spending rate 8.5% inflation 2% costs 0.4% Schweser calculates the required return as follows: 1.085 * 1.02 * 1.004 = 11.11% In the guidline answers of CFAI exams the return is calculated as: 8.5% + 2% + 0.4%=10,9% Wich method should I use on the exam?
Either method would be appropriate unless specifically stated is the consensus vote
If you review any of the morning exams posted on the CFAI website, they accept an arithmetic and geometric calculation for return. Either would do.