I know many were posting this YEO thing. 2005 exam. everthing of this Q is a puzzle to me . She asked for cash reserve. not bond reserve baby, cash is cash. 6month of living cost is 1500000. asset base 9095600. ok about 16% . I know her liquidity needs were minimal but She Asked FOR CASH RESERVE !!"!! So i reluctantly put circle on the highest allocation available and I got wrong. CFA ! You must have fiduciary duty to your client, Do what asked by client. DAMN SHE ASKED FOR CASH RESERVE !!! NOT BOND RESERVE !!! (my blood pressure rising ! )
To add to the above - bonds pay interest income which in her case are taxed @ the highest rate …so why such a high allocation ?? Only because she is risk averse ??