Required Rate fo Return discount, investment, management, question, required

mkytz15

How would one solve this question:
What is the required rate fo return for a DB pension plan assuming a discount rate to value liabilities of 5 percent, inlfation of 2 percent and 0.3 percent investment management costs?

whew1110

*of

Viceroy

DB plan normally doesnt state to keep the real value of the portfolio, the assets arent meant to live indefineitely. Unless, explicitly stated, but I dont think Ive ever seen a DB plan where they wanted to maintain the real value of the assets like an endownment or foundation.
5.3 for DB plan
If it were an endownment it’d be 7.3

bchadwick

Systematic wrote:
DB plan normally doesnt state to keep the real value of the portfolio, the assets arent meant to live indefineitely. Unless, explicitly stated, but I dont think Ive ever seen a DB plan where they wanted to maintain the real value of the assets like an endownment or foundation.
5.3 for DB plan
If it were an endownment it’d be 7.3
if benefits are indexed to inflation, then the returnw ould  need to include the rate of inflation.

giorgio10

If benifit are indexed to inflation, in should be corporated in discount rate. In this case is 5% included

dcfox83

Does anyone remember if the discount rate was nominal or real, becasue if it was real, then we need to incorporate inflation. Else if its nominal discount rate…. See Question 3 2008.

dandman

igor555 wrote:
was mgmt fee on both versions of exams?
I dont remember it being on the version i took, it had inf and disc rate only :/ …

SFoyil

truongdv wrote:
If benifit are indexed to inflation, in should be corporated in discount rate. In this case is 5% included
that depends if it’s real or nominal. if you’re referring to the exam, then i don’t know, because we’re not supposed to discuss it.  OP, is it real or nominal? if nominal, then the inflation rate is just to mess with you.

nixie24

^ same here, i just used the dis rate and didnt include inflation but i dont recall ANY fee..

NakedPuts

i think some of you guys are confusing individual IPS with institutional IPS