B. Return CFA 21-13 Foothill College Endowment Fund ise t on Case Facts ouse Ins

Question

B. Return CFA 21-13 Foothill College Endowment Fund ise t on Case Facts ouse Institutional; endowment Type of investor Provide annual scholarships currently the Purpose totaling $39.5 million $I billion 6 percent, calculated as spending rate of of Asset base Stated retum desire 4 percent plus previously expected college tuition inflation of 2 percent Other return factorsRevised 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 Significant C. Time horizon D. Overall time horizon Short to intermediate Long term Below average Above average Not significant Multistage Single stage term E. Tax concern Significant 2. Discuss appropriate client objectives: Not significant 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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