Which of the following best describes the time horizon constraint of foundations and endowments?
A) Foundations may have an infinite life, whereas endowments always have finite lives. B) Foundations may have a finite life, whereas endowments typically have infinite lives. C) Endowments and foundations generally both have infinite lives.
Your answer: B was incorrect. The correct answer was C) Endowments and foundations generally both have infinite lives.
Foundations and endowments are generally established for infinite time horizons. There are some foundations that are required to spend down their assets in which case they would have a finite time horizon. (Study Session 5, LOS 20.i)
Qbank, huh?! I’ve had one of those… I think both are infinite - especially endowments that require protection of corpus. But, some foundations aren’t, like some private ones.
It’s a poorly worded question…but since the question says best describes, my gut reaction for endowments and foundations is usually infinite time horizon (in comparison to other institutional investors)
