Dear all,
Quick question regarding calculation of return requirements norminal vs real:
Example in Schweser is that if you have a spending need that will increase with inflation / is stated in real values you should add the inflation to the real return which is expenses / portfolio value.
There is another example where expenses will increase with inflation and the portfolio value should also maintain or reach a specific real value (terminal real value is given). However similar to the first example the real return is calculated and then inflation is simply added.
To me this seems contradictory: how do the calculations for a required return change depending on whether the portfolio itself should maintain real value or nominal value over time horizon?
Best,
Mercutio