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 Schweser Exam 3 AM - #2 - Individual Portfolio Management 
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Joined: 01 Mar 2013
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One of the parts of this question refers to having to calculate the current year’s after tax return requirement. It notes that the portfolio’s owner will not retire for 15 years, and when they retire they will be living off of $80,000/year. They are a net saver of roughly $20,000/year, and when you calculate the retirement portfolio’s needed value using an NPV formula in your calculator (at, say $80,000x(1 + inflation)^15/year for 20 years, with the -80,000+inf number as pmt, n = 15, fv = 0, and i/y at inflation to get pv) you get a number substantially lower than where the portfolio is today after removing all immediate liquidity needs. Would it be typical on a CFAI exam for them to ask you for the current year’s after tax required return, and point you to the $80,000 retirement number for the current year’s required portfolio income, even when the present value of the cash needed in the future is, like I already mentioned, substantially lower than where the portfolio’s value is, like this question requires? This doesn’t make any sense to me, and while reading the problem I felt that it was very poorly worded.


08 Jul 2015
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Joined: 01 Mar 2013
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08 Jul 2015
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