I’m struggling to use the correct approach when there are multiple factors in calculating a return. Example: 3% asset return, 3% currency return Is there a standard of when to multiply them ((1.03 x 1.03)-1) vs add them (3% + 3%)? I would assume when there are multiple compounding periods that multiplication would be the standard. However, I seem to feel that I’m finding inconsistencies. Required return when inflation is a factor seems to be the other popular place for my frustration.
let me qualify the answer: (in individual ips questions). no there is not. both answers are accepted so 3% real return + 3% inflation = 6% nominal (additive) or 6.09% (multiplicative)
For currency questions - they have used the Approx equal to in most places in the book.