I am confused Why in stating return equirement CFA writes reaL RETURN OF 4%? Shouldn’t it be 5 % (that is spending rate)? Is n’t when we add inflation we get nominal return? I totally don’t understand logic in this paragraph
the return obj is to protect principal from inflation, so it’s 4%. the 5% is the minimum spending rate.
sorry i take that back. shouldn’t it be 1.05 * 1.04(inflation) = 1.092 -> 9.2%? this is like schweser p. 160 answer 1.
that’s exactly my point. I checked cfa errata page, its not there.