Hollistic Balance Sheet

In the TTs, there is a question that asks to calculate the total assets under the holistic balance sheet.

In order to get the value, you need to calculate the discount rate. I used the risk free rate, but the correct answer sums the risk free rate + the occupational income volatility rate.

What is the occupational income volatility rate and why you need to add it to the rf?

Thx for the help

That should be given in the question, no? It’s an adjustment to the normal discount rate when determining the PV of someone’s future human capital. A race car driver would have a much higher occupational volatility discount rate because of the uncertainty of their income vs. say, a doctor who would use a lower volatility discount rate. I think that’s right anyway.