Is this CFAI question wrong ?

Hi All,

These two questions have puzzled me, have a look and kindly share your responses. Both of them are from EOC questions.

Smith is the financial advisor to Nancy Johnson and Michael Wu. Johnson is a 35-year old professor with a stable and secure annual income of $175,000. Wu is a 35-year old stockbroker with an income that averages $175,000 per annum and is highly correlated to risky asset returns. Johnson and Wu have comparable total wealth and exhibit moderate risk tolerance.

Recommend which of the following portfolio construction strategies are optimal for Johnson and Wu and justify the selections.


Strategy A

Strategy B

Strategy C

Strategy D

Strategy E







AAA-rated government bonds






My answer here was - Nancy Johnson - Strategy B or C while for Wu it was C.

Nancy - Stable secure income; Bond like human capital and therefore more of FC should be allocated to Equities. So, it has to be A, B or C. Considering moderate risk tolerance as mentioned in the question, my response was either B or C.

Official answer from the book - Strategy A; Explanation - same as mine except that the answer doesnt talk about risk tolerance at all

Wu - Human capital is risky; equity like and therefore more of FC should be allocated be allocated to bonds. Considering moderate risk tolerance and a stock broking job, answer should be C (instead of D)

Official answer - Strategy B (which is basically 80 percent equity and only 20 percent bonds)

Am i doing something wrong here ?

Haha yah I thought the same exact thing.

This question has been discussed number of times on this forum.

cpk123 highlighted that CFAI answer is very much dependent on two “graphs” in the reading (I believe Figure 9 and Fig 12) - where they map the age of the investor to amount equity and fixed income empirically - and this question and the next use that graph almost to the letter.