2.
higher than
Page 8 Level III
Answer Question 1-D on This Page
Determine whether
the foundation’s
target spending for
the coming year will
be lower, the same,
Justify your response.
or higher using the
new spending rule
instead of the old
spending rate.
(circle one)
lower
the same
higher
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Page 10 Level III
QUESTION 2 HAS FIVE PARTS (A, B, C, D, E) FOR A TOTAL OF 22 MINUTES.
William MacDougal, a portfolio manager for Ethereal Capital, manages fixed income
investments for institutional clients in the country of Scorponia. He manages a portfolio that
invests in both domestic government bonds and domestic corporate bonds.
MacDougal manages the portion of the portfolio invested in government bonds to match the
duration of the 10-year Scorponia government bond. He is concerned about an upward shift in
interest rates and is seeking ways to increase the fund’s return. He assesses the effect of adding
foreign sovereign debt from Tauravia and adjusting the current portfolio’s duration. Bond
market data and MacDougal’s exchange rate forecast appear in Exhibit 1.
Exhibit 1
Bond Market Data and Exchange Rate Forecast
Scorponia Tauravia
Currency SCF TRF
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