. Harry and Dianna McInnis are reviewing their financial plan. They are now both aged 63, will retire this year. Their current circumstances are summarized below: Pension income will total $100,000 a year and will not increase with inflation. Annual expenses will total $180,000 initially and will increase with inflation. Inflation is expected to be 2 percent annually. Their personal investments now total $1 million (excluding trust distribution). They will rely on this $1 million portfolio to support their lifestyle and do not wish to reduce their level of spending. Both Harry and Dianna have health problems and neither is expected to live more than 10 years. All health care expenses will be covered by employer-paid insurance. Because their daughter is now financially independent, Harry and Dianna sole investment objective is to meet their spending needs. They are not concerned with growing or maintaining principal. The income deficit may be met with both investment income and by invading principal Use the table below to select and justify with at least two reasons the most appropriate of the four portfolios as an asset allocation for Harry and Dianna? Asset Allocation Portfolio A Portfolio B Portfolio C Portfolio D Domestic large-cap stocks 14% 30% 40% 30% Domestic small-cap stocks 3% 5% 10% 25% Foreign stocks 3% 5% 10% 25% Intermediate-term fixed income 70% 60% 30% 20% Cash & Cash equivalents 10% 0% 10% 0% Total 100% 100% 100% 100% Expected annual Return (after tax) 4.20% 5.80% 7.50% 8.50% Annual Standard Deviation 6% 8% 13.00% 18.00% Recommended Portfolio: Reason 1: Reason 2