PalacioHill

If you ignore her portfolio return of 82500, she will have 50000 in income and 100000 in expenses. So, she currently has a shortfall of 50000. She needs 50000 per year to cover these additional expenses (50000/1120000=4.5.). Both the 50000 income and the expenses of 100000 will move with inflation (meaning the shorfall will also increase each year). So, she needs a REAL return of 4.5%.

The portfolio return of 82500 can be broken into two components. 1. related to inflation(1120000*1.03=33,600 or 3%) 1. real return (82500-33600=48900 or 4.4%).

My guess.