2nd question today, sorry. Example 18 (page 312-15) in CFAI V3 says “(1) Foundation has ability to take moderate risk… (2) so long as no undue volatility is introduced to cover near-term scholarship payments”: - for (1), I thought all foundations have above-average risk tolerance? not “moderate ability” - for (2), how could anyone definitely say the volatility is “undue”, or “warranted”? You’re measuring volatility with an annualized standard deviation, looking backward. In any one year, actual volatility experienced may be higher or lower. Thanks
I thought all foundations have above-average risk tolerance? not “moderate ability” - Not all of them. Few might have problem in meeting the required spending requirements
I hear you, but the question didn’t really dimension the spending need beyong the 5% requirement to maintain tax exempt status (which I thought was standard). It just said $30,000 per scholarship, without saying how many students. I guess in the absense of clarification, we just pick “moderate”. Maybe by “undue volatility”, they mean some outrageously high number that might set the foundation back for years. Anyway, thanks.