2008 Morning IPS (#1A)

CFA Level III
#21

2008 - the mortgage payment of 55K was AFTER TAX. So no need to gross up Tax.

2011 - had no tax implications, as far as I can see.

after tax salary of 475K which equals living expenses of 250K + 225 K Payment on mortgage.

So no tax adjustment there.

2010 - Elisa Lima case -> 140 K Pre-tax salary, 96K Living expenses (after tax), tax rate = 25% so need to gross up the living expenses - since they ask for a pre-tax nominal rate of return.

140 - 96/(1-0.25) = 12 K which they tell you elsewhere is the TDA payment.

#22

CP

I was getting confused between 2010 and 2011 exams.

it is now very clear

#23

I had a six stage time horizon on that question: 1. Now until next dirstribution 2. Distribution until college starts 3. College starts until college ends 4. End of college until retirement

  1. Retirement until parents death (another cash flow) 6. Remaining retirement

Understood that they didnt give a timeframe for the parents death, but its a huge inflow, so I thought it should count as a stage somewhere. They obviously didnt even come close to this in the answer…but this still seems correct to me even after looking at the guideline. Anyone disagree?