So before practicing any questions I figured this would be one of the easiest parts of developing the IPS but after doing a couple of old exams it seems fairly inconsistent. Does anyone know how to calculate liquidity needs from the portfolio rather than just for the one time events in the near term future? I’ve seen some where they say you should have emergency funds on hand which depending on account size could be approx 2-3% of account in cash. Then I’ve seen others such as on the exam from 2004 (Q6) regarding a foundation that provides 80% of the operating budget to a hospital. Given the budget needs and corpus size of the portfolio it would be approximately 5.5% a year. Seems like an even more crucial liquidity event than just having emergency funds and yet when they ask you to develop an asset allocation they say liquidity is only 0-3%. Are they saying that dividends and interest should cover the operating budget needs? Liquidity is extremely important because if there are a couple questions tied to it you can miss a lot of points on IPS, recommended portfolio, etc. Bottom line is do you incorporate expected dividends and interest into liquidity needs? Maybe not if its emergency fund? Any help would be appreciated.