2014 mock Q 6 has Endowment and its ability to tolerate risk is high because of long time horizon and low return requirements.
Q provide two reason that endowment has above average risk tolerance. (4 minutes)
Answer 1:
The two reasons are:
(1) Endowment’s time horizon is long.
(2) Endowment’s annual spending requirements are low.
Answer 2:
(1) Endowment’s time horizon is long so it allows to tolerate fluctions of returns and has time to make up for any shortfall it encounters along the way.
(2) Endowment’s annual spending requirements are as low as 2%.
Looking at this obviously Answer 2 seems right.
My question is how much points would I get for Question 1?
It’s hard to come up with nice looking sentense and write it in time… (my answer 1 essentially says the same thing but its not as detailed as answer 2).
Yes its appropriate because his biases are cognitive.
Guideline answer -
Lam’s behavior shows evidence of primarily cognitive biases (availability, representativeness). Cognitive biases result from errors in processing and retaining information, so modification through education can have an effect. Emotional biases (such as those demonstrated by Ashland) result from feelings and instincts, and are much harder (if not impossible) to modify.
I thought the first question you posted you answered fine IMO…
I think you could have expanded on question 11 if it was worth more points. Maybe add that education will have a positive impact since his biases are cognative?
