2013 Exam AM Q1 - living expenses 1 year or 2 years inflation?


I have used 300,000 * 1.025*2 as expenses because. the question says:

1- Last year expenses were 300,000

2- calculate the return for the coming year

I know that my english let me down sometimes and was not sure this one of them

CFA instute has used 300,000 * 1.025*2 reflecting only one year.

anybody who has noticed inconstistency in the way these question are adressed

thanks a lot

it says expenses in retirement …

and not sure why you are doing 300000*1.025 *2? what is the *2 for?

for 2 year.

last year there expenses were 300,000

this year they will be 300000*1.025 ^1

and for the coming year 300000*1.025 ^2

sorry, I meat to use the exponant

Thanks again for your reply

Looks like you’re having a language issue.

“For the coming year” is this year. Don’t overthink it.

i did the same thing tobe honest just cause they said last year … language disadvantage :slight_smile:

Yea that was confusing to me as well…and I speak English lol. What I was confusing was when the say required return for the coming year - taking it to mean, what does the portfolios have to earn in the coming year (which would be to meet next year’s needs). But what it’s asking are what return is required to meet the coming year’s needs/expenses.

Thank you guys!

I wrote my email late last night. I reread it today, i mixed too many things(typos) the 2 and 1, the exponant and *.

apologies for that. I guess I needed sleep. which lead me to think i shoud take it easy friday. BUT until then, i am studying hard :slight_smile:

I will scale my time one year behind now :slight_smile: will take it case by case

thanks again

Another clue would be:

“Thomas sold his consulting business at year-end and retired” < - year has just ended and we’re rolling into a new year and in the year which just ended, expenses were 300,000, so for the coming approaching year, * 1.025 …

This seems clear to me now but 2005 AM is a total mess.