The textbook answer for Return Objective seems arbitrary to me…and my questions are: 1) So if there’s no mention of inflation rate in the vignette, we can assume a “standard” 3% inflation? 2) Is it safe to assume a 7% nominal after-tax return over a 15-year time horizon? 3) Why use $2 million intead of $4 million as the asset base? Just to be conservative? In general, how should we approach the ambiguous nature of some IPS vignettes? I would appreciate your insights.
Have you checked the CFAI errata ? I’m not sure if it is the same Q but i remember reading another post on here referring to a similar situation .
Thank you very much, Rudeboi. The “arbitrary” assumptions were eliminated from the textbook answers per CFAI errata.