Hi all,
Can you please help me finding Paul and Jessica’s human capital (at 45 years old) along with PV of lifetime consumption needs on the economic balance sheet on page 340?
For Jessica, I did fv = 0, iy = -0.95, n = 20, pmt = 46510.
Cpt pv = 1188223 and 1188223×92% = 1093165.
However I am unable to calculate the same for Paul and pv of lifetime consumption.
Can someone please help?
Thankyou!
For human capital calculation, you will need to multiply the probability of surviving up to age X to the wages at age X (for every year until retirement), then discount them with (r + y).
For Jessica’s case, you got it right by coincidence. You will not be able to compute the PV of human capital unless you have the mortality table (not provided by CFAI)
As for PV of lifetime consumption needs, these are the inputs for [TVM]:
BGN model (Annuity due):
65,000 [PMT]
45 [N]
1.03/1.02 - 1 = 0.980392% [I/Y]
0 [FV]
[CPT] [PV] …
Thankyou so much. I really appreciate it!