Deal of The Day! Hurry Up, Grab the Special Discount - Save 25% - Ends In 00:00:00 Coupon code: SAVE25
Welcome to Pass4Success

- Free Preparation Discussions

CFA Institute Exam CFA-Level-III Topic 1 Question 2 Discussion

Actual exam question for CFA Institute's CFA Level III Chartered Financial Analyst exam
Question #: 2
Topic #: 1
[All CFA Level III Chartered Financial Analyst Questions]

HAS THREE PARTS Wyatt Washington is the portfolio manager for Mark Beitia, a recent retiree. He is currently exploring a change in Beitia's strategic asset allocation. He gathers data on the expected returns, standard deviations, and correlations for five assets. Using these market expectations, he derives an efficient frontier. Washington uses the following information in his construction of the asset allocation:

* Beitia's asset base = $5,000,000.

* Annual after-tax spending amount = $150,000.

* Estimate of future inflation = 3.5%.

* Beitia will donate $750,000 to his alma mater in one year in one lump sum.

* Risk-free rate = 4.0%.

* Beitia's income tax rate = 25%.

Washington forms four corner portfolios from his efficient frontier and calculates the following expected returns and standard deviations:

Show Suggested Answer Hide Answer
Suggested Answer: B

Contribute your Thoughts:

Currently there are no comments in this discussion, be the first to comment!


Save Cancel