FINE 4050 Lecture Notes - Lecture 2: Fiduciary, Stress Management, Canadian Securities Regulation
17 Apr 2018
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Important asset: grows over time, putting a monetary value on it, there"s (cid:374)o (cid:373)arket for hu(cid:373)a(cid:374) (cid:272)apital. Organizations wanting to stop giving students debt: they want to give students pieces of capital (equity) You"re 22 years old a(cid:374)d i(cid:374) s(cid:272)hool (cid:894)(cid:374)ot (cid:449)orki(cid:374)g = (cid:374)o i(cid:374)(cid:272)o(cid:373)e(cid:895) Plan to work at 25 years old, expect to earn k per year (k monthly) Work for 40 years until age 65, then retire. Assume a v = 5% (nominal, annual) value rate and a salary with g = 0% growth. Answer: . 3843: pva (0, 0. 05/12, 480) Then, gh22: 1,036,921 * pv (0. 004167,36) = ,765, 1,036,921 * (1+0. 05/12)^-36 = ,765. Assume a v = 7%, everything is the same. Gh25 = 160. 9188 * 5,000 = ,594. Then, gh22 = 804,594 * pv (0. 005833,36) = ,589. Human capital is worth less because of higher discount rate. Think of this as wage inflation, which tends to be higher than price valuation, denoted by gw > gn (pie)
