ok. we’ve been through this, but i’m still consistently getting it wrong… so if i’m retired (65) and have a desire to leave 1mm to my granddaughter when i die. is that two time horizons? 65 to death, and another from my death to ? Or is that one time horizon and the beginning of another time horizon for my granddaughter? elementary questions, i know, but i’m having trouble… this comes from cfai question #12 on p 149 in book 2.
I didn’t do this question yet. In what form is the money being given to the granddaughter? If it is in the form of a trust (which might make sense since the granddaughter probably isn’t old enough to manage the $) then it would be two time horizons - retirment and post retirement (or post death). If the money was just be outright given to somebody else who could manage it then I would think it would be only one time horizon. How old is the granddaughter? What did the question say?
I will venture a guess … just a guess … Thats one time horizon only. If you plan to setup a trust that pays your grand daughter regularly over a period of time after your death, that could be a 2nd time horizon. But in this case, one time horizon only.
the problem was probably purposely unclear about that. the actual question shows this couple wants to leave money to 2 different recipients, $1mm to the local college that they have already set up a “gift fund” for. (so this is not another time horizon) they also want to leave $1mm which is the size of their account now outside of this gift fund, to their granddaughter. they have not set up a trust and nothing is promised. their goal is to give their granddaughter what is left in the account after they die. you guys are both right, ofcourse. it’s one time horizon. i guess i wasn’t clear on when a bequest desire becomes a new time horizon for the benefactors… no mention of age of granddaughter.