IPS - nominal and real returns required, question, returns, example, problem

firat

Hi all,
When given the required return in an IPS problem, should we always assume its given as real return or is it nominal return?
For example, in question 2 in the CFAI volume 2 book, pg. 145, it seems like if we’re given the rate of return on a portfolio of investments, we should always consider that nominal. But when calculating required return (living expenses, etc), we should always consider this real return?

lucasg85

I don’t think there’s a clear cut answer, it depends on the information given (e.g. they throw in a sentence or two regarding inflation).