time horizon question..

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.

3? Retiremement, college & death+bequest?

cfasf1: The question isn’t tightly constructed. I can justify all 3 answers depending on how things are sequenced and with what time gaps. I would go with A-3, till retirement, education, after education and retirement.


5 TH1: 13 Years - Current until Daija enters college TH2: Approx 4 years - Daija’s college funding TH3: Approx 13 years - After college until retirement TH4: 25-30 Years - Retirement TH5: Life of estate and distribution of assets post-retirement -I’m going to say TH5 should be included because the assets probably won’t be distributed immediately since they are going to grandchildren.

Actually, I think the answer is 4 leaving out the post-retirement time horizon. This seems to be the way these questions have been leaning lately…

3 until retirement, retirement, post retirement whats the answer?

3 . Till college, college+ retirement, post retirement

4, till retirement, college, retirement, post retirement (bequest)

3; college, retirement, death+bequest

  1. there is no bequest requirement. just a wish: She would love to be able to leave something to these future grandchildren. if this sentence activates a bequest, then 4. IMO


mwvt9 Wrote: ------------------------------------------------------- > 4 Which TH’s are you counting?


Wow, these are exactly the kinds of questions that make the exam difficult and often more representative of subjective,lucky guess of their “implied” assumptions than actual competency… I would say (3) because the curriculum specifically states that upon death the portfolio becomes someone elses wealth/portfolio to manage But I acknowledge, that especially for very wealthy folks with an explicit “pass along” strategy, it is sometimes appropriate to explicitly factor in a post-death time phase, but there is no clear cut criterion provided. Since we are not talking about the Rockefellers here I would lean to (3) but sometimes I think it is a coin flip on these types of questions!

I gotta go with 4: Now until daughter is in college 4 years while daughter is in college From college graduation until retirement During retirement The college part is tricky because are you supposed to assume that she will have everything saved up for 4 years of college by the time the daughter starts? Maybe, maybe not. If so, then you could argue there are only 3 horizons. It states she works for the government so it is a good bet she is not very wealthy. It is likely she won’t be able to save up for all 4 years of college over the next 13 years. Leaving something to her grandchildren is a desired outcome but not necessary.

sf, what is the answer?

now until college college after college until retirement retirement post-retirement (bequest) 5???

5…agree with bedfox427… What is the answer?csaf1

Sorry guys. I completely forgot that i posted this question last night before going to bed… Your answer: A was incorrect. The correct answer was C) 4. 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.