1D Liquidity BSAS says €3,000/month for parents €2,000/month for nephews Vignette say her salary has increased so that she can support her parents and nephews without any change in standard of living. I thought liquidity need is the cash needed only after taking into consideration her salary. So in this case if her salary covers all the expsense, should liquidity need be 0? 5B Ability to take risk of the foundation I got above average ability risk but the aswer is average BSAS says “No specific liability but they do have the required 5% payout as a private Foundation (grants plus overhead)” So my question is “private foundation” can not have an above average ability to take risk?! 5C Vignette “The foundation has the spending need of 5%, but it usually keep 15% of its spending need as cash” Does it mean the liquidity is 15%* 5%. I thought for foundation spending need 5% is liquidity need? Thanks
I had the same issue with 1D and 5B.
For 5C it says needs keeps 15% of its spending needs as cash/cash equiv, so I guess they could keep it in in other vehicles, but I answered closer to what you did.
1D: even if she can swing these costs with her salary, they’re still a liquidity need…it’s all part of the same pie. Salary, expenses, portfolio value, it all works out into the same calculation.
Smarshy If you look at the answer to Q1C in 2008 AM, you will see the liquidity need for year 1 is 55,000 which is the NET cashflow in year 1 ( Living expense+Mortgage pmt- salary)
I don’t have it with me, but that was just for year one. The liq needs for family were later on, right?
but I am not sure if it makes any difference if it is one year or later on, bc if she continues to earn enough to cover those expenses liquidity will always be zero. it is really weird as in most other IPS question, I thought, the liquidity is some thing very short term. I have never seen any IPS stating the liquidity needs for retirement expenses when a person still have 10 year working life…conceptually it doesn’t make sense to me.
A few BSAS questions to add to the thread. Help on how to think about any of the below would be greatly appreciated. AM: 5A: for return objective, I calculated the (400k+100k)*1.0275 / 10M on the assumption that our current assets are 10M and the coming year’s costs/grants will grow with inflation. Anyone else see it this way, or any explanation why this isn’t correct? 10.3: Why are non-discretionary funds included in the calculation? Is this because we’re calculating the “total assets” rather than the composite performance? I think I answered my own question… PM: 16) the answer key doesnt mention the “long term liabilities” part of the question, which let me towards C reasoning that a risk averse long term investor would want duration matching and would prefer a longer term benchmark 35) with regards to the uptick rule answer © wouldn’t shorting a future be the way around the uptick rule? I had thought the only difficulty was pairing a long equity future with short underlying (where the uptick rule could be a problem) 43) Would adding duration of the DKK denominated bonds just add equivalent interest rate sensitivity which should be directly linked to currency due to IRP (ie if DKK currency weakens, the DKK bond yields would have to rise to maintain IRP, thus longer duration DKK bonds would still get hit). Maybe I’m overthinking this one. 53) Delta hedging with the 45s vs the 50: If you wanted to delta hedge with deep out of the money calls (ie the 50-calls) you’d need about 2x the number of contracts to be delta hedged. Even if the gamma per contract was higher for the 45s (being closer to the money), the total “dollar gamma” (I don’t think that’s a real term) would be higher and would require more rebalancing to keep hedged if the underlying moved in price. I’m DEFINITELY overthinking this one, but it’s bugging me. Any derivatives jocks out there who could correct my thinking, or just tell me to shut up and memorize the CFA bullet points.
For question #10 - AM - GIPS , why is it CORRECT that the firm not include the 2000 results if that was the year the firm incepted and the only presented 2001 - 2005? I thoughgt they MUST disclosure why the composite is not in compliance… any one else have this issue?
dipper Wrote: ------------------------------------------------------- > For question #10 - AM - GIPS , why is it CORRECT > that the firm not include the 2000 results if that > was the year the firm incepted and the only > presented 2001 - 2005? > > I thoughgt they MUST disclosure why the composite > is not in compliance… any one else have this > issue? they did disclose, they said the reason right there in the statement. Plus the fund had over 5 years of GIPS complient returns…all good.