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proposed strategic expected return

Hi all, in EXAMPLE 5 of the REAL ESTATE session (Adding Real Estate to the Strategic Asset Allocation); Solution 2 stated:

Solution to 2:

L3V5R30-113 The proposed strategic asset allocation’s expected return of 4.9% falls well short of the (1.05)(1.02)(1.0020) – 1.0 = 7.31% return objective based on the description of the problem.

Could some one help me understand how to arrive at this 7.31%, what formula to use?


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Spending rate, inflation, management fee, respectively.

Reread the example, then go back and reread Reading 15, section 3.

You have to be able to pull the pertinent facts out of a vignette quickly.

Simplify the complicated side; don't complify the simplicated side.

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