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Donna Everitt case

Hi all, I have a question on the Donna Everitt case from the CFA official website and I am wondering if you can help me with question 5 about the required inflation adjusted after-tax return. The part which confuses me is how come they would consider the salary and living expense as part of the net investable asset calculation whereas when you look at other past exams like #2 of 2011 the net investable asset calculation would not even consider salary or living expense at all?  tks

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Thats a good point.

For #2 (2011 AM), i note that in current year after tax salary of 475,000 = 250,000 (current yr living expense) + mortgage payment (225,000), so no savings/depletion of asset in current year to factor in.

But in Donna Everitt case, her after current yr after tax income ($90,000) is less than current year $150,000 (expense), so this will eat into her investable based by $60,000 (150-90).

Happy to hear other thoughts.

Btw, in my view if this is how long item sets Questions be, then good luck!! to me…this case study (especially the return & liquidity question) looks more appropriate for AM session 

Agreed. Don’t understand why the living expenses feed into the investable asset base here. 

Did this item set again, continue to be puzzled! 

Further, in #3, Uses of liquidity does not include the expense($150,000) that cannot be covered by after tax salary [150,000 * (1-.04)]…liquidity needs have to cover short term expenses (if any that is not being covered by ongoing income etc)

this is a weird/almost incorrect item set vs. how these have been done in past AM papers.

Bumping up again, to see if people can shed some light.

time to move on!

why the increased donation of engineering and single contribution not account for? 

to be honest this is even beyond the calculation amt in AMs, reminds me of a few of those absurd LV2 topic tests last year

I’m not really getting this part of the case (when asked to calculate required return)…

Required withdrawal/Investable assets

= 1.49%

why 90? where did this come from? I know its the after tax salary but why is that the return requirement? 

could someone help explain this a little bit?


You got 1.49, now just add inflation to it.