calculation of after tax nominal required return

CFA Level III
#1

  1. after tax nominal required return = after tax real required return + inflation rate

  2. after tax nominal required return = before tax nominal required return * (1-tax rate), where before tax nominal required return = before tax real required return + inflation rate

Which one is correct?

#2

The first one is correct.

The second one might be correct, depending on what the vignette tells you.

#3

But this https://www.analystforum.com/forums/cfa-forums/cfa-level-iii-forum/91371100 states that the second is correct.

Totally confused:

  1. after tax nominal = (before tax real + inflation)(1-tax rate) = before tax real (1-tax rate) + inflation (1-tax rate) = after tax real + inflation (1-tax rate)

or

  1. after tax nominal = before tax real (1-tax rate) + inflation = after tax real + inflation
#4

No, it doesn’t.

It depends on what the vignette says. In particular, it depends on whether the return to cover inflation is taxable or not. Sometimes it is, and sometimes it isn’t.