5. Unique (2
The college has significant nondomestic (USD) revenue, and this should
points)
be considered in the portfolio asset allocation.
Candidate discussion: Maximum 16 points.
(Study Session 6, LOS 13.i, k)
B. Brown has developed the asset allocation for Shailor College endowment shown in Figure 1.
He has recomputed the desired return to be 8.5% based on new information regarding expected
college expense inflation. Recommend for the T-bills, corporate bonds, and venture capital
whether each proposed allocation should most likely be increased or decreased. All other
factors, except desired return, are unchanged. Support each recommendation with one fact
relevant to the college's situation. Assume that any additional funds required or freed up to meet
the changes can be met by adjusting other allocations.
Grading Guide
Answer for Question 3-B
Recommended
Change Explanation (For the exam)
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