For the first and second question on Managing Individual Investor Portfolios, (the Christa case), I am very lost as to what to include under Liquidity.
The book’s answer for the first part which asks about the liquidity requirements of Christa was that the proceeds from the sale of Ingermarine exceed Christa’ anticipated needs for cash and thus there are no liquidity concerns for the coming year. By that I assumed that the proceeds were not included in the portfolio and were just used to satisfy Christa’s liquidity needs. If it has been part of the portfolio, then they wouldnt be available to cover her living expenses.
Yet in the second question, which relates to the returns on the portfolio, the proceeds were included as part of the portfolio and the return was computed based on the new investable base.
Could someone kindly explain the following and how to think in such a situation?