for those who did not attend official contact due to one circumstances, here is the assignment for Investment Analysis. Also, the solution will be posted ASAP.
For:
Questions and answers email: theotherwomaninmarriage@gmail.com
Ambrose
Green, 63, is a retired engineer and a client of Clayton Asset Management Associates
(“Associates”). His accumulated savings are invested in
diversified Global Fund (“the fund”), an
in-house investment vehicle with multiple portfolio managers through which
associates manage nearly all client asset on a pooled basis. Dividend and capital gain distributions have
produced an annual average return to Green of about 8% on his $900,000 original
investment in the fund, made six years ago.
The $1,000,000 current value of his fund interest represents virtually
all of green’s net worth.
Green
is a widower whose daughter is a single parent living with her young son. Although Green is not an extravagant person,
his spending has exceeded his after – tax income by a considerable margin since
his retirement. As a result, his
non-fund financial resources have steadily diminished and now amount to
$10,000. Green does not have retirement
income from a private pension plan, but he does receive taxable government
benefits of $1,000 a month. His marginal
tax rate is 40%. He lives comfortably in
a rented apartment, travels extensively, and makes frequent cash gifts to his
daughter and grandson, to whom he wants to leave an estate of at least
$1,000,000.
Green
realizes that he needs more income to maintain his lifestyle. He also believes his assets should provide an
after-tax cash flow sufficient to meet his present $80,000 annual spending
needs, which he is unwilling to reduce.
He is uncertain as to how to proceed and has engaged you, a CFA
charter-holder with an independent advisory practice, to counsel him.
Your
first task is to review Green’s investment policy statement.
AMBROSE GREEN
INVESTMENT POLICY STATEMENT
Objectives
a.
“I
need a maximum return that includes an income element large enough to meet my
spending needs, so about a 10% total return is required”.
b.
“I
want low risk, to minimize the possibility of large losses and to preserve the
value of my assets for eventual use by my daughter and grandson”
Constraints:
a.
With
my spending needs averaging about $80,000 a year and only $10,000 of cash remaining,
I will probably have to sell something soon”
b.
“I
am in good health and my no noncancelable health insurance will cover my future
medical expenses”
You
are required:
1.
Identify
and briefly discuss four key constraints present in Green’s situation not
adequately treated in his investment policy statement.
2.
On
the basis of your assessment of his situation and the information presented in
the introduction, create and justify appropriate return and risk objective for
Green.
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