Why the “implied assets (human capital)” was decreased since “just prior to retirement” ? The statement of “just prior to retirement” is vague. If it means a few days before retirement, the “implied assets (human capital)” was almost decreased to 0 and it is almost “remain unchanged”. Of course, if CFAI insist that almost decreased to 0 does not mean it equals 0, then I have no word to say. But I don’t think its a good question. Do you think so ?
Another issue : Can you find the terms of implied assets and implied liabilities in 2009 L3 curriculum ? They are found in R16 of 2010 L3 curriculum ! Why ?
Good point! AMC. I don’t have answer for u about whether the terms of implied assets/liabilities were in 2009 L3 curriculum. In fact, I like to know the answer myself. Can anyone help?? I missed this question like many others in 09 exam. Everyone knows what HC is and how it changes before/after retirement. However, many weren’t sure what implied assets/liabilities are then. In addition, the CFAI model answer states “The present value of the Tracys future employment income is zero. Their implied assets dropped to zero upon retirement and remain at zero.” I believe the studying materials states company and govt. pension income are considered HC. Since Tracys still receive both upon retirement thereafter, why their HC is zero??? Can someone help to explain?? Thanks in advances for your time and comment!
In the formula for Human Capital (R19), earnings are adjusted for (i) inflation, before & during retirement and (ii) pension/Social Security payments. So, I read that as Human Capital excludes these factors. There are several other postings on this particular exam question, with the same point. I failed it last year, and I’m sure most others did too. As AMC says, they didn’t even define Implied Assets/Liabilities until this year (it’s in the new readings on estate planning).
CFAI shall explain openly & transparently regarding this question & its solution !
failed it, too. what are the deifnitions of each, please? Thanks, M.
this is a bad question. I guess CFAI opinion implied assest=HC. from the word, implied asset should also includes potential return from their investment portfolio, potential inherit from their parents or relative, etc. from my past experiences w/L1 and L2, CFAI made even stupider mistake than this one in mock exam. It gives more pressures to earn enough mark in order to pass the exam. BTW, I can’t find the implied asset in R16 of 2010 L3 curriculum . can you tell which page?
hey guys, actually, I got the risk tolerance question wrong, too. I said that no change will be in there, actually, I thought that since the Time Horizon is becoming shorter and that the Tracy’s have now a strong bequest desire, then they should not increase their risk tolerance… no one of you guys had the same thought as me? Thanks, M.