Beckers current year, say 2011, living expenses is $250000. – Taken care by their income.
Portfolio value at the end of the year 2011 = $4350000
Beckers next year living expenses for 2012 (250000 - 48000)*1.03 = $208060 (Pension expected to grow at inflation rate)
Net investable portfolio must be $4350000 - $209500= $4140500
Beckers year after living expenses for 2013 (250000 - 48000)*(1.03)^2 = $214302 (Pension expected to grow at inflation rate)
Return == 214302/4140500 = 5.175 == 8.175 with inflation additive.
Calculations are wrong in the solution. Am I missing some thing? |