From Reading 19, Example 2:
Return objective
CFFA’s assets shall be invested with the objective of earning an average nominal 6.5% annual return. This level reflects a spending rate of 4%, an expected inflation rate of 2%, and a 40 bp cost of earning investment returns. The calculation is (1.04)(1.02)(1.004) – 1 = 0.065, or 6.5%. When calculating nominal ror, why does the example multiply the %s together (after adding 1) instead of adding them up?
Other areas of the textbooks simply add the real rate to the inflation rate