CFA三级十年真题 (2008-2017)：level_III_essay_questions_2011.docx

TheMorningSessionofthe2011LevelIIICFAuExaminationhas9questions.Forgradingpurposes,themaximumpointvalueforeachquestionisequaltothenumberofminutesallocatedtothatquestion.QuestionTopicMinutes1PortfolioManagementIndividual/Behavioral152PortfolioManagementIndividual233PortfolioManagement一Institutional264PortfolioManagement一Economics235PortfolioManagement-AssetAllocation206PortfolioManagement一FixedIncome197PortfolioManagement一EquityInvestments228PortfolioManagementRiskManagement169PortfolioManagement-PerformanceEvaluation16Total:180THISPAGEINTENTIONALLYLEFTBLANKANYMARKSMADEONTHISPAGEWILLNOTBEGRADEDQuestions1and2relatetotheBeckerfamily*Atotalof38minutesisallocatedtothesequestions.Candidatesshouldanswerthesequestionsintheorderpresented.QUESTION1HASTWOPARTS(A,B)FORATOTALOF15MINUTES.RobertBecker,age75,retired5yearsagofromthebuildingproductsbusinessthathefounded.Afterhisbusiness,Buildco,wentpublicinthe1990,s,heremainedasCEOandcontinuedtoholdsharesinthecompany.Afterhiswif,sdeath,BeckerhiresEmilyFrost,aportfoliomanagerandtrustspecialist,tohelpwithhisestateplanning.Beckerestablishesarevocabletrustandanirrevocabletrust.Income,realizedcapitalgains,andestateassets(atdeath)arealltaxedataflat20%rate.Fortherevocabletrust,thecostbasisofinvestmentsincreasestothemarketvalueonthedateofBecker'sdeath,andtheassetsaresubjecttoestatetaxes.Fortheirrevocabletrust,thecostbasisofinvestmentsdoesnotchange,andtheassetsarenotsubjecttoestatetaxes.Currently,thetwotrustseachhave2.0millionU.S.dollars(USD)oftheirassetsinBuildcoshares,withacostbasisofUSD200,000each.AllBuildcoshareshaveunrealizedcapitalgains.Beckerhasthefollowingtwoimmediateobjectivesaspartofhisestateplanning:Objective1:SellUSD1.0millionofBuildcoshareswhileminimizingtotaltaxes.Objective2:PutadditionalassetsintoatrusttoprotectthoseassetsfrompotentialfuturelegalclaimsagainstBecker.A.Determinewhichtrust(irrevocable,revocable,orbothequally)ismoreappropriateforeachobjective:i.Objective1ii.Objective2Justifyyourresponsewithonereasonforeachobjective.Note:Considereachobjectiveindependently.AnswerQuestionI-AintheTemplateprovidedonpage5.FrostmeetswithBeckertocomparetheirviewsoninvesting.FourdiscussionsfromthatmeetingareshowninExhibit1.Exhibit1SelectedDiscussionsfromBecker-FrostMeetingDiscussionNumberSpeakerDiscussion1Becker:Frost:ThefirstthingyoumightnoticeaboutmyinvestmentstyleisthatIfavorgrowthinvestmentsoverincome-producingassets.Idon,tthinkthatistherightapproach.Equitiesmightdeliverhigherlong-termreturns.However,foratrustportfolio,Ipreferthattheclientknowsthesizeandtimingofthecashflowshewillbereceiving.That,swhataninvestorgetswithbonds.2Frost:Becker:InoticeyouholdasignificantpositioninRollingMixCementshares.RollingMixCement*sCEOusedtorunthewesternoperationsforBuildco.Hedidawonderfuljobforus,soIthinkRollingMixsharesaregreattoown.3Frost:Becker:Iwaslookingatthemutualfundsinyourportfolioandcanseethatyoupurchasedanequalamountacrossfourmutualfunds.Ithinkthatmutualfundfamilyoffersfburgreatproducts.SoIboughtallofthem:anEAFElarge-capfund,aU.S.growthfund,aU.S.smallcapfund,andaU.S.corporatebondfund.4Frost:Becker:Inoticeyouhavemanyportfoliopositionswherethecurrentvalueshavebeenbelowcostforawhile.Investingrequirespatience.Youhavetogivethingstimetoworkout.B.Identifythediscussioninwhichoneoftheparticipantsbestillustrateseachofthefollowingbehavioralbiases:i.representativenessii.framedependenceiii.aversiontoambiguityJustifyeachresponsewithonereason.Note:Considereachbiasindependently.Useeachdiscussiononlyonce.AnswerQuestionI-BintheTemplateprovidedonpage6.AnswerQuestionLonThisPageTemplateforQuestionI-ANote:COnSidereachobjectiveindependently.ObjectiveDeterminewhichtrust(irrevocable,revocable,orbothequally)ismoreappropriateforeachobjective.