# Likelihood of reading 12 calcs showing up on exam?

Given this is a new reading, it seems highly likely it will show up on the exam. Maybe a full item set? Do you think it is more likely the financial needs calc shows up or the surrender cost calc?

Just curious

Donâ€™t know why but I have a gut feeling that needs analysis method will show up in AM section and surrender cost calc in PM.

If the needs calculation is on the morning (or afternoon) for that matter it will be by far the most amount of calculations seen on an AM exam on a single problem (remember that all/most questions are independent of one another)

I think NPCI and NSCI are likely more testable.

i just wonder how would they test it

whats NPCI and NSCI btw?

@Turbo

Needs? You mean a core capital?

@h21

Net payment Index and Net Surrender Index

and i have no idea what they are, amazing

No. Human value life = Humana capital - Cost they would have incurred living.

Needs based = What they would NEED since the person died up to a period. AKA education, living expenses they covered, etc. There is a problem in reading 12 that is needs based. It has like 5 PV formulas, a bunch of removing certain payments, changing life income on years, taking FV of education discounting, solving what they have already, and removing it. I would be SHOCKED if we got a problem like that solve. Like almost walk out shocked. It would have to be like a 20 minute problem.

Human value life I could see being a 3-6 minute problem though. Just need to figure out the person would be worth (PV of human capital) - What they would have lived on (PV of their expenses).

For reading 12, I personally see Net payment/Surrender, Explain Human Value vs Needs, and maybe build an econ balance sheet with Vested pension in Financial Capital and Unvested in Human capital.

I see. This is something related to need for Life insurance and premature death risk.

there was a question on surrender cost index in one of the latest mocks (2015-2017?)

SCI = [(fv premiums - fv dividends - cash value ) / (1+ rf)^n )] / (benefit /\$1000)

sorry just quickly, what is net payment/surrender?

Jsnazz - not sure what the Human Value Life calculation you are describing is; however, i definitely see Net Payment / Surrender on the test and am glad I have it nailed down. I just flipped through the Schweser book and there is not calculation related to â€śHuman Value Lifeâ€ť - Iâ€™ll pick up the CFA text and take a look, any page number you have? Thanks!

Insurance comparison calculations:

Net payment: Cost per Face value thousands if you gave up insurance with nothing (They died)

Surrender: Cost Face value thousands if you get a cash value at end

Use N and IY provided

• Bgn > Pmt of insurance > FV (1)
• End > Pmt of Dividends > Fv (2)
• For net (1-2) = future value cost, for Surrender (1-2-Cash value (given)) = FV
• Bgn > FV from above > solve payment (3)
• (3) / (Face value/1000) = cost.
• Lower is better

Reading 12 4.1.1.4 = Blue box (Calculating life insurance need) and then below. The reason I know this? They do it both in an EOC and in the Example they show at the end (The massive one), section 5. As I saidâ€¦I will be blown away by a needs based calc. Although I think the LOS (Analyze and critique) is doing that. I could see us saying they want a needs based and asking how much insurance they need, giving us both needs numbers and Human Value life number.

Seems it isnâ€™t covered by Schweser. See one of last readings in official curriculum. I am going to learn this.

Not only did Schweser not cover it, there were no EOCs in the official curriculum. It had to be downloaded separately.

Downloaded? Itâ€™s not in any of the official CFA curriculum in the hard copy text?

The readings are in the text. But not the End of Chapter Questions. There is a PDF of them on the website.

I use Vital Source and readings have been updated few times during prior 6 months. Maybe it was updated.

Guys, see the LOS - none of them state anything with respect to calculating human life value or even discussing it. Additionally, the important point is how LI is priced: mortality expectations, discount rate and loading (see curriculum page 412). I would not waste time trying to do all of those calculations for human life value. Focus on the points you are sure you can get and donâ€™t miss them. Not the ones that maybe 2% of candidates can calculate.

I would study net Net Cost / Net Surrender though, just my 2 cents.

Given the responses here, I hope they put it on the exam! Us CFAI text studyers need to be rewarded somehow!