Return Calculation (Managing Individual Investor Portfolios; EOC, Question 11, Part C)


The question states this “An after-tax annual return of 5.4% is required over five years to meet the minimum pledge ($2.6mm that the client wants to donate)”

How do we say if this return is real or nominal?

The question essentially asks for the appropriate asset allocation. The expected annual return of the various portfolio allocations in the question is stated on a nominal after tax basis. Why should i not add inflation rate to the above 5.4% to get the nominal after tax return?