bluejazzy

Beatnik Wrote:
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> Hi guys,
>
> I have a problem with the the question in the
> afternoon part of CFA mock exam, which gives
> historical equity nominal return, T-bill return
> and rate of inflation and asks to calculate the
> risk premium. The correct solution:
> 1+RP=(1+RR)/((1+RFR)*(1+inflation))
>
> That would make sense, but there's a seemingly
> identical question in EOC of reading 52 in CFA Vol
> 4 (question 13, p.380) where the correct solution
> is given as 1+RP=(1+RR)/((1+RFR) i.e. here they
> don't subtract inflation premium and get a larger
> RP figure.
>
> Am I missing something here is it a mistake on the
> CFAI side? My guess would be the answer in the
> exam was the right one...


I have the same problem and I have written to CFA about it. Yet to hear back from them. But, my guess is that the curriculum is correct since Treasury return is 'Nominal risk free return' not 'Real risk free return'.