CYE funds 75% of Cheyenne College’s annual administrative budget and actively solicits donations through annual fundraisers. Donations, equal to approximately 3% of the portfolio’s current value, offset potential shortfalls between average returns and the spending rate
Concluson: The magnitude of importance that CYE’s portfolio distributions have in Cheyenne College’s administrative budget reduces CYE’s risk tolerance. – this is wrong according to cfa answer.
I remember institute’s heavy reliance on endowment should reduce the endowment’s risk tolerance. So what is that conclusion wrong?
What’s the right answer via the CFAI? Just from what you’ve provided, it looks like the ongoing donations to the endowment are offsetting reliance on returns (and thus increasing risk tolerance).
I think the key is in fact that Endowment actively solicit donations so there is no room for liquidity concerns neither its risk tolerance is lower regarding this matter.
Agree with that. Thank you !
If I am sponsor of Sorcerer’s Mikey football club but actively am receiving donations from Victoryeo which offset in significant amount my spending, what is my risk tolerance? Is it reduced at all?
You’re welcome. Let’s nail this thing!
Risk tolerance would be increased, no? You can accept higher risk because you aren’t reliant solely on returns to fund my club and protect the endowment asset base…you are also receiving ongoing cash money from Victoryeo.
Correct. Further it may be the case, few years after no more contributions from Victoryeo and my risk tolerance regarding this fact rapidly decreased. Institutional and Individual are not difficult per se but is easy to misinterpret if you don’t read carefully the case. Thus are most time consuming. At last taken AM I burnt 1 hour for first two questions and guess what topic are the first questions on each AM.
On the flip side, if you do allocate the proper time and pay close attention, the IPS questions can score you significant points. I’ve done 7 AM papers so far (08 - 14) and the IPS questions are often a solid percentage of my points. Although, if you blow one (like I did on the 2013 exam) it can really hurt. Feast or famine all the way. Fingers crossed that I feast in June.
CFA website has the AM paper from 2014 - 2016. Where can we download the rest?