Geralt Riviera (45 yrs old) has recently separate from his wife Yennifer Venerberger (46 yrs old). Although the split was mutual and neither party will pay alimony to the other, they do share custody and responsibility of their adopted daughter Ciri (12 yrs old). On top of that, Ciris biological grandmother has left a vast fortune to her that is to be held and managed by Geral and Yennifer until her 18^th birthday. Up until her birthday, the portfolio proceeds are used to pay for Geralt and Yennifers living expenses as well as any care or education needs for Ciri until she takes over the portfolio. Any excess returns are to be returned to the portfolio to grow. The portfolio stands at $73,650,000 and is currently invested in 30 yr Treasuries which yield 2.09%.

Mr. Riviera approaches you about the situation, seeking financial advice. He elaborates on the situation, mentioning that he works in bounty hunter industry. His income is not steady, but on average is steady and grows at about 2% greater than inflation. This past year he earned $302,000 approximately and expects next year to remain in line with normal growth. Yennifer is an active officer in the military and earned approximately $315,000 last year. Her pay grows at the rate of inflation and she is entitled to full retirement benefits which is projected to cover her costs indefinitely after she turns 55.

Prior to their separation this past year, Yennifer and Geralts joint costs were approximately $395,000, allocated evenly between the two and grow at the rate of inflation. Ciris schooling and are costs were an additional $120,000 also growing at the same rate. I have approximately $765,000 in personal savings and Yennifer has approximately $892,000. Neither of us have invested the money.

As an advisor, you believe it is prudent to conduct an interview to better understand Geralts goals as well as his risk/return profile. The following are excerpts from that interview:

• I am in great physical health for my age and do not forsee myself retiring for at least another 20-30 years
• My job tends to be dangerous and full of risks which makes the job enjoyable
• Aside from retirement, I dont forsee any other major expenses one Ciri takes over her portfolio as that should take care of everything
• According to my last tax returns, my current income tax rate is 28.5% while capital gains is at 25%. Yennifers was 32% and 25% respectively. I believe inflation was roughly 4% last year.
• I tend to assess my situation and study it, but I am action oriented.

Please answer the following regarding your evaluation of

1. Determine what type of investor Mr. Riviera may be and determine his willingness and ability to tolerate risk, his overall risk tolerance.

1. Using the information from above, please make the following assessments

• What is the size of Ciris portfolio at the end of this year? (.04 pts) (Hint, be careful about capital gains).
• What is Mr. Rivieras net income for the next year? (.04 pts)

2. Determine Mr. Rivieras time horizon, liquidity needs for the next year (hint, part of this is a number related to expenses), and legal, regulatory and tax considerations. Assume the details still hold from part (i) and living expenses have not increased as they did in part
3. Now lets assume that six years have passed and now Ciri is in control of her portfolio. Assuming that Mr. Riviera has been saving all his excess money, tell me the following

• What is the size of Ciris Portfolio (end of year 6)?
• What is the size of Mr. Rivieras Portfolio (end of year 6), assuming that he added his net income to his existing savings every year?
• What is the required return on his portfolio now assuming that his annual expenses for the coming year are $425,000 while all other parameters remain the same.