Can someone please give the explicit calculations for how the solution arrives at the 4.427 percent? Thank you.
Same here, I get 4.14% What do you get? J.
Hi, J. I am going to leave out the GBP currency symbol in what follows. Here are my calculations (which I did using Excel). Year One: Start with an investable base of 1,235,000 and deduct 26,000 for living expenses. This leaves 1,209,000. Year Two: Compound the 1,209,00 at some rate x to get 1,209,000 (1 + x). Deduct 26,000 for living expenses to get 1,209,000 (1 + x) - 26,000. Year Three: Compount the [1,209,000 (1 + x) - 26,000](1 + x) and deduct 26,000 to get [1,209,000 (1 + x) - 26,000](1 + x) - 26,000. Repead this process until you get to year 18. The x that gets me to 2,000,000 is around 4.75 percent (which is very different from the 4.472 percent shown in the solution). What was your method?
Hi cadlag, I know I used the TVM method on my calculator. I don’t exactly remember how I did it, I’ll have to recheck my calculations. I do remember that I was under CFAI’s value by about 0.30. Let me check and get back to you on this. J.
Has anyone resolved this? I’m inclined to calculate it as follows: FV = 2,000,000 PV = -1,235,000 PMT = -26,000 N = 18 compute interest, I = 1.0414 1.0414% is clearly incorrect. Any clarity on how to obtain 4.427% as per the correct answer?