(circleone)Justifyyourresponsewithonereasonforeachobjective.LScllUSD1.0millionOfBuildcoshareswhileminimizingtotaltaxes.irrevocablerevocablebothequally2.PutadditionalassetsintoatrusttoprotectthoseassetsfrompotentialfuturelegalclaimsagainstBecker.irrevocablerevocablebothequallyAnswerQuestion£onThisPageTemplateforQuestionI-BNote:Considereachbiasindependently.Useeachdiscussiononlyonce.BehavioralbiasIdentifythediscussioninwhichoneoftheparticipantsbestillustrateseachofthefollowingbehavioralbiases(circlethediscussionnumberfromExhibit1).Justifyeachresponsewithonereason.I2i.representativeness341ii.frame2dependence34iii.aversionto12ambiguity34THISPAGEINTENTIONALLYLEFTBLANKANYMARKSMADEONTHISPAGEWILLNOTBEGRADEDQuestions1and2relatetotheBeckerfamily*Atotalof38minutesisallocatedtothesequestions.Candidatesshouldanswerthesequestionsintheorderpresented.QUESTION2HASFOURPARTS(A,B,C,D)FORATOTALOF23MINUTES.Fiveyearshavepassed.RobertBeckerrecentlydiedandlefthisestatetohisonlychild,Michael.Michaelandhiswifeareboth50yearsoldandhavenochildren.Michaelexpectstoreceivehisafter-taxinheritanceof8.0millionU.S.dollars(USD)attheendofthisyear.TheBeckersbothplantoretireatthattime,andaremeetingwithEmilyFrostlohelpthemestablishaninvestmentplan.TheBeckerscurrentlydonothaveaninvestmentportfolioandtheyownahomevaluedatUSD3.7million.Attheendofthisyear,theBeckers,outstandingdebtwillbeUSD3.5million(homemortgage)andUSD150,000(consumerdebts).TheBeckerswillpayofftheirmortgageandtheirconsumerdebtssoonaftertheinheritanceisreceived.TheBeckerscurrentlyhaveacombinedafter-taxsalaryofUSD475,000,current-yearlivingexpensesofUSD250,000,plusannualmortgagepayments(principal+interest)ofUSD225,000.MichaescompanypensionwillpayhimUSD48,000after-taxnextyear,andthenpaymentswillgrowattherateofination,whichisexpectedtobe3%annually.HisemployerwillcontinuetopayalloftheBeckers,medicalcostsuntildeath.BoththepensionandhealthbenefitswillcontinuetoaccruetoBecker,swife,ifhediesfirst.TheBeckersexpecttheirlivingexpenseswillalsocontinuetogrowattherateofinflationuntiloneofthemdies.Atthattime,theyexpectthesurvivor,slivingexpenseswilldecreaseto75%oftheircombinedexpenses,andthencontinuetogrowattherateofinflation.TheBeckersintendtofundtheirlivingexpenseswithMichaespensionandinvestmentincomegeneratedfromtheirinvestableassets,whichdonotincludetheirhome.TheBeckersconsidertheirinvestmentbasetobelarge,andwanttheirportfoliotobeinvestedconservatively.Theywanttomaintaintherealvalueoftheirinvestableassetsovertime,andplantoleavetheirestatetocharity.Allincomeandrealizedcapitalgainsaretaxedat20%.A.Calculatetheafter-taxnominalrateofreturnrequiredfortheBeckers,firstyearofretirement.Showyourcalculations.(8minutes)B.DiscusstwofactorsspecifictotheBeckers,situationthatdecreasetheirrisktolerance.C.FormulateeachofthefollowingconstraintsfortheBeckers,investmentpolicystatement(IPS):i.liquidityii.timehorizon(4minutes)Severalyearslater,theBeckersagainmeetwithFrost.TheirinvestableportfolioisnowvaluedatUSD7.0million.TheBeckersstatethattheirprimarygoalistomaintaintheircurrentlivingstandardaslongastheylive.TheBeckersalsowanttoleaveacharitablegiftofatleastUSD5.0millionfromtheirinvestableassetsaftertheyhavebothdied.However,theyarenotwillingtoriskrunningoutofmoneyintheiroldagetoachievethissecondarygoal.TheBeckersagreewithFrosttoassumea25-yeartimehorizon.FrostproducesMonteCarlosimulationsfortheBeckersusingtwoportfolioswithdifferentassetallocations.Thesimulationsusealongseriesofhistoricalindexdataforeachassetclassinthetwoportfolios.TheresultingdistributionsofterminalvaluesareshowninExhibit1.Allterminalvaluesareafterexpectedtaxesandspendingneedshavebeenmet.Exhibit1MonteCarloSimulationResultsProjectedPortfolioTerminalValuesat25YearsPercenlileTerminalValues(USDthousands)PortfolioAPortfolioB95th17,80835,81490由11,91621,72975th9,19214,45450,h4,8968.81325th2,1545,01610th29405,fa390D.i.Determine,basedontheMonteCarlosimulations,whichportfolio(AorB)willbetterallowtheBeckerstoachievetheirgoals.Justifyyourresponsewithonereasonrelatedtorisk.ii.DiscusstwoimprovementsFrostcouldmakeinherMonteCarlosimulations.QUESTION3HASFIVEPARTS(A,B,C,D,E)FORATOTALOF26MINUTES.StacyBergenisaconsultantfortheendowmentsoftwoAmericanuniversities-WeymountUniversity(WU)andSlateUniversity(SU).WUisaprivateuniversitywithannualoperatingexpensesof150.0millionU.S.dollars(USD).WUhasanendowmentcurrentlyvaluedatUSD750.0million.BergengathersthefollowinginformationaboutWUanditsendowment:TheWUendowment'sprimarygoalistomaintaintherealvalueofitsassetsoverthelongterm.TheWUendowment'ssecondarygoalistocontinuetofund25%ofWU,sannualoperatingexpenses,bymeansofitsspendingrule.Tuitionandgrantsfundtheremainderoftheannualoperatingexpenses.Asaprivateinstitution,WUreceivesnogovernmentfinancialsupport.TheWUendowment:usesasimplespendingrulewitha5%annualspendingratebasedontheendowment'sbeginning-of-yearmarketvalue.receivesprivatedonationsandusesthesedonations,inpart,foritsliquidityneeds.evaluatesitsinvestmentmanagersbasedontheendowment'sthree-yearaverageannualreturn.forecaststheinflationrateofWU,soperatingexpensestobeequaltothegrowthrateoftheHigherEducationPriceIndex(HEPI),whichisexpectedtobe4%annually.ohasanannual0.55%managementexpenserate.A.i.FormulatethereturnobjectivefortheWUendowment.ii.CalculatetherequiredreturnfortheWUendowment.Showyourcalculations,(4minutes)B.Determinehowachangeineachofthefollowingfactors,holdingallelseconstant,affectstherisktolerance(increases,decreases,doesnotchange)fortheWUendowment:i.privatedonationsii.expectedinflationJustifyeachresponsewithonereason.Note:Considereachfactorindependently.AnswerQuestion3-BintheTemplateprovidedonpage20.C.FormulateeachofthefollowingconstraintsfortheWUendowment'sinvestmentpolicystatement(IPS):i.liquidityii.timehorizon(4minutes)AyearhaspassedsinceBergen,sinitialreview.Duetosignificantlossesinthemarketvalueoftheportfolio,theWUendowmentnowprovideslessthan25%ofWU,soperatingexpenses.Inaddition,donationshavedeclined.TheinvestmentcommitteeasksBergentoproposemeasurestomaintainthelong-termrealvalueoftheendowment,andreducethevolatilityoftheendowment'sfundingOfWU'soperatingexpenses.Inresponse,Bergensuggeststhefollowingstrategicactions:Strategicaction1:Decreasetheendowment'sspendingrate.Strategicaction2:Adoptarollingthree-yearaveragespendingrule,basedontheendowment'sbeginning-of-yearmarketvalueforthelastthreeyears.Strategicaction3:Revisetheportfblio,sassetallocationtodecreaseitsrisk.D.DeterminewhichoneofBergen,sstrategicactionsis:i.leastlikelytoassisttheendowmentinachievingitsprimarygoal.ii.mostlikelytoreducethevolatilityoftheendowment'sfundingofWU,soperatingexpenses.Justifyeachresponsewithonereason.AnswerQuestion3-DintheTemplateprovidedonpage22.