CFA mock 2018 PM question 7, calculation of economic net wealth.
One desired item on the list is 325k for a vacation home. Why is this counted as a liability for net wealth? They will possess the home afterwards for a MV of 325k so to me it should not be counted as a liability for wealth purposes.
bump
I see what you mean, but since it’s a future expenditure, it’s safer to deduct it instead of adding it from net wealth
My first approach was to ignore it since it is no change in net wealth. But if cfa institute wants it this way, I will follow (on Saturday)
“Purchase of a vacation home in the next five years, with an estimated present value of $xxx,000”
I also think this is wrong. It is just a substitution of one asset for another asset. it would be fair to substract just transaction costs and then depreciation or estimated consumption of value. To take the whole sum as a liability is just plain wrong. Could potentially be even a great investment, which is rented out most of the year.
Most of my “wrong” answers are probably right 