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sabre

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发表于 2013-4-2 14:36 | 只看该作者
Thanx all
If you can see the answer on essay question no 1 in 2009 exam, it is differ from what we said above
in the question : $ 45,000 after tax net income needed
$ 1,000,0000 investment portfolio 20% tax rate inflation 4 %
Based on aove: before tax nominal return should be = (4.5%+4%)/1-.20 = 10.625%
However the exam answer shows the before tax nominal return = 9.6 %
Can any body explain why this diffrece happened and what is the correct way to calculate before tax nominal return STRATING from after tax real return?
Thanx

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ASSet_MANagemen

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发表于 2013-4-2 14:37 | 只看该作者
Before tax expenses=45,000/(1-0.2)=56,250
Before tax real rate of return=56,250/1,000,000=5.6%
Before tax nominal rate of return=5.6%+4%=9.6%
I guess we have to calculate spending before tax first and then calculate the return adj for inflation. Thanks for the info!

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