Managing Individual Investor Portoflios

CFA Level III Portfolio Management
#1

Hi All, Question regarding practice problem 1 - Reading 8 : ‘Managing Individual Investor Portfolios’ I thought the ‘Cash Reserve’ was deducted from the investable base when agreed on and specified in advance. This is the case but is not deducted from the investable base in the question. What would be the general rule here? Thanks. A

#2

Thanks. Makes sense if you include it throughout the IPS. Even if both answers are correct, I would still like to know what the ‘preferred’ approach is. Thanks;