|
Q30. Compared to the average time horizon of his current clients, the time horizon of the investment company and endowment fund will be:
Investment Co. Endowment Fund
A) longer longer
B) shorter longer
C) shorter shorter
Q31. Which of these situations (the investment company or the endowment fund), would have the fewest tax considerations?
A) The endowment fund.
B) There is no clear answer.
C) The investment company.
Q32. Which of these situations (the investment company or the endowment), would require the most attention to generating a positive alpha?
A) The investment company.
B) The endowment.
C) There is no clear answer.
Q33. With respect to the statements made by Monarch and Linn comparing foundations and endowments:
A) Monarch is incorrect about taxes and correct about functions; Linn is correct about taxes and incorrect about functions.
B) Monarch is correct about taxes and correct about functions; Linn is incorrect about taxes and incorrect about functions.
C) Monarch is incorrect about taxes and incorrect about functions; Linn is correct about taxes and correct about functions.
Q34. Monarch thinks he might be questioned about the predictive power of an investment manager’s past performance. Which of the following factors is least likely to help when projecting how well a manager will do in the future is:
A) the manager’s nominal return.
B) what time frame was used to measure performance.
C) whether the performance was evaluated relative to a style benchmark.
Q35. Ed Simon, CFA, works for Mountaintop Consultants, a middle-market investment advisory firm catering to institutional clients. Simon’s supervisor has recently given him the task of revising the firm’s basic investment policy statements (IPS) for foundations and endowments. Simon knows that there are many similarities between foundations and endowments, but that there are also some important differences that mandate development of two separate “boilerplate” documents that can then be customized for individual accounts.
Simon has come up with a template that includes sections for each client’s background, risk and return objectives, constraints, strategic asset allocation, and performance monitoring. To highlight the differences between the objectives and constraints of foundations and endowments, Simon has prepared Exhibit A below:
Exhibit A: Foundations vs. Endowments - Objectives & Constraints
|
|
Foundations |
Endowments |
|
Return |
|
|
|
Risk Tolerance |
Varies: Low to High |
Varies: Low to Average |
|
Time Horizon |
Infinite |
Infinite |
|
Tax |
Generally tax-exempt |
Generally tax-exempt |
|
Legal & Regulatory |
Uniform Management of Institutional Funds Act (most U.S. states) |
Uniform Management of Institutional Funds Act (most U.S. states) |
|
Liquidity & Income |
Spending limited by law to 5% annually; liquidity for grants. |
No legal spending requirements but need stable income source. |
|
Unique Constraints |
Entity-specific; may be social investing concerns |
Entity-specific; may be social investing concerns |
Simon understands that there are four major classifications of foundations. To clarify some of the differences, he consults his co-worker Gus Grainger, who has a number of foundation clients. Grainger tells Simon “It’s easy – just remember that independent, company-sponsored, and operating foundations are subject to some type of minimum spending requirement and may be subject to taxation, whereas community foundations are not.”
Simon ponders Grainger’s statement and responds: “I thought that independent, private, and family foundations have minimum spending rules. I will research this further and get back to you.”
Simon wants to complete the return objectives section of Exhibit A. Which of the following best indicates differences between the return objectives of foundations and of endowments?
A) Foundation return objectives are to provide a permanent base of funding whereas endowment return objectives depend on the time horizon of the endowment.
B) Endowment returns usually are dictated by a rule-of-thumb of "5.3% + inflation," whereas foundation return objectives are dictated by spending rules.
C) Foundation return objectives are closely linked to the time horizon of the foundation, whereas endowment return objectives are to provide a permanent base of funding.
Q36. Following completion of the return objectives, Simon proofs the remaining sections of Exhibit A. For foundations, which of the remaining sections are NOT correct?
A) Tax, liquidity & income.
B) Risk tolerance, liquidity & income, legal & regulatory.
C) Risk tolerance, time horizon, legal & regulatory.
Q37. Which of the following best describes the major difference between the time horizon constraint of a foundation and of an endowment?
A) Foundations may have an infinite life, whereas endowments always have finite lives.
B) Foundations may have a finite life, whereas endowments typically have infinite lives.
C) Endowments and foundations both have infinite lives.
A) private or family foundation.
B) community foundation.
C) endowment.
Q39. Which of the following most accurately depicts the tax treatment of a private foundation and an endowment?
A) Endowment investment income is taxable, whereas private foundation investment income is not.
B) Private foundation investment income is taxable, whereas endowment investment income is not.
C) Operating foundation investment income is taxable, whereas endowment investment income is not.
Q40. With respect to Grainger’s and Simon’s statements concerning the spending policies of the different types of foundations:
A) Grainger is correct; Simon is incorrect.
B) Grainger is correct; Simon is correct.
C) Grainger is incorrect; Simon is correct.
Q41. Which of the following statements concerning foundations and endowments is TRUE?
A) Foundations are grant-making institutions and may have variable time horizons; endowments are established to permanently fund some activity, and typically have infinite lives.
B) Foundations are grant-making institutions and may have variable time horizons; endowments are established to permanently fund some activity, and typically have minimum payout requirements.
C) Foundations are established to permanently fund some activity and have high degrees of risk tolerance.
Q42. The risk tolerance of a foundation differs from that of the fixed-income segment of a life insurance company in which of the following ways? The risk tolerance of a foundation:
A) will typically be much less than that of the fixed-income segment of a life insurance company.
B) will typically be much greater than that of the fixed-income segment of a life insurance company.
C) and that of the fixed-income segment of a life insurance company will both be relatively low.
Q43. The return objectives for a life insurance company can be broken into two segments, the fixed-income and the surplus segments. Which return objectives are mostly associated with each segment, respectively?
A) Spread management and capital gains.
B) Yield maximization and spread management.
C) Spread management and maximizing yield.
Q44. The time horizon of a non-life insurance company differs from that of a pension fund in that a nonlife insurance company’s time horizon:
A) is dependent on the uncertainties of policies sold, whereas the time horizon of a pension fund is a direct consequence of the business cycle.
B) may be quite short and will depend upon the characteristics of policies sold, whereas a pension fund's time horizon may be much longer, depending on workforce characteristics.
C) is quite long due to the uncertainty of the liability structure associated with policies sold, whereas a pension fund's time horizon will be much shorter due to the finite life of employees.
[此贴子已经被作者于2009-3-4 17:51:54编辑过] | 
发表于 2009-3-4 17:48
| 
