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?作者: whew1110 时间: 2013-4-28 07:30
*of作者: Viceroy 时间: 2013-4-28 07:31
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作者: bchadwick 时间: 2013-4-28 07:32
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.作者: giorgio10 时间: 2013-4-28 07:32
If benifit are indexed to inflation, in should be corporated in discount rate. In this case is 5% included作者: dcfox83 时间: 2013-4-28 07:32
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.作者: dandman 时间: 2013-4-28 07:33
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 :/ …作者: SFoyil 时间: 2013-4-28 07:33
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.作者: nixie24 时间: 2013-4-28 07:33
^ same here, i just used the dis rate and didnt include inflation but i dont recall ANY fee..作者: NakedPuts 时间: 2013-4-28 07:33
i think some of you guys are confusing individual IPS with institutional IPS作者: spartan1 时间: 2013-4-28 07:34
so…5% right?作者: Kiakaha 时间: 2013-4-28 07:34
^ that’s what i did.. when I left the exam everyone was saying its 7. something im not sure but I was kind of sure that it is 5 only.. its not a found or end.. im not sure.. anyone?作者: Benjiko 时间: 2013-4-28 07:35
not if its real kid cudi作者: ASSet_MANagemen 时间: 2013-4-28 07:35
Went with SQRT(25) here as the RRR作者: fishmarket 时间: 2013-4-28 07:35
Given the discount rate did not state that inflation was included, I think it is safer to add inflation. Also add MGMT fees too.作者: whew1110 时间: 2013-4-28 07:36
i must have been blind, i didnt see mgmt fees either. were they buried in the text somewhere?作者: soddy1979 时间: 2013-4-28 07:36
^ must have been blind too .. low probability to have a lot of blind people not seeing management fees.. high probability of having different versions of exams.. who knows ..作者: jcfa2011 时间: 2013-4-28 07:36
I recall the question said “show your calculation”. Would the CFAI do that of it was just the 5%?作者: SpyAli 时间: 2013-4-28 07:36
Ilovegold wrote:
I recall the question said “show your calculation”. Would the CFAI do that of it was just the 5%?
Another hint that you had to make some exercise with the figures. If you were to put just 5% in the answerbook, it is hardly to be considered as “calculation”, isn’t? Thus, in order to make the calculation you needed to show a manupulation with those three figures.作者: MiniMe7 时间: 2013-4-28 07:37
^interesting作者: cyber21 时间: 2013-4-28 07:37
Since …. then x% is the req rate of return.
I think this is fine. But i barely had time to even THINK of their question format lol i just answer and move forward and STILL i left question 9 untounched!
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