(6minutes)Bergen'sotherinstitutionalclient,SU,isagrowingpublicuniversity.SUhasanannualoperatingbudgetofUSD210.0million.TheSUendowmentiscurrentlyvaluedatUSD700.0million.BergengathersthefollowinginformationaboutSUanditsendowment:TheSUendowment'sprimarygoalistomaintaintherealvalueofitsassetsoverthelongterm.TheSUendowment'ssecondarygoalistocontinuetofundSU,sannualoperatingbudgetshortfall(currently10%oftheoperatingbudget),solongasthatdoesnotviolateitsspendingrule.o90%ofSU,soperatingbudgetisfundedbygovernmentfundingandtuition,andthisisexpectedtocontinue.TheSUendowment:fundsSU,soperatingbudgetshortfall,butcapsitscontributionatitsspendingmaximum.ohasaspendingmaximumthatis5%oftheaverageofthelastthreeyears,beginning-of-yearmarketvalue.hasexperiencedsignificantgrowthinprivatedonationsoverthelast10years.evaluatesitsinvestmentmanagersbasedontheendowment'ssix-yearaverageannualreturn.forecaststheinflationrateofSU'soperatingbudgetat1percentagepointbelowthegrowthrateoftheHEPLTheHEPIisexpectedtogrowat4%annually.E.DiscussthreefactorsthatsuggesttheSUendowmenthasgreaterrisktolerancethantheWUendowment.(6minutes)ANYMARKSMADEONTHISPAGEWILLNOTBEGRADEDAnswerQuestion3onThisPageTemplateforQuestion3-BNote:Considereachfactorindependently.FactorDeterminehowachangeineachofthefactors,holdingallelseconstant,affectstherisktolerance(increases,decreases,doesnotchange)fortheWUendowment,(circleone)Justifyeachresponsewithonereason.i.privatedonationsincreasesdecreasesdoesnotchangeii.expectedinflationincreasesdecreasesdoesnotchangeAnswerQuestion3onThisPageTemPlateforQUeSlion3-DDctcnnincwhichoneofBergen,sstrategicactionsis:Bcrgen,sstrategicactions(circleone)Justifyeachresponsewithonereason.i.leastlikelytoassisttheendowmentinachievingitsprimarygoal.123ii.mostlikelytoreducethevolatilityoftheendowment'sfundingofWU,soperatingexpenses.123THISPAGEINTENTIONALLYLEFTBLANKANYMARKSMADEONTHISPAGEWILLNOTBEGRADEDQUESTION4HASFIVEPARTS(A,B,C,D,E)FORATOTALOF23MINUTES.DanielWallbankisthechiefinvestmentofficerofalargeglobalassetmanagementfirm.Heisconsideringequityinvestmentsinaspecificdevelopingcountry.Hisprimaryconcernistodeterminetheintrinsicvalueofthatcountry,sbroadequityindexrelativetoitscurrentmarketvalue.Wallbankasksthefirm,smarketstrategist,JudyShipp,toassisthimwiththevaluationprocess.ShippsuggestsusingtheCobb-Douglasproductionfunction,undertheassumptionofconstantreturnstoscale,tomodelthegrowthinrealeconomicoutput.Herpreviousresearchshowsthat,overthelongtermandinadevelopingcountry,thegrowthrateofcorporateearningsanddividends,adjustedforinflation,shouldcloselytrackthegrowthofrealgrossdomesticproduct(GDP).HerresearchonthiscountryprovidestheprojectionsshowninExhibit1.Exhibit1CountryProjections(2011-2025)Averageannualgrowthintotalfactorproductivity(TFP)2.8%Averageannualgrowthincapitalstock3.6%Averageannualgrowthinlaborinput2.2%Averageunemploymentrate2.0%Outputelasticityofcapital0.4A.CalculatetheprojectedaverageannualrealGDPgrowthrateusingtheCobb-DouglasproductionfunctionandtheinformationinExhibit1.Showyourcalculations.(4minutes)ShipptellsWallbankthattheCobb-DouglasprojectionofGDPgrowthmaybeaffectedbytwoactionsthecountry'sgovernmentisconsidering:Action1:Issuenewregulationstoreduceenvironmentalpollutionbymanufacturers.Action2:Decreasetheminimumretirementagebythreeyearsforallworkers.B.Determinetheinitialeffect(increase,decrease,ornochange)eachactionwouldmostlikelyhaveonthecountry'sGDPgrowthtrend.Justifyeachresponsewithonereason.Note:Nocalculationsarerequired.Considereachactionindependently.AnswerQuestion4-BintheTemplateprovidedonpage28.(6minutes)Shippcompilesthedatatoestimatetheintrinsicvalueofthecountry'sbroadequityindex.Thecurrentannualdividendfortheindexis10.00U.S.dollars(USD).Sheassumestheinitialdividendgrowthrateis6.0%andthatover15yearsthedividendgrowthratewilldeclinelinearlybyatotalof50%.Theassumeddiscountratetoperpetuityis5.5%.C.Calculatethecountry,sbroadequityindexpricelevelimpliedbytheH-Model.Showyourcalculations.(4minutes)ShipptellsWallbanktherearetwoalternativemodelsthatcanbeusedtodeterminethefairvalueofane