Develop an IPS for the following client with the relevant information requested below. Ashley (38) and John (40) Anderson live in West Fargo. Ashley stays home to care for their newborn twins. She recently inherited $700,000 (after taxes) in cash from her father's estate. John earns an annual salary of $120,000 before taxes. In addition, they have accumulated the following assets (current market values): $10,000 in cash $170,000 in stocks and bonds $250,000 in common stock at work. They need $30,000 for a down payment on the purchase of a house and plan to make a $30,000 non- tax-deductible donation to a local charity. Their annual living expenses are $75,000. After-tax-salary increases will offset any future increases in their living expenses. Addition savings net of expenses will be invested. They also want to achieve their educational goals for their children and their own retirement goals - total of $2,000,000. They want to have sufficient funds to retire in 15 years, when their children beginning their four years of college education. They express that they do not want to experience a loss in portfolio value greater than 15 percent in any one year. Their income is taxes at 30%. a. Formulate the risk objective. b. Formulate the return objective. Calculate the pre-tax rate of return that is required to achieve this objective. Show your calculations. c. Formulate the constraints portion. i. Time horizon ii. Liquidity requirements 111. Tax concerns iv. Other circumstances d. Asset Allocation - create a strategic asset allocation for the Andersons. You can use the table below for reference if you need. Explicitly provide asset allocation for the Andersons. You can use the information provided below but you are free to develop your asset allocation. Justify your recommendation discussing portfolio characteristics and capital market assumptions. Asset Class Total Return Yield Portfolios B A D 13.0 15.0 14.0 6.5 6.0 6.5 3.0% 1.0 1.5 6,5 6.0 6.5 ON 0 0 80 0 0 35% 5 10 20 10 5 15 15 0 0% 0 10 30 20 0 U.S. Large-cap stocks U.S. small cap stocks Non-U.S. stocks U.S. corporate bonds (AA) U.S. Treasury notes Non.U.S. government bonds Municipal bonds (AA) Venture Capital U.S. Treasury bills Total After tax expected return Sharpe ratio After tax yield Expected inflation: 3.0% 4.0 20.0 4.0 4.0 0.0 4.0 0 0 20 100% 10 0 5 100% 7.5% 0.50 2.9% 0 10 5 100% 13.0% 0.45 1.9% 10 25 5 100N 6.4N 0.45 3.3 0.35 Develop an IPS for the following client with the relevant information requested below. Ashley (38) and John (40) Anderson live in West Fargo. Ashley stays home to care for their newborn twins. She recently inherited $700,000 (after taxes) in cash from her father's estate. John earns an annual salary of $120,000 before taxes. In addition, they have accumulated the following assets (current market values): $10,000 in cash $170,000 in stocks and bonds $250,000 in common stock at work. They need $30,000 for a down payment on the purchase of a house and plan to make a $30,000 non- tax-deductible donation to a local charity. Their annual living expenses are $75,000. After-tax-salary increases will offset any future increases in their living expenses. Addition savings net of expenses will be invested. They also want to achieve their educational goals for their children and their own retirement goals - total of $2,000,000. They want to have sufficient funds to retire in 15 years, when their children beginning their four years of college education. They express that they do not want to experience a loss in portfolio value greater than 15 percent in any one year. Their income is taxes at 30%. a. Formulate the risk objective. b. Formulate the return objective. Calculate the pre-tax rate of return that is required to achieve this objective. Show your calculations. c. Formulate the constraints portion. i. Time horizon ii. Liquidity requirements 111. Tax concerns iv. Other circumstances d. Asset Allocation - create a strategic asset allocation for the Andersons. You can use the table below for reference if you need. Explicitly provide asset allocation for the Andersons. You can use the information provided below but you are free to develop your asset allocation. Justify your recommendation discussing portfolio characteristics and capital market assumptions. Asset Class Total Return Yield Portfolios B A D 13.0 15.0 14.0 6.5 6.0 6.5 3.0% 1.0 1.5 6,5 6.0 6.5 ON 0 0 80 0 0 35% 5 10 20 10 5 15 15 0 0% 0 10 30 20 0 U.S. Large-cap stocks U.S. small cap stocks Non-U.S. stocks U.S. corporate bonds (AA) U.S. Treasury notes Non.U.S. government bonds Municipal bonds (AA) Venture Capital U.S. Treasury bills Total After tax expected return Sharpe ratio After tax yield Expected inflation: 3.0% 4.0 20.0 4.0 4.0 0.0 4.0 0 0 20 100% 10 0 5 100% 7.5% 0.50 2.9% 0 10 5 100% 13.0% 0.45 1.9% 10 25 5 100N 6.4N 0.45 3.3 0.35