Rd 38 - Schmitt family case

CFA Level III Portfolio Management
#1

Hi all,

This is from CFAI reading #38. Exhibit 6.

Have someone figured out where did they get 1,246,000 for Jessica’s HC ? Her annual after-tax income is 20,490 given in case. Discount rate should be 3%*1.06-3% ? But even then, it still doesn’t come close to the PV in the text. Age is currently 28, so N=65-28=37

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Thanks,

#2

Hi there,
There’s another thread about the Schmitt family.
Anyway: if Jessica dies, Paul is the survivor!
Paul’s wage: 33670, 37 years, adjusted rate= 0% [growth=discount rate], FV=0, BEG for annuity due
PV=1,245,790.00

#3

Got it now, thanks.