The endowment fund for The University of Southern California state in their 2019 endowment report specify...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The endowment fund for The University of Southern California state in their 2019 endowment report specify the endowment investment objective as: "Recognizing that market volatility and economic change create both risks and opportunities, the university employs a long-term and active investing philosophy that responds to changing environments and takes advantage of valuation extremes. This approach is designed to enable the endowment to grow in real terms, providing meaningful annual returns that keep pace with inflation, while minimizing risk and volatility." Regarding their spending policy, USC states "The payout is set annually by the Finance Committee of the Board of Trustees, and is generally between 4% and 6% of the average market value of the Endowment Fund for the previous 12 calendar quarters." If USC does not forecast any further donations, inflation is forecasted to be 1% per annum and the desired real fund growth of 1.5%: (i) calculate the expected real required return? (ii) how will the spend (payout) policy impact the real value of the fund? (i) Between 6.5 and 8.5%, and (ii) the spending policy will have a low impact on fund's real value since the payout will be based on the last 12 payouts. (i) Between 5.5 and 7.5%, and (ii) the spending policy will have a low impact on fund's real value since the payout will decrease if fund performance had been poor in the last 12 quarters. (i) Between 5.5 and 7.5%, and (ii) the spending policy will have a high impact on fund's real value since the payout will increase if fund performance had been poor in the last 12 quarters. (i) Between 6.5 and 8.5%, and (ii) the spending policy will have a low impact on fund's real value since the payout will decrease if fund performance had been poor in the last 12 quarters. (i) Not enough information provided to calculate the answer, and (ii) the spending policy will have a high impact on fund's real value since the payout will be based on the last 12 payouts. The endowment fund for The University of Southern California state in their 2019 endowment report specify the endowment investment objective as: "Recognizing that market volatility and economic change create both risks and opportunities, the university employs a long-term and active investing philosophy that responds to changing environments and takes advantage of valuation extremes. This approach is designed to enable the endowment to grow in real terms, providing meaningful annual returns that keep pace with inflation, while minimizing risk and volatility." Regarding their spending policy, USC states "The payout is set annually by the Finance Committee of the Board of Trustees, and is generally between 4% and 6% of the average market value of the Endowment Fund for the previous 12 calendar quarters." If USC does not forecast any further donations, inflation is forecasted to be 1% per annum and the desired real fund growth of 1.5%: (i) calculate the expected real required return? (ii) how will the spend (payout) policy impact the real value of the fund? (i) Between 6.5 and 8.5%, and (ii) the spending policy will have a low impact on fund's real value since the payout will be based on the last 12 payouts. (i) Between 5.5 and 7.5%, and (ii) the spending policy will have a low impact on fund's real value since the payout will decrease if fund performance had been poor in the last 12 quarters. (i) Between 5.5 and 7.5%, and (ii) the spending policy will have a high impact on fund's real value since the payout will increase if fund performance had been poor in the last 12 quarters. (i) Between 6.5 and 8.5%, and (ii) the spending policy will have a low impact on fund's real value since the payout will decrease if fund performance had been poor in the last 12 quarters. (i) Not enough information provided to calculate the answer, and (ii) the spending policy will have a high impact on fund's real value since the payout will be based on the last 12 payouts.
Expert Answer:
Answer rating: 100% (QA)
Endowment fund of University consists of money or property that are pooled for using the investment ... View the full answer
Related Book For
Essentials of Accounting for Governmental and Not-for-Profit Organizations
ISBN: 978-0073527055
10th Edition
Authors: Paul A. Copley
Posted Date:
Students also viewed these mathematics questions
-
Southern State University had the following account balances as of June 30, 2012. Debits are not distinguished from credits, so assume all accounts have a normal balance: Accounts receivable . . . ....
-
State University administrators believe their freshman applications are influenced by two variables: tuition and the size of the applicant pool of eligible high school seniors in the state. The...
-
State University has increased its tuition for in-state and out-of-state students in each of the past 5 years to offset cuts in its budget allocation from the state legislature. The university...
-
What do you believe is the most challenging aspect of using the economic analysis workbook? Briefly describe the challenge and any suggestion you have to reduce the challenge.
-
Phosphatidylserine (PS) is considered to be an intermediate in the biosynthesis of phosphatidylethanolamine (PE) in E. coli, yet PS is not found in appreciable amounts among E. coli membrane...
-
Alexis Kunselman, president of Pharsalia Electronics (PE), is concerned about the prospects of one of its major products. The president has been reviewing a marketing report with Jeff Keller,...
-
Pew Research Center collected data on the same 10 political value questions from 1994 to 2014 and combines these responses to place each person on a scale ranging from consistently liberal to...
-
Travelers pay taxes for ying, car rentals, and hotels. The following data represent the total travel tax for a 3-day business trip in eight randomly selected cities. (a) Determine a point estimate...
-
As of December 31, 2014, Toyota company: had assets of 13,050,000, liabilities of 4,650,000, share capital of 3,300,000 and retained earnings of 5,100,000. What is the Total equity as of that date?
-
Evaluate the following pure-yield pickup swap: You currently hold a 20-year, AA-rated, 9.0 percent coupon bond priced to yield 11.0 percent. As a swap candidate, you are considering a 20-year,...
-
Draw the approximate workspace for the following robot. Assume the dimensions of the base and other parts of the structure of the robot are as shown.
-
Please help explain why the under-listed two forces of porter fives are essential in a plant-based industry The threat of new entrants and The intensity of competitive rivalry. Please, in your...
-
Describe one way how Asian Americans communities are described in the Pew Research Center's "Key Facts about Asian Americans." What are the limitations of this key fact sheet? What kind of...
-
Assess the near-term outlook for growth in India and the sources and influences of that growth. Provide scholarly sources to support your assessment.
-
This is a part of the Report Topic: Uncle Tobys Some competitors of Uncle Tobys, such as Kellogg's or Sanatorium. Current microeconomics analysis: Critically analyse the current microeconomics...
-
A current problem facing our department is being able to tell the future. I am sure this is a problem for all of us. Of course, my department needs a specific crystal ball to predict the future auto...
-
2. What is the Economic Order Quantity as discussed in Chapter 2, given the following? D= 1800 racks per year C = $250 A $350 (estimated from supplier's pricing) i= 6.5% Determine the following: h= ?...
-
Pappa's Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, purchases invoices during the year, and the inventory count at December 31 are...
-
What are the required financial statements of a federal agency?
-
Baird County maintains an investment trust fund for the School District and the Town of Bairdville (separate governments). Presented below is the preclosing trial balance for the investment trust...
-
Presented below is a partially completed Statement of Activities for a homeless shelter. Complete the Statement of Activities by filling in the amounts that would appear in each of the shaded areas....
-
The pendulum on a grandfather clock has a period of 2.00 s. If the clock is not wound, the pendulums amplitude begins to decay at a rate of 0.53% each pendulum period. a. What is the time constant of...
-
The motion of a nightingales wingtips can be modeled as simple harmonic motion. In one study, the tips of a birds wings were found to move up and down with an amplitude of 8.8 cm and a period of 0.82...
-
A block with a mass of 0.28 kg is attached to a horizontal spring. The block is pulled back from its equilibrium position until the spring exerts a force of 1.0 N on the block. When the block is...
Study smarter with the SolutionInn App