FINE 4050 Lecture Notes - Lecture 3: Risk Premium, Human Capital, Life Insurance
9 May 2016
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Document Summary
Ch 3: personal balance sheet and human capital. Personal balance sheets assess our financial position at a point in time. Traditional (or accounting) balance sheets outlines your assets, liabilities and net worth: net worth = total assets total liabilities. Financial assets consist of the market value of all your assets (excluding human capital); total money you would hold if you sold everything you own. Include intangible assets such as value of life insurance policies and pension plans. Present value of all of your expected future income. Discounted sum of all the wages projected to earn over the course of your life. The value of your gross human capital at age x is denoted by gh x. Market values of all (financial) debts you owe at the age of x el x. 0 amount of cash needed today to pay off all of your liabilities in one lump sum.
