In the “story” it is clearly stated that the family have an annual USD 225,000 mortgage payment that has to be paid - but then in the answer, when calculating the required return for the first year of retirement (which is ony 1 year away) they have conveniently left that out of the expenses that are required to be covered.
Are we just to assume, without being told that the mrtgage payment mentioned is the last one they had to make? Seems a bit strange that they call it an “annual mortgage expense” which says to me it is ongoing…and then suddenly the next year it dissapears from any plans they have to account for.
Can anyone set me straight on why the mortgage payment isn’t included in the answer for the “required return in the 1st year of retirement”. These God damn IPS questions are driving me crazy…!!!
For me this is due to the information paragraph 2 : The Beckers will pay off their mortgage and their consumer debts soon after the inheritance is received"
It imply that the full mortgage is repaid (3.5M) and this amount is deduce from the after tax inheritance (8 millions) .
There is no longer annual mortage payments in their first year of retirement which starts after receiving the inheritance (one year from now) , as stated in paragraph 1.
So saying as I missed that point and added the mortgage payment onto the required return for the next year, and saying that I got everyting else right (taking into consideration the incorrect mortgage payment), how do people think that would be marked?