CFAI 2005 AM Q 7 Yeo

This is a strange question. We calculate the required after-tax real rate of return of 5.0167% and then adjust it for inflation of 3%. But the outflows comprise: - her living expenses (with inflation @ 3%) - her son’s education costs (with inflation @ 6%) - her annual donation to charity (no inflation) So we calculate the total required outlfows for the year, and then we adjust for inflation of 3%! wtf? We have already accounted for inflation for each component (using their own inflation rates), then we just apply a broad inflation rate of 3% again. Why? It just doesn’t seem logical.