Couple of doubts from Schweser concept checkers. Both are in Book 3, Pg.75. No.5) They have provided a table with 3 portfolios, their expected returns, SD and asset class weights. There is a 4th portfolio D, for which they ask us to calculate the asset class weight. I wasn’t sure how to do this, so I checked the answer and first thing they tell us is to invest 35% of the funds in portfolio A and 65% in portfolio B. How did they get these figures? Is there something I am missing? I didn’t see anywhere where they give us any required rate of return. No.6) Question is based on a vignette. Question asks us to calculate the spending rate before tax, ignoring inflation. (inputs are obviously given, so no problems there). My question here is, the client needs an expenditure in a year’s time. So, yes, you have to discount it by the risk-free rate. But I didn’t see any risk-free rate anywhere but when I checked the answer, they use 2%. Where did they get this 2% from? Thanks
For Q 5: They missed one line : (From schweser 2008 , Q 5) says Portfolio D consists of 35% of Portfolio A and 65% of Portfolio B. They removed entire question 5 related to this data set. Q 6 is what now is Q 5 For q 6. It says risk free rate is assumed to be 2%
Oh boy…found it just now…i feel like an idiot.