Colum

I don’t think so. This is a very common mistake L3 candidates commit when calculating required rate of return for individual investors.
Mr Smith thinks in nominal terms about his retirement needs - CURRENTLY, in Year 0 ! This means his 50 grands will be not 50 grands in one year but 2% cheaper. Thus, to keep the client’s needs constant in power purchasing terms you should adjust the 50 grands by 2% - at the year 1 beginning the real money are 50,000 x 1.02, and the 20 grands are as well.
Then, to calculate the required rate of return THE portfolio needs to provide in Year 1, you need further to adjust the return for nominal terms - this is required for the investor must be provided by the return figure at the beginning of investment period.
It is explained by Schweser in the Practice Tests.