnote in the CFAI texts. Either way, I added inflation on the second return and I’m pretty sure it’s wrong.
if you go to a financial advisor and tell them your goals, and ask them what you need to have in 5 years to meet the goals, the financial advisor doesnt come back to you to say, oh you need $1 million plus inflation. you would fire them right there. their job is to give you one number which includes everything.
There are only two tragedies in life: one is not getting what one wants, and the other is getting it - Oscar Wilde
when someone says they want 1mm at retirement I dont think they calc in inflation, they want 1 mm in todays dollars. I dont think the FA said the 15 mm #. In any case I think I am wrong but I still think it is bs.
Did you all see my post from before? In the first question last year, they asked you to calculate the return needed to get a future value at retirement and the exam anser calculates the return with an inflation adjustment at the end. Look at Q1 from the CFA 2007 exam. Its a similar calculation.
5major Wrote:
——————————————————-
> Did you all see my post from before? In the first
> question last year, they asked you to calculate
> the return needed to get a future value at
> retirement and the exam anser calculates the
> return with an inflation adjustment at the end.
> Look at Q1 from the CFA 2007 exam. Its a similar
> calculation.
last year it said something like they need 5MM in today’s dollars, this year’s clearly stated they need 15MM at retirement
5major Wrote:
——————————————————-
> Did you all see my post from before? In the first
> question last year, they asked you to calculate
> the return needed to get a future value at
> retirement and the exam anser calculates the
> return with an inflation adjustment at the end.
> Look at Q1 from the CFA 2007 exam. Its a similar
> calculation.
Agreed, but the wording in the 07 exam stated something like this:
maintain the purchasing power of these gifts to be equivalent to C$2,000,000 and C$1,000,000 in today’s dollars.
I am not exactly sure how the wording was for the second part on this yrs exam, but this gives me hope since I included inflation.
Not in any of the past exams or questions did it ever say the principle was already inflation protected. That part I honestly dont remember seeing on the exam. Worse case they dock some points for adding inflation to the return, I dont think you can get hammered too much for adding inflation to the calculation.
volkovv Wrote:
——————————————————-
> First Return: 9.74% if you do geometric return or
> 9.52% if you do arithmetic (numbers were real
> return 5.52% and inflation 4%)
>
> Second Return: 8.48% (no inflation was necessary)
the question stated that the financial advisor, calculated in inflation and all their other needs into figuring out they need 15mil at the end of 5 years…therefore you don’t need to add it again. answer is 8.48%
Was there an inflation rate given in the case ? I remember searching the whole case and did not find one. So finally I put a rate of 5.52 % without inflation. If we assume inflation, people might assume different rates, more over the couple lived in Brazil I feel the inflation rate of Brazil is definitely higher than 4%.
More over if CFAI wants us to assume the inflation rate of Brazil, then candidates can have different answers, in that case how will they value.
I am not sure whether they wanted us to consider the inflation. Any thoughts ?
4% inflation was given. (Written “four percent” to make it harder to spot, of course).
The 2nd part indicated a final value of 15 million, from what I recall. If this was meant to mean anything other than a nominal value, it’s extremely misleading. If inflation had to be factored in, the actual final value would be like 18 mil. or something.
philly20 Wrote:
——————————————————-
> Did anyone get the last Q in the AM? The Currency?
> That was hard…..I got minus one percent
> unhedged……didnt get the hedged I dont think.
> Anyone?
Sounds close to me. I came up with -0.74% hedged and -0.94% unhedged or vice versa. I wasn’t sure if that was close enough to be considered effective but I said it was.
Now that I realize I have made mistakes in both calculations. What were the minutes assigned to the return calculations? Was it like 12 minutes for the first one and like 6 for the second one?
s23dino Wrote:
——————————————————-
> hezagenius Wrote:
> ————————————————–
> —–
> > 5major Wrote:
> >
> ————————————————–
>
> > —–
> > > I adjusted the second answer for inflation. I
> > had
> > > 8.48% and then multiplied times 4% for
> > inflation.
> > > They said to protect for inflation. I got
> like
> > > 1.0848*1.04=12.8%, something like that. I
> know
> > > thats a high return requirement. But without
> > the
> > > inflation adjustment, the purchasing power is
> > not
> > > maintained even if you want a target amount
> of
> > > $15M. At least thats what I think.
> >
> >
> > Someone mentioned a footnote that said the
> future
> > amount they needed was already
> inflation-adjusted.
> > I don’t recall seeing it but I’m sure it was
> > there.
>
> There is no way there was a footnote stating this,
> can anyone confirm this? If so that unbelievable,
> mention it in the case they have all this other
> cr@p in there.
Does anyone know anything about this?
s23dino Wrote:
——————————————————-
> There is no way there was a footnote stating this,
> can anyone confirm this? If so that unbelievable,
> mention it in the case they have all this other
> cr@p in there.
Somewhere early in the long AM thread, it is mentioned. Maybe they were talking about a footnote in the CFAI texts. Either way, I added inflation on the second return and I’m pretty sure it’s wrong.
again, pretty basic concept….
if you go to a financial advisor and tell them your goals, and ask them what you need to have in 5 years to meet the goals, the financial advisor doesnt come back to you to say, oh you need $1 million plus inflation. you would fire them right there. their job is to give you one number which includes everything.
