Institutional return objective

2012 Morning Mock CFAI Q 6 A: calculate the return requirenment.

The answer they have presented does not add inflation to the discount rate (Required r) ???

I thought the same thing at first, but it mentioned in the second to last paragraph.

(Note that expected future liabilities already incorporate expected inflation-related adjustments to benefits for Plan participants.)

another thing to add is it might not even tell y ou inflation is accounted for and toss in inflation to trick you. Basically i think of it like this. if you know the future value then that’s the value you got to get to. The I/Y that you solve for will get you there incorporating everything you need (inflation,fees,premiums, etc)