CFA 2-13 Foothill College Endowment Fund on Case Facts use Institutional; endowm

Question

CFA 2-13 Foothill College Endowment Fund on Case Facts use Institutional; endowment Provide annual scholarships currently Type of investor the Purpose totaling $39.5 million $I billion f Asset base Stated return desire 6 percent, calculated as spending rate of 4 percent plus previously expected college tuition inflation of 2 percent Other return factors Revised expectation of college tuition inflation is 3 percent Tax concerns Questions I. Underline the word at right that best describes the client's: Tax exempt A. Risk tolerance B. Liquidity requirement C. Time horizon D. Overall time horizon Below average Significant Single stage Short to intermediate Above average Not significant Multistage Long term term E. Tax concern Significant Not significant 2. Discuss appropriate client objectives:d A. Risk B. Return

Explanation / Answer

1. The institution in the above scenario is an College Endowment fund with main objective to fund the scholarship on annual basis at present totalling to $ 39.5 Mio with an Asset Base of $ 1 Billion.

2. Both the objectives are mentioned in terms of return requirement i.e. Stated Return Desire and other return factors. Accordingly, client objective is Return based.

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