One of the mock question talks about an investor who has 10.2mm in account now and withdraws 55m each year for mortgage payment. He needs to have 15mm by the time he retires which is in 5 years.
I calculate the rate required 8.5% and multiply by (1+inflation) to get the nominal rate of return required but the answer just leaves it at 8.5%
Question asks for after-tax nominal rate of return that is required.
I’m sure I’m missing something simple but why don’t I need to multiply by (1+inflation)?
I understand about the after tax part but why don’t I need to multiply by 1+inflation? In previous section it asked to calculate return, it was a simple liquidity needs/asset base so like 55K/1M = 5.5% but you have to count for inflation so the actual answer is (1.055)(1.04)-1 = 9.72%. Why do I ignore inflation for the next part?