Emma Young, a $47-$year$-$old single mother of two daughters, ages $7$ and $10,$ recently sold a business for

$$5\mathrm{.}5$ million net of taxes and put the proceeds into a money market account. Her other assets include a

tax$-$deferred retirement account worth $$3\mathrm{.}0$ million, a $$500,000$ after$-$tax account designated for her

daughters' education, a $$400,000$ after$-$tax account for unexpected needs, and her home, which she owns

outright.

Her living expenses are fully covered by her job. Young wants to retire in $15$ years and to fund her

retirement from existing assets. An orphan at eight who experienced childhood financial hardships, she

places a high priority on retirement security and wants to avoid losing money in any of her three accounts

A broker proposes to Young three portfolios, shown in Exhibit $1.$ The broker also provides Young with

asset class estimated returns and portfolio standard deviations in Exhibit $2$ and Exhibit $3,$ respectively.

The broker notes that there is a $$500,000$ minimum investment requirement for alternative assets. Finally,

because the funds in the money market account are readily investible, the broker suggests using that

account only for this initial investment round.

EXHIBIT $1$ Proposed Portfolios

Exhibit $2$ Asset Class Pre$-$Tax Returns

Exhibit $3$ Portfolio Standard Deviations

Young wants to earn at least $6\mathrm{.}0\%$ after tax per year, without taking on additional incremental risk.

Young's capital gains and overall tax rate is $25\%.$

$30.$ Determine which proposed portfolio most closely meets Young$$s desired objectives $($consider risk, returns, and constraints$)$:

A$.$ Portfolio $1$

B$.$ Portfolio $2$

C$.$ Portfolio $3$

The broker suggests that Young rebalance her $$5\mathrm{.}5$ million money market account and the $$3\mathrm{.}0$ million tax$-$deferred retirement account periodically in order to maintain their targeted allocations. The broker proposes the same risk profile for the equity positions with two potential target equity allocations and rebalancing ranges for the two accounts as follows:

Alternative $1$: $80\%$ equities $+/8\mathrm{.}0\%$ rebalancing range

Alternative $2$: $75\%$ equities $+/10\mathrm{.}7\%$ rebalancing range

$31.$ Determine which alternative best fits $$3\mathrm{.}0$ million tax$-$deferred retirement account and which alternative best fits $$5\mathrm{.}5$ million money market account.

A$.$ $$3\mathrm{.}0$ million $-$ Alternative $1$ and $$5\mathrm{.}5$ million $$ Alternative $2$

B$.$ $$3\mathrm{.}0$ million $-$ Alternative $2$ and $$5\mathrm{.}5$ million $$ Alternative $1$

C$.$ $$3\mathrm{.}0$ million $-$ Alternative $1$ and $$5\mathrm{.}5$ million $$ Alternative $1$

D$.$ $$3\mathrm{.}0$ million $-$ Alternative $2$ and $$5\mathrm{.}5$ million $$ Alternative $2$

$32.$ Identify the primary reason for the broker$$s reassessment of Young$$s circumstances.

A$.$ Change in Goals

B$.$ Change in Constraints

C$.$ Change in Beliefs