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Question 60 morning CFAI mock

The answer shows rho= r - I, I am confused here as to whether subtract I from r or use r directly in the formula of P/E flow through rate.....as even the example in CFA ethics book do not use r-I and use r directly without subtracting I (Inflation)...but the solution to the mock subtracts I to get rho......can anyone help as to which is the right method ??

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