Calculating Disability Assistance: Brandon & Eileen (Quiz 38.3)

CFA Level II Portfolio Management
#1

Hi guys,

I am stuck on this question calculating disability benefit. I am able to PV the benefit for Brandon [N = 10, PMT = 30, I/Y = 0.98] but I cannot seem to calculate the right benefit for Eileen. I am also confused as the growth rate exceeds the risk free rate so I am getting a negative number. Any ideas?

1 Like
#2

I don’t have access to the question, but you can let the rate go negative! Set I = (RF rate - growth rate)/(1+growth rate).

#3

thanks ill try this!

#4

Hello there,

A bit late but the answer was indeed I/Y = -0.96% (1.03/1.04 - 1) while I/Y for Brandon… If you use the financial calculator, use PV = -527’492 and PMT = 50’000