Practice problem Reading 14- Question 1 132, problem, instead, income

bdavi77962

The answer for Ongoing expenses(page 156) 1 is Eur 132,500. Should that not be net of expenses covered by income of Eur 50,000 and be Eur 82,500 instead?

segalm

Sorry for the confusion.
I will try to be more explicit- When drafting the “Liquidity” Section of the IPS, one should only include liquidity requirements that need to be covered by the Portfolio only. It should not include expenses that will be paid out of employment income. The art sales in that case is an annual income and is not part of the portfolio.
So ongoing liquidity requirements should be 132,500 less 50,000.

dandman

Sorry, not sure what you are asking. Her ongoing expenses, 132,500, are covered out of the 50K in art sales and 82.5k expected portfolio return (which equals exactly 132,500 hence all of her ongoing expenses are expected to be covered by her level of expected income).