Certainty Equivalent formula

[anand99]

Hello David,

In the study notes on Page 11, the formula for CE is given as
CE[CF(n)] = E[CF(n)] * [1+r(WACC)]^n / [1+r(f)]^n
however the computation is showing
$356 = $453*(1+3.50%)^5/(1+8.616%)^5

Where Rf = 3.50% and WACC = 8.616%

 

[David Harper CFA FRM]

Hi anand, yes, thanks, it's a typo and should read like the computation (risk free on top): CE[CF(n)] = E[CF(n)] * [1+r(f)]^n / [1+r(WACC)]^n.
I will correct on revision ASAP, thanks for the feedback,