Return Requirement - general guidelines?

CFA Level III Portfolio Management
#1

What is the general rule and guidelines when calculating return requirement for individual investors?

So far I have understood as

(Cash outflows - cash inflows) / investable asset base

But I didnt understand 1-2 EOCs as they didnt show detailed calculations. The last EOC Maclins’ case, for example.

#2

there are two types there…

1 = where they provide you the details of inflows/ outflows -> and ask you to calculate return required for next period … which is the case solved in the book.

2 = where they give you periodic payments over a number of years

PV of portfolio is provided. an Ending Value required after N years, a payment over those N years.

so N is given, PV is given, FV is also given, PMT is provided. Calculate the I/Y.

  • remember to be consistent with the inflation adjusted or not cashflows for FV, PV and PMT.
  • remember to be consistent with teh before tax/after tax nature of the cashflows
  • remember that PV and FV need to have opposite signs.
  • may make sense to make inflows = Positive, Outflows = Negative consistently.

Maclin is probably the 2nd type of calculation.

#3

The text mentions the crossover between the Return objective and Liquidity constraint.

Is it safe then to assume that you will likely find the necessary numerator components (required spending %, spending $, required actuarial rate, etc) to calculate the return in either one of these sections ??

#4

look at the past questions for a guideline.

there has been only 1 year in the past 2007 Elizabeth Yao case - where the data was not properly provided and it was confusing. In the recent couple of years the data has been pretty well laid out.

#5

cpk123 !!! Glad you’re still on this forum dude…, although I know you will rather not be taking Level 3 again. Are you done with studying?

#6

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#7

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#8

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