› CFA › CFA Level 3 › Retail IPS – Return objective calc

Retail IPS – Return objective calc

Add A Reply
Login
  • Author
    Posts
    • Avatar of adossa3adossa3
      Participant
        17 Apr 2017 at 7:19 am
        Up
        1
        ::

        Hey there!

        Am mucking up the return requirement – cant think straight any more!

        Shouldn’t one add any after-tax salary less living expenses to investible assets for the return objective calculation ? I understand in most cases, after-tax or before-tax salary/income is always equal to living expenses, so there is no investible asset to earn on. But where after-tax salary exceeds living expenses, should it be added to the Investible Assets figure ?

        2) all immediate spending and liquidity needs go in the numerator / Investible assets, for the required return calculation – correct ?

        Thanks very much
        Aaliya

      • Avatar of Sophie MaconSophie Macon
        Keymaster
          18 Apr 2017 at 3:06 am
          Up
          3
          ::

          @adossa3 – I don’t think you should add excess salary to investible assets, unless explicitly said so (which is rare). Because they need liquidity as well and investments are usually long term.

          I don’t follow your 2nd question, care to explain more?

        • Avatar of Sophie MaconSophie Macon
          Keymaster
            17 Apr 2017 at 8:28 am
            Up
            2
            ::

            Hi @adossa3 – before I answer, have you taken a look at CFA Level 3 topic picks section? I wrote some guides on IPS questions…

          • Avatar of adossa3adossa3
            Participant
              17 Apr 2017 at 11:22 pm
              Up
              1
              ::

              Hi, yep, saw the IPS tips – many thanks

            • Avatar of sankrutimehtasankrutimehta
              Participant
                17 Apr 2017 at 2:40 pm
                Up
                0
                ::

                @adossa3: I do goof up at times at the return requirement part of the IPS…so if u figure out any standard rules do share them 😀

            • Author
              Posts
            Viewing 4 reply threads
            • You must be logged in to reply to this topic.