The first line in the answer states “The expected return of 11.11% lies between Corner Portfolios 4 and 5…” Where the hell does the expected return of 11.11% come from?
In the question, it says spending rate is 8.5%; inflation 2%; and managing cost is 0.4% So (1+0.085)(1+0.02)(1+0.004)-1=0.1111; here is your 11.11%. Does this help?
Absolutely and thanks a bunch. I wasn’t factoring in the managing costs of 0.4% so I kept getting 10.67%. Alot of time and frustrating wasted on something as simple as that. If it helps me not to do that again, it’s worth it I guess. Thanks again.
In this example, it seems fairly straightforward. However, back in private weatlth managment. My brain draws a blank. So much staff is throwing at you, I didn’t know what to include and not to include. THAT was frustrating.