Was this definitely before tax? I remember looking at the question for at least 1-2 minutes just to figure out if I need to divide by (1-T). After thinking it through, I did divide to get the before-tax number, and it made sense at the time. When I talked it over with people during the break, everybody mentioned that you shouldn’t divide because it asked for after-tax. I vaguely remembered reading after-tax as well, but that might just be paranoia.
sct123 Wrote: ------------------------------------------------------- > think it just said one payment of 200k The 200k was only applicable if they retired at 65. The question was regarding the required return if they retired @ 60 (college covered by scholarship).
Everything they took out of the portfolio was taxed at 20%, the mortgage payment, the 200K and the shortfall from pension income vs expenses. My before tax return requirement was 11 % (maybe 11.02%)
Time horizon: Where they asking for the time horizon UPON retirement under the 2 scenarios, or were they asking for the 2009 TH under the scenarios?
kelvinqiu Wrote: ------------------------------------------------------- > it said to account the before tax normal rate? > > i use after tax/(1-t) + I > > and resut is around 9.5% > > > is that right? > > > after tax not include i is around 4.*% > > > > ------------ > > besides, the afternoon’s exam was too easy, much > easier than last year which i took too.sigh~~ dont > know why I got 9.5 too but it seem that we are alone year. Hey, I think i give all i got
As i recall the expenses were the living and the house and the income was the two pensions plus portfolio. Divide one by the other and the answer was… ?
I got 5.0625% - I don’t think you have to add inflation; if the assets are indexed to inflation you need to calculate the return above inflation that you need from the overall portfolio
McLeod81 Wrote: ------------------------------------------------------- > L3BeatIt Wrote: > -------------------------------------------------- > ----- > > JarJarBinks Wrote: > > > -------------------------------------------------- > > > ----- > > > it said annual expenses and pension income > and > > in > > > the question everything was indexed to > > inflation, > > > so i never added the inflation(as spending is > > > quoted on normal basis according to > schwezer). > > I > > > may be wrong > > > > me too. my answer was 4.5%, because the assets > > were indexed to inflation already. > > > Yeah, but the were going to change the allocation. > And even if they did keep the TIPS, the inflation > premium built into the securities will still be > reflected in the return. cant see how inflation would be adjusted…fatigue may be
McLeod81 Wrote: ------------------------------------------------------- > Time horizon: > > Where they asking for the time horizon UPON > retirement under the 2 scenarios, or were they > asking for the 2009 TH under the scenarios? i misread this at first. went back at end and it said 2009 ips for: i. age 60 retire and ii. age 65 retire.
I had like 10.86% using multiplicative.
I got in the 10’s also.
Halberstram Wrote: ------------------------------------------------------- > I got 5.0625% - I don’t think you have to add > inflation; if the assets are indexed to inflation > you need to calculate the return above inflation > that you need from the overall portfolio THis excately correct, but you must add the inflation( I think ) because the part you calculated the required return is not indexed, only the portion the goverment goig to pay is indexed.
Malloozer Wrote: ------------------------------------------------------- > Everything they took out of the portfolio was > taxed at 20%, the mortgage payment, the 200K and > the shortfall from pension income vs expenses. > > My before tax return requirement was 11 % (maybe > 11.02%) That’s EXACTLY what I had.
something like this 40.000 x 1.04 / 1.000.000 = 4,16% adding inlfation 4.16+4 = 8.16 / 0.8 = 10,2 i am not sure the exact numbers but this is what i did
Remember the 200k was only needed if they planned to retire later in life. Otherwise they did not have that liquidity amount.
they said the mortgage payment AND taxes were 200k (or whatever the number was)
First I got 4.68% real before-tax (due to 1st year inflation). The nominal after-tax became 5.85 + 4 = 9.85%
Motoloco that sounds about right since the pensions were coming out tax free. It was definitely asking for pre-tax. I went and re-read the question looking for that.
I gave em both pre and after, take that
wow i think i really screwed this one up. what about the 4% return on the portfolio? didn’t you guys include that, because i ended up with answer including inflation of 6.3%