In the solution… 1. Why did they exclude the inheritance from the asset base at retirement? 2. Why did they use a 4% real return and not the 13.8%, or 13.8% minus 3% inflation (10.8%)? Did they pull the 4% out of thin air? Thanks in advance! asz2001@aol.com
are you refering to CFAI book 2 page A-5? Check the CFAI erreta, they delete the whole paragraph from "To maintain his lifestyle… " to “…requires a 4.2% percent after-tax return”.
Thank you very much!