CFAI book 6, page 339, in the “Schmitt family” case.
At age 45, I fail to recompute Paul’s and Jessica’s human capital in the economic balance sheet.
CFAI shows Paul’s human capital = 798,000 and Jessica’s human capital = 1,093,000
Jessica salary before taxes = 80000
nb periods = 20
Discount rate = 3%
I compute adjusted rate as (1+discount+risk adjustment)/(1+growth):
for jessica adjusted rate = (1+3%+1%)/(1+5%)= -0.95%
PV for Jessica=PV(-0.95%,20,80000,1) as annuity due in excel = 1,754,941
then multiply by 92% probability rate (given in the text)
HC for Jessica=1,614,546
Is anyone able willing to help? Is the HC based on the after-tax salary? Or does the CFAI use a different mortality table (ie a % different from 92% at each period)?