Question

Consider that you have decided to quantify many of the aspects required for financial planning on a personal basis. Accordingly, using your age as of the first day of next month, make all the appropriate assumptions as to discount rates to use, inflation rates and any other variables you may need and explain your rationale. Use the methodology described in the course and the videos. It is important that you lead the discussion and explanation of the plan so it would be understood by a reader of the document

Answer 1

When quantifying aspects of financial planning, variables like discount rates and inflation rates are important to consider. By using index numbers and base years, you can simplify the total quantity spent over a year for products and calculate inflation rates. These calculations help in developing a comprehensive financial plan based on age and other variables.

Step-by-step explanation:

When quantifying aspects for financial planning, several variables need to be considered, such as discount rates, inflation rates, and other relevant factors. To determine the appropriate discount rate, consider factors like risk and return on investment. Inflation rates can be calculated using index numbers and base years, which simplify the total quantity spent over a year for products.

For example, if you want to calculate the inflation rate for a specific product, you can use a base year as a reference point and compare the prices from different years to determine the percentage change. This helps in understanding the purchasing power of money over time.

Using these methodologies and calculations, you can develop a financial plan based on your age, making assumptions about the discount rates, inflation rates, and other variables. By applying these concepts, you can estimate the present value of future cash flows and make informed decisions about your financial savings and investments.