REDUCE VENTURE TOO HIGH CONSIDERING 60% ALLOCATION TO HIGHER RISK A...

3. Reduce venture

Too high considering 60% allocation to higher risk assets (small

capital

caps, hedge funds, venture capital)

Candidate discussion: 1 point each for correct decision and then supporting it.

(Study Session 6, LOS 13.i,k)

C. Recommend whether the college is more or less likely to hedge the foreign currency

exposure of international stocks given their tuition program and explain your answer.

Grading Guide

Answer for Question 3-C

More likely to hedge foreign currency exposure. The college already has foreign currency

revenue, so foreign stock is increasing the exposure to foreign currency.

(Study Session 9, LOS 19.c)

QUESTION 4 HAS ONE PART FOR A TOTAL OF 9 MINUTES

Jeff Stone, another trustee of the Shailor College endowment, has questioned Brown's

recommendation to employ an active management strategy for the entire equity portion of the

endowment portfolio. Specifically, Stone made the following three statements:

Statement

"Large-cap stocks are the most appropriate place for active management because