Hi,
I have difficulty in understanding the PV of survivor’s income under the case study. Eg is obtaining the value 758,000 under Paul column and 1,246,000 under Jessica on pg. 333.
It seems that the rate used is zero. Is it becos there us no need to b adjusted hence ‘zero’? We are to adjust the rate using (1+discount rate) /(1+growth rate) when discount rate is higher than growth rate. Will we still need to adjust the rate using above formula when the discount rate is equal to growth rate and discount rate is less than growth rate).
Also, pg 345, why the denominator of adjusted rate is( 1+nominal increase) rather than the annual growth rate of 2%.
Lastly, are we suppose to know the calculations relating to reading 38?
Thanks