2007 morning session Q1 Part A, the real required return of 4.84% was calculated using the following inputs:
N=35, pv=C$4MM,pmt=-C$205,000, fv=-C$3.0MM
compute i = 4.84%.
Why is pmt 205,000 (200,000*1.025) when PV and FV are in real terms? Shouldn’t it be 200,000 (in real terms also)?
I have same question here
pretty sure they tell you that spending needs have to keep up w/ inflation
I"m sorry guys, but can I ask where everyone is getting all the old exams from? The only one I can find is the 2012 mock. Thanks for the help!
Yes, spending needs have to keep up with inflation, but if we are using nominal terms for annual spending, the target future value should be nominal value, too. The guideline answer has annual spending in nominal terms but the rest of the inputs in real terms. Not consistent.
If you login as a member, you can find them on the official CFAI website. Just search “sample questions”.
You’re thinking too much on that one formalforce. The annual spending has to keep up w/ inflation so you gross it up by inflation
PV are the assets you have
FV is given as a “real” value that you have to meet at a future date.
That’s it.