my answer wa (1+0.06)(1+0.035)(1+0.004)(1-0.0206)-1=7.88%
my question is why the guidance doesn’t include the last factor (1-0.0206)?
i got it by the logic of $2mn contribution annually, and the foundation would spend $3mn right away, so 0.0206=2/(100-3).
i think it makes sense when there is ongoing contribution, the return requirement is decreased.
anyone can please give a rule of thrumb why to (not to) and how to treat contribution when calculating return objective? and maybe also liquidity?
I did a similar thing - I have no idea why this was neglected, because logically, if you need to spend 10.14% of the beginning market value, which we’ll assume is 100mil after earning back the 3 million that was spent out of the fund over the course of the year, then that means you need to spend 10.14 million. if you know you’re going to be given an additional 2 million, then you only need 8.14 million, don’t you? apparently not according to the answer key - you need the whole 10.14 million return. not sure why.
I might be wrong (I did the same thing you guys did) but I think this is a key sentence:
“The annual contributions from the Foundation to the university will be used to cover a portion of the university’s operating expenses.” After reading this a few times I think this means the contribution flows directly to the University… I.e., the contribution covers operating expenses in excess of 6%… 
It’s amazing how missing one sentence can get it all wrong on two questions