cdogstu77 Wrote: ------------------------------------------------------- > 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% Yeah I think that got to be included. My memory didn’t work well after the exam… I don’t know whether I included that… hahahah!
i got 10.85 (1.04)(1.045)/.8
I had the required distribution as 45,000. 45,000 / 1,000,000 = .045 1.045 * 1.04 = 1.0868 - 1 = .0868 8.68% / .8 = 10.85% Anyone else? The fact that the portfolio had inflation indexed securities doesn’t change the returns requirement.
tomkwong Wrote: ------------------------------------------------------- > cdogstu77 Wrote: > -------------------------------------------------- > ----- > > 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% > > > Yeah I think that got to be included. My memory > didn’t work well after the exam… I don’t know > whether I included that… hahahah! Yeah because if i recall correctly, expenses were 125,000?, pension income was 85,000?, and then there was an additional 4% return that the portfolio earned (4% *1000000) =40000.
bosjcm Wrote: ------------------------------------------------------- > I had the required distribution as 45,000. > > 45,000 / 1,000,000 = .045 > > 1.045 * 1.04 = 1.0868 - 1 = .0868 > > 8.68% / .8 = 10.85% > > Anyone else? The fact that the portfolio had > inflation indexed securities doesn’t change the > returns requirement. Same here, 10.85
bosjcm Wrote: ------------------------------------------------------- > I had the required distribution as 45,000. > > 45,000 / 1,000,000 = .045 > > 1.045 * 1.04 = 1.0868 - 1 = .0868 > > 8.68% / .8 = 10.85% > > Anyone else? The fact that the portfolio had > inflation indexed securities doesn’t change the > returns requirement. now we’re talking - that sounds right
Jscott24 Wrote: ------------------------------------------------------- > bosjcm Wrote: > -------------------------------------------------- > ----- > > I had the required distribution as 45,000. > > > > 45,000 / 1,000,000 = .045 > > > > 1.045 * 1.04 = 1.0868 - 1 = .0868 > > > > 8.68% / .8 = 10.85% > > > > Anyone else? The fact that the portfolio had > > inflation indexed securities doesn’t change the > > returns requirement. > > > > now we’re talking - that sounds right same
I had $975000 as the asset base, and 45000/year needed to cover the short fall. 45000/975000 = 0.0462 Add inflation and gross up for taxes: ((1.0462)(1.04) - 1)/(1 - 0.2) = 11 %
cdogstu77 Wrote: ------------------------------------------------------- > tomkwong Wrote: > -------------------------------------------------- > ----- > > cdogstu77 Wrote: > > > -------------------------------------------------- > > > ----- > > > 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% > > > > > > Yeah I think that got to be included. My > memory > > didn’t work well after the exam… I don’t know > > whether I included that… hahahah! > > > Yeah because if i recall correctly, expenses were > 125,000?, pension income was 85,000?, and then > there was an additional 4% return that the > portfolio earned (4% *1000000) =40000. That was an expected return on the retirement portfolio, correct? Don’t think that plays into the return requirement. am i wrong?
my question said after tax. thus i didnt divide by .80. maybe there were different wuestions my question said after tax nominal return
Wasn’t the pension $80,000 and the asset base $1,000,000 at the beginning of the retirement? The first was given the the later was $1,100,000 minus the 100k distribution for the mortgage payoff.
nikko0355 Wrote: ------------------------------------------------------- > my question said after tax. thus i didnt divide > by .80. maybe there were different wuestions > > my question said after tax nominal return Where did you take the exam?..may be there are two versions…in other message there is a similar situation from an asian frriend
The 100K distribution to pay off the mortgage was to come out of the portfolio. The question said that any income taken from the portfolio was taxed at 20%. Thus the 100K after tax was 125K before tax. That’s the way I understood it anyway.
45000/100000 = 4.5% 4.5/0.8 = 5.62% ( becuase, they will pay 20% of tax) 1.04*1.0562 = 9.84%
You adjust for inflation before you gross up for taxes.
Wasn’t the asset base 1,000,000 minus 100,000 for the mortgage is 900,000 for the return requirement? That’s what my memory tells me.
Put me down for the 10.85% club…
Haha I lost a lot of points on this thread.
Malloozer Wrote: ------------------------------------------------------- > You adjust for inflation before you gross up for > taxes. I tought you gonna pay tax on the portion that is required because this what you gonna sell.
Malloozer Wrote: ------------------------------------------------------- > The 100K distribution to pay off the mortgage was > to come out of the portfolio. The question said > that any income taken from the portfolio was taxed > at 20%. Thus the 100K after tax was 125K before > tax. > > That’s the way I understood it anyway. it said the 100,000 would cover the mortgage paydown and resulting taxes.