CFA Level I · CFA Level I Exam · Portfolio Management: An Overview
A client's IPS specifies that the portfolio must be able to meet an expected USD 200,000 tuition payment in two years. This statement most likely addresses which IPS constraint?
The statement addresses the liquidity constraint. A known USD 200,000 cash need in two years requires assets that can be converted to cash with minimal loss of value. It is neither a legal requirement nor a unique circumstance such as an ethical exclusion.
- ALiquidityCorrect
- BUnique circumstances
- CLegal and regulatory
Explanation
A known cash need at a specific future date is a liquidity requirement, which affects the need to hold assets that can be sold quickly with little price impact. It is not a legal matter or an unusual personal preference.
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