Return objective and Liquidity requirement (in general and MarkM 3AM exam)

Could someone please shed some light on the following:

Return objective: If the individual has listed several goals and they do not state a hierarchy (i.e. primary or secondary), what approach should be taken when you get an question to state the return objective?

The particular individual has sufficient cash flow to meet all his stated goals (i.e. make donations, cover living costs) however the answers did not state these. It only stated his objective to maintain the real value of the portfolio.

Liquidity constraints: If there is sufficient cash flow to cover off the annual requirements (donations, living costs) - should we state the cash outflows, then also state the positive liquidity events and finish off by mentioning these are offset?

Should we answer the question differently if they asked for liquidity requirement?

When thinking of return objective you can rephrase it with “what is the individual’s portfolio supposed to achieve with all available assets?” Since your individual covers all expenses from his own salary then portfolio does not need to meet this particular goal. Now, it does not make a lot of sense to me that person that can cover all current expenses wants only to maintain portfolio value as his ability to take risk is well above average. In his case, he only needs to achieve return equal to inflation because his personal income covers all expenses. It is possible you did not account for a current expense or future plan (leave to charity/children), causing his return objective to be very low.

For liquidity constraint I would just say that since his current income surpasses his current living costs and donations, and that there are no extraordinary outflows (for example to finance children’s education), there are no know liquidity constrains.

thanks

i think there was a similar situation in one of the schweser mock exams in practice book 1, but there they completely ignored the income and just stated the required liquidity needs (outflows) and then calculated the required rate of return as return objective to meet the outflows/liquidity needs… despite that his salary was high enough to cover certain expenditures - completely ignored. It was about calculating it for the first year, where the guy still recieved salary/income (not retired yet)… so for me this makes no sense