lcai

Haven't looked at the '09 exam yet, so can't weigh in on that specifically.

Regarding ongoing expenses, I would probably treat the current year's shortfall as a liquidity requirement as well and mention it in liquidity and adjust my asset base. And so if I'm calculating a return requirement for next year (current year + 1) I would want my portfolio return to cover subsequent shortfalls and so I wouldn't view that as a liquidity need - i.e. if I had an 8% shortfall every year, wouldn't want to hold 8% in cash, maybe some emergency portion but not the full shortfall as that would be a drag on portfolio.

Since all we have to go by is old exams I don't necessarily know if this is exactly right, but this is what makes most sense to me.

My impression is that CFAI discloses the model answer, but if you had a couple other bullet pts that were logical and fit with the story you would not be penalized. Not sure how they could deduct pts for saying: "xx will have ongoing liquidity need of $x per year, which should be covered by portfolio return" ..again this is my view, no way to really verify this.