For the first question of the AM section, why does the explanation of the Risk Tolerance not even mention that she will not have a job in 6 months? Are we supposed to just assume that that it’s not an issue since she is confident that she’ll get a job in a year’s time and got the $750K lump-sum to cover 3 years of salary?
yes, i think it’s a combo of 3 years of future salary in the bank + substantial portfolio + her confidence backed by several job offers already
Thanks. I had just added the $750K to her portfolio and assumed she had $3,750,000 instead of just $3,000,000, which has me a little confused as to what the difference is between just starting off with $3,750,000 vs. $3,000,000 plus $750,000 severance. Anyway, this brings up another question I’ve had. Are there any guidelines regarding what is considered a substantial portfolio? I remember being surprised on a different question with a $5 million portfolio that the Ability was not Above Average. I think it had to do with liquidity needs, but still.
are you referring to the Marks case in 1AM vol.1 exam? their ability was in fact above avg, but that was cut to average given that they were relying on portfolio to cover living expenses and they were not yet retired. i think it’s circumstantial defining a substantial portfolio. must consider size of expenses relative to portfolio (spending rate), reliance upon portfolio to cover those expenses, time horizon for covering those expenses, etc.