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CFA Questioins: Chapter: Problem: 2 26 6 9 8 15 10 4 13 3 15 11, 13 17 5 19 7, 10 21 6 22 13 25 10 26 3 CFA Examination III (1993) 9(a). At this point we know (or can reasonably infer) that Mr. Franklin is: unmarried (a recent widower) childless 70 years of age in good health possessed of a large amount of (relatively) liquid wealth intending to leave his estate to a tax-exempt medical research foundation, to whom he is also giving a large current cash gift free of debt (not explicitly stated, but neither is the opposite) in the highest tax brackets (not explicitly stated, but apparent) not skilled in the management of a large investment portfolio, but also not a complete novice since he owned significant assets of his own prior to his wifes death not burdened by large or specific needs for current income not in need of large or specific amounts of current liquidity Taking this knowledge into account, his Investment Policy Statement will reflect these specifics: Objectives: Return Requirements: The incidental throw-off of income from Mr. Franklins large asset pool should provide a more than sufficient flow of net spendable income. If not, such a need can easily be met by minor portfolio adjustments. Thus, an inflation-adjusted enhancement of the capital base for the benefit of the foundation will be the primary return goal (i.e., real growth of capital). Tax minimization will be a continuing collateral goal. Risk Tolerance: A ccount c ircumstances and the long-term return goal suggest t hat the portfolio can take somewhat above average risk. Mr. Franklin is acquainted with the nature of investment risk from his prior ownership of stocks and bonds, he has a still long actuarial life expectancy and is in good current health, and his heir - the foundation, thanks to his generosity - is already possessed of a large asset base. Constraints: Time Horizon: Even disregarding Mr. Franklins still-long actuarial life expectancy, the h