In morning session, especially for IPS, I almost never calculate the return rate correctly, missing some component all the time. I always spend too much time on IPS. When going forward to the rest, the time is limited. I am worried about my time control in exam. Anyone can tell me the solution?
I basically have all the same probs, I spend too much time on them and usually screw up the final number. This is where part marks are key. Much of my work is correct, just one slip up along the way or bad assumption etc. Try not to let it affect your overall time mgmt. I just did the morning section for exam 2 in volume 2, and they gave 12 mins for a whole individual IPS which was somewhat involved and required a few judgement calls. I thought that was rather ridicuous, as usually CFA gives at leas 20-30 mins, and doesn’t look for a whole IPS. Best of Luck!
Actually I gave up the volume 2 morning session because I am not confident on its focus and answer. I only worked on CFAI, but have the same probs in time control every time of every exam. So many details in the material!
I’ve basically written off the return calculations. As I’ve hashed over numerous times, there is no consistency to their calculations from year to year. I can confidently say that I have NEVER gotten the same answer as them on about 30 of these. It is unbelievable if you ask me.
Dont spend too much time on return calculation. move on with other quesitons if you feel that it is too tough. I am thinking of skipping ind portfolio question and attempting at the end…
there is a reason why we have to show our work
I had the same problem. Keep in mind they give you alot of time to calculate it. The only way to do it properly in my opinion is do the following: - an inflow/outflow analysis of every item they present to you and *think about every single one. You will have to adjust some for inflation and others you will not, some you may even disregard. Adjust expenses for inflation, take taxes into consideration for salaries and so on. - Think about the denominator, exclude anything that is not investable and you will not draw a return form i.e. a vacation home or the person’s house. -Determine your real return requirement - Add or geometrically link the inflation to it. --------For a future liability that the client may shoot for use TVM to get there.
I am having the same problem with the IPS. I plan on leaving this question(s) to the end of the test. No need to get frustrated early with stupid (average) Vs ( Below Avg) questions.
Same here… these return requirement calculations are ridiculous. Seems depending on the weather outside, they change the way it’s calculated.
Return Calcs and List 4 out of 6 type questions!
JP-- Its hopeless. We’re all on AF and taking Level 3, so we’re all sharpies, but when it comes to 5th grade math, I can’t do it the CFA way. Sometimes you discount a liquidity event (like purchase of a house down the line) and sometimes you don’t. Should you do it for the question you’re looking at? Flip a coin, because its different every time. I can justify every one of my return calcs but I won’t get the credit. I could take my math to the office, where we do this type of thing every day, and the boss would say to run with it. But in CFA-land its wrong. And you know what burns me up? Every single one of these clients has a return requirement to just preserve the purchasing power of their portfolio and live off the income. Guess what? The institute needs to get on the phone with some high net worth clients because a bunch are looking for big capital appreciation, even if they’re worth $10,000,000 with $300k in annual expenses. In the real world, if you talk capital preservation to many rich 50 year old smart guys, they’re going to take their account to your competitor across the street.
I wouldn’t worry about this too much. Unless it is a very straight forward problem (doubtful) most candidates won’t calc the return CFAI way. I don’t know anyone who got it right last year, myself included, and we all passed.
jamespucyk Wrote: ------------------------------------------------------- > I had the same problem. Keep in mind they give you > alot of time to calculate it. > > The only way to do it properly in my opinion is do > the following: > > - an inflow/outflow analysis of every item they > present to you and *think about every single one. > You will have to adjust some for inflation and > others you will not, some you may even disregard. > Adjust expenses for inflation, take taxes into > consideration for salaries and so on. > > - Think about the denominator, exclude anything > that is not investable and you will not draw a > return form i.e. a vacation home or the person’s > house. > > -Determine your real return requirement > > - Add or geometrically link the inflation to it. > > --------For a future liability that the client may > shoot for use TVM to get there. hmm how about 2002 IPS question 5? WTF was that?
Yes. And the problem about average or below average problem. Who can tell the difference? I hate average. It is easy to distingush between ‘above average’ and ‘below average’. With ‘average’ included, who knows?
some past exams do have “average” as the answer. 
yeah this whole morning IPS thing drives me up the wall, its a huge cfa weakness that we’re forced to learn what huge list of specific circumstances could be ‘average’ when ‘average’ isnt even defined.
Wouldn’t it be sadly ironic to fail the exam for refusing to settle for average? 