My apologies if this has been dealt with in a previous thread, but I quickly searched for such a thread and couldn’t find it. I’m simply not seeing how CFAI comes up with the 3% inflation assumption and 4% real return assumption. Is it given some where in the question and I somehow missed it? If we are supposed to figure it out, then could someone kindly please tell me how we are supposed to do so? I see that the question is mentioned already in the CFAI errata but they don’t seem to address my specific question yet. Many thanks in advance.
Oh, and where do they get the assumption that Stephenson can achieve a 7% return from as well? Many thanks.
I just re-read the errata again more carefully and it looks like CFAI just want you to delete the whole paragraph. Glad I didn’t waste too too much time on that. Others should beware of that errata change on that question. A-5