There are only two tragedies in life: one is not getting what one wants, and the other is getting it - Oscar Wilde
when someone says they want 1mm at retirement I dont think they calc in inflation, they want 1 mm in todays dollars. I dont think the FA said the 15 mm #. In any case I think I am wrong but I still think it is bs.
First question:
add Inflation after calulating reqd return to get 55,000 BRL.
2nd part: no need to add since the terminal value was provided to you
about 8.5% for the 2nd part. I cant recall what the first one was
chill2day
First Return: 9.74% if you do geometric return or 9.52% if you do arithmetic (numbers were real return 5.52% and inflation 4%)
Second Return: 8.48% (no inflation was necessary)
how many points was the second calculation worth. I think someone said around 6. Is this correct?
LargeMouthBass Wrote:
——————————————————-
> how many points was the second calculation worth.
> I think someone said around 6. Is this correct?
6 to formulate the return objective. That includes the calculation as well as stating the objective.
Did you all see my post from before? In the first question last year, they asked you to calculate the return needed to get a future value at retirement and the exam anser calculates the return with an inflation adjustment at the end. Look at Q1 from the CFA 2007 exam. Its a similar calculation.
guys are we talking about different questions here???
i had 2.75 % in inflation not 4 and i am damn sure about this
anyone else had 2.75% inflation????
5major Wrote:
——————————————————-
> Did you all see my post from before? In the first
> question last year, they asked you to calculate
> the return needed to get a future value at
> retirement and the exam anser calculates the
> return with an inflation adjustment at the end.
> Look at Q1 from the CFA 2007 exam. Its a similar
> calculation.
last year it said something like they need 5MM in today’s dollars, this year’s clearly stated they need 15MM at retirement
I remember 2.7% general inflation for AM question1. The inflation was higher for Walt’s financial expenses..
ya …also there was no mortgage expenses…..
was there any mortgage expense in yur case career and bsc
i got nominal pretax of 6.46% and annual req ( second part of 7.7%
can anyone confirm?
yup, don’t remember mortgage…
I got 6.4 odd and 7 odd percentage for AM first and second part…
feel much better now…either we are both right or I am sunk….
CareerChange trust me we are not wrong :)
sounds like different exam questions.
Walt? Who the hell is Walt?
The Brazilian couple was the Carvalhos.
5major Wrote:
——————————————————-
> Did you all see my post from before? In the first
> question last year, they asked you to calculate
> the return needed to get a future value at
> retirement and the exam anser calculates the
> return with an inflation adjustment at the end.
> Look at Q1 from the CFA 2007 exam. Its a similar
> calculation.
Agreed, but the wording in the 07 exam stated something like this:
maintain the purchasing power of these gifts to be equivalent to C$2,000,000 and C$1,000,000 in today’s dollars.
I am not exactly sure how the wording was for the second part on this yrs exam, but this gives me hope since I included inflation.
Not in any of the past exams or questions did it ever say the principle was already inflation protected. That part I honestly dont remember seeing on the exam. Worse case they dock some points for adding inflation to the return, I dont think you can get hammered too much for adding inflation to the calculation.
volkovv Wrote:
——————————————————-
> First Return: 9.74% if you do geometric return or
> 9.52% if you do arithmetic (numbers were real
> return 5.52% and inflation 4%)
>
> Second Return: 8.48% (no inflation was necessary)
I got these numbers too…
Did any one notice that part A said to formulate return objectives and part B said calculate next year ror. So you had to know B to do A…
the question stated that the financial advisor, calculated in inflation and all their other needs into figuring out they need 15mil at the end of 5 years…therefore you don’t need to add it again. answer is 8.48%
frisian Wrote:
——————————————————-
> Walt? Who the hell is Walt?
>
> The Brazilian couple was the Carvalhos.
Walt was the name of the father I think. They bumped him off in 9 years.
Was there an inflation rate given in the case ? I remember searching the whole case and did not find one. So finally I put a rate of 5.52 % without inflation. If we assume inflation, people might assume different rates, more over the couple lived in Brazil I feel the inflation rate of Brazil is definitely higher than 4%.
More over if CFAI wants us to assume the inflation rate of Brazil, then candidates can have different answers, in that case how will they value.
I am not sure whether they wanted us to consider the inflation. Any thoughts ?
4% inflation was given. (Written “four percent” to make it harder to spot, of course).
The 2nd part indicated a final value of 15 million, from what I recall. If this was meant to mean anything other than a nominal value, it’s extremely misleading. If inflation had to be factored in, the actual final value would be like 18 mil. or something.
Did anyone get the last Q in the AM? The Currency? That was hard…..I got minus one percent unhedged……didnt get the hedged I dont think. Anyone?
anyone?
philly20 Wrote:
——————————————————-
> Did anyone get the last Q in the AM? The Currency?
> That was hard…..I got minus one percent
> unhedged……didnt get the hedged I dont think.
> Anyone?
Sounds close to me. I came up with -0.74% hedged and -0.94% unhedged or vice versa. I wasn’t sure if that was close enough to be considered effective but I said it was.
I didn’t have time to finish the calculations. Just said that it was effective. I wonder if they will given me any points …
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