CFA Level I · CFA Level I Exam · Portfolio Management: An Overview
Which of the following IPS constraints is most likely to be affected by a client's need to withdraw cash regularly to fund living expenses?
Liquidity is the constraint most affected. It captures the client's need for cash to meet expected and unexpected withdrawals, so regular spending requirements call for holdings that can be sold readily without large price concessions, unlike legal or unique circumstance constraints.
- ALiquidityCorrect
- BUnique circumstances
- CLegal and regulatory
Explanation
Liquidity constraints concern the need for cash to meet anticipated and unanticipated withdrawals. Regular living expense withdrawals create such a need. Legal and regulatory and unique circumstances address external rules and special client preferences.
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