AFMR’s return objective is closest to
9.5%
9.74%
10.27%
solution
1.055 * 1.035 * 1.005 - 1=9.74%
my question is why risk free rate 4% is not needed?
return objective is based on required return for the foundation - which is 5.5% spending rate, along with management fee (cost of earning return) and inflation.
However, I got this wrong because I added the % rather than do geometric return with multiplication. I’ve seen many examples where they do additions to come up with required return. Anyone shed some light on when to use geometric or additions for questions like this?