Required return - tax, inflation etc. (add or multiply?)

[sachin_patel]

I have come across questions where sometimes it adds and sometimes it multiplies.
Can I be safe and multiply all the time?
i.e (1+r)(1+t)(1+inflation)-1
I’d rather keep it standard and not think when is it safe to add vs multiply.. what is everyone’s thoughts?
Thanks.

 

[sachin_patel]

The only concerns I have is if CFAI guideline answers have added, what would be grader’s action?

 

[JJ1337]

Both calculations are OK and you should get the points.

 

[Jen R]

During the Schweser 3 day review, we were told to add for individuals and multiply for institutional investors. It appears that both will be fine on exam day based on prior mocks though.

 

[jitendra179]

See insti portfolio is larger size, hence even few decimal percentage higher matter a most, so use multiplicativa for insti, no harm to do the same for individual as well if you are more comfortable.

 

[Viceroy]

Multiply when in doubt is my best answer.