Vivian Collins is a client of ESP Financial Advisors. She presents her situation as follows: Collins is currently a divorced mother to a 5-year-old daughter, Daija. She is 35 years old. She has worked at her current job with the government for the last 13 years, and assumes that she will remain there until retirement and collect her pension. Collins wants to be able to send Daija to the college of her choice. Collins expects her daughter to eventually marry and have children. She would love to be able to leave something to these future grandchildren. How many time horizons does Collins have? A) 3. B) 5. C) 4. Question ID#: 92038
Based on critical goals - 3 horizons ~13 years until she starts paying college tuition ~27 years to retirement >20 years post retirement based on life expectancy Including secondary desires (generation skipping bequest to grand children) 4 horizons
4? 1st until college 2nd until end of college 3rd until retirement (because cash flows have changed) 4th post retirement 5th IF they wanted a bequest
2nd until end of college - should not be counted. I’ll go with plug here
Three- a)college for kid, b) retirement , c) post retirement.
I am on team Sparty here with 4… I could see that not paying 35,000 a year for college being a significant change in cash flows.
I am also in the 4 camp
i say 3
Collins has 4 distinct time horizons. The first is now until the time that Daija enrolls in college. The second is supporting Daija’s college education. The third is her remaining years before retirement and after supporting Daija through college. The fourth is retirement. In retirement if a goal is to leave some assets to her grandchildren then the portfolio would need to be managed with that in mind.
I say 4 and go with the explanation of cfaboston.
There was sort of a similar question in the 2009 CFA sample essay questions. In the answers, the answer said either counting the time the child is in college as a time stage or not counting it would be correct. There were other stages, so it sounded like they were saying not to get hung up on whether it should be a distinct stage or not. Check it out for yourself. It’s question 1 or 2. Edit: I can’t remember the specifics of the question. I recommend checking it out though to see how similar it is to this Schweser question.
Yes I agree with that. It will not be a multiple choice. In essay, I will say 2 that is before and after retirement, and I will note child’s education can be a possible 3rd one. Comparing to the 2 big stages, child education is way smaller in amount and shorter in duration. I can always argue it is not material enough to be qualified as a separate stage. Also in IPS I can setup a pyramid layer for it if I have to. DC Zanini Wrote: ------------------------------------------------------- > There was sort of a similar question in the 2009 > CFA sample essay questions. In the answers, the > answer said either counting the time the child is > in college as a time stage or not counting it > would be correct. There were other stages, so it > sounded like they were saying not to get hung up > on whether it should be a distinct stage or not. > > Check it out for yourself. It’s question 1 or 2. > > > Edit: I can’t remember the specifics of the > question. I recommend checking it out though to > see how similar it is to this Schweser question.
“Collins expects her daughter to eventually marry and have children. She would love to be able to leave something to these future grandchildren.” Guys, she doesn’t even have any grandchildren yet (she thinks the 5 year old daugher will eventually marry and have kids). Even if we assumed that there were grandchildren the second part of that is not emphatic enough to count as a stage to include in IPS. 3 stages would be the answer in the form the question is currently stated…she “would love” to leave “something”. How do you plan out what “something” is? 3 stages.
Hmm, quickly assumed people were saying 4 and including bequest. The distinction between enrolling/through college is not a seperate stage. You could break it down forever…these are major changes. Some wouldn’t even include the college in the stages, depending on how emphatic the desire to fund it was. 3 stages.
Mission.CFA Wrote: ------------------------------------------------------- > Vivian Collins is a client of ESP Financial > Advisors. She presents her situation as follows: > Collins is currently a divorced mother to a > 5-year-old daughter, Daija. She is 35 years old. > She has worked at her current job with the > government for the last 13 years, and assumes that > she will remain there until retirement and collect > her pension. Collins wants to be able to send > Daija to the college of her choice. Collins > expects her daughter to eventually marry and have > children. She would love to be able to leave > something to these future grandchildren. How many > time horizons does Collins have? > > A) 3. > > B) 5. > > C) 4. > > Question ID#: 92038 The correct answer was C. Collins has 4 distinct time horizons. The first is now until the time that Daija enrolls in college. The second is supporting Daija’s college education. The third is her remaining years before retirement and after supporting Daija through college. The fourth is retirement. In retirement if a goal is to leave some assets to her grandchildren then the portfolio would need to be managed with that in mind. thanks
I remember reading in one of the CFAI books that the end-of-college timeframe will coincide with her retiring and hence we should be good with 3 only.
No way I’d put that answer on the exam.