4. She has been unwilling to take
Yeo has below-average risk
tolerance, as she is clearly very
Below average
risk-averse when faced with
uncertain outcomes associated with
iii. Overall risk
investing. Her current conservative
tolerance Average
investment preferences, both stated
and implemented, outweigh her
Above average
above-average ability to assume
risk.
Part C
Justify each of your responses
Formulate each of the
with one reason based on Yeo’s
following constraints in
Yeo’s investment policy
specific circumstances and/or her
Constraint
statement
interview with Hamid
This formulation is justified by the
following:
Yeo’s time horizon is long-
• The first stage consists of Yeo’s
term and consists of two main
i. Time horizon
initial four years in retirement,
stages.
which include Lok’s university
expenses.
• The second stage encompasses
the rest of her time in retirement,
which could be 21 years or more
according to Yeo’s mortality
expectations.
Malaysia’s tax structure
Because capital gains are not
ii. Tax concerns
taxable, there is a preference for
differentiates between
ordinary income and capital
investment returns from capital
gains.
gains versus taxable interest and
dividend income.
LEVEL III, QUESTION 8
Topic: Portfolio Management-Individual Investor
Minutes: 12
Reading References:
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