Private wealth mgmt :Return requirement 207, adjusted, expected, question

maxmeomeo

I have a question about Private wealth mgmt book 2 of CFAI. Q 2 on page 207 where Christa return requirment is calculated. In the solution it says “Because the portfolio’s expected retun of 7.4% translates to real retun of 4.4 %, the portfolio is not expected to meet the return requirment of 4.5%”
But both the returns of 7.4% and 4.5% were calculated the same way without adjusting for inflation, so my question is why the 7.4% return is adjusted for inflation and then compared with the 4.5% retrun which was calculated the same way as 7.4%?? the only difference is that Chrits reduces her living expenses by combining studio and apart? we are comparing apples with oranges
82,500/1,120,000 =7.4%, this is then adjusted for inflation?
50,000/1,120,000 = 4.5%
Thanks

ShooterMcCFA

Her current expenses are 100,000 and her art sales are 50,000, so this year she needs to generate 50,000 from her portfolio of 1020000, or 4.46%.  If you think in real terms, her net income requirement stays at 50,000.  If you prefer nominal, then you would inflate her expenses and income by 3%, so she would need roughly 7.5%.
So she needs 4.5% real of 7.5% nominal.  The 4.5% isn’t adjusted for inflation because it’s real.