CFAI mentioned in the case that first distribution from porfolio should occur immediately. Doesn’t that mean we should deduct 200,000 living expenses from the current capital base 4000,000, and then use the result 3,800,000 as the PV in our formula to calculate the return. I don’t understand why CFAI answer kept the asset base 4000,000 for return calculation. I appreciate your feedbacks
don´t they substract those 200.000 from their current asset base of 4.200.000? I understand that asset base = + 1.000.000 in the stock + 2.400.000 inheritance + 800.000 bonds and cash equivalents = 4.200.000 Minus immediate 200.000 expense = 4.000.000 asset base
Thanx, apparently I need to go for sleep!!