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BardCh ZICKLIN COLLEGE 233%? Optimizing Liquidity You run an endowment fund for a university that currently has 1 billion in investments. You can make both
BardCh ZICKLIN COLLEGE 233%? Optimizing Liquidity You run an endowment fund for a university that currently has 1 billion in investments. You can make both liquid investments (stock and bond market) and illiquid investments (real estate and hedge funds). You can only ofoad your illiquid investments once a year. The university revenues this year will be distributed according to a normal distribution, with mean 400 million and standard deviation of 50 million. The university will also get donations, which will be distributed uniformly between 100 and 250 million. The operating cost of the university is normally distributed, with mean 650 million and standard deviation of 150 million. Your predictions for how the three investments will behave over the next year are given in the table below: Investment | Expected Return | Stande Deviation Liquid | 4% | 8% Illiquid | 7% | 1 1% Suppose that if the university runs out of money during the year, it will lose the equivalent of 100 million dollars due to borrowing costs and bad publicity. How much of the endowment should be invested in illiquid investments
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