Q#2. Louise und Christopher Maclin live in Chicago and currently rent an apartment in the metropolitan area. Christopher Maclin, aged 40, is a supervisor at Barnett Co, and came an animal salary of $80,000 before taxes. Louis Maclin, aged 38, stays home to care for their newborn twins. She recently inherited 900,000 (after wealth-transfer taxes) in cash from her father's estate. In addition, the Maclin have accumulated the following assets (current market value) $5,000 in cash $160,000 in stocks and bonds $220,000 in Bamett Common Stock The value of their holdings in Barnett stock has apprecinted vubstanbully as a real of the companys growth in sales and profits during the past 10 years. Christopher Maclin in confident that the company and its stock will continue to perform well. The Maclin needs $30,000 for a down payment on the purchase of a house and plan to make a $20,000 non-tax-deductible donation to a local charity in memory of Louise Maclin's father. The Maclin's annual living expenses are $74,000. After-tax salary increases will offset any future increases in their living expenses. During discussions with their financial adviser, Grant Webb, the Maslins express concerns about achieving their educational goals for their children and their own retirement goals. The Maclin's tell Webb: They want to have sufficient funds to retire in 18 years when their children begin their four years of university education They have been unhappy with the portfolio volatility they have experienced in recent years. They state that they do not want to experience a loss in portfolio value greater than 12 percent in any one year - They do not want to investment in alcohol and tobacco stocks.They will not have any additional children, After their discussion, Webb calculates that in 18 years the Maelin will need 52 million to meet their educational and retirement goals. Webb muggests that their portfolio be structured to limit shortfall risk (defined as expected total retum minus two standard deviation) to no lower than a negative 12 percent return in any one year. Maclin's salary and all capital gains and investment income are taxed at 40 percent and no tax-sheltering strategies are available. Webb's next step is to formulate an investment policy statement for the Maclin. A. 1) formulate the risk objective of an investment policy statement for the Meclis i) Formulate the return objective of an investment policy statement for the Maslims Calculate the pre-tax rate of return that is required to achieve this objective. Show your calculations B Formulate the construinte portion of an investment policy tatement for the Meclis addressing each of the following D 1) Time Horizon Liquidity requirements Tax concerns Wnique circumstances Note: Maclin does not require addressing legal and regulatory concerns in any of the above res Q#2. Louise und Christopher Maclin live in Chicago and currently rent an apartment in the metropolitan area. Christopher Maclin, aged 40, is a supervisor at Barnett Co, and came an animal salary of $80,000 before taxes. Louis Maclin, aged 38, stays home to care for their newborn twins. She recently inherited 900,000 (after wealth-transfer taxes) in cash from her father's estate. In addition, the Maclin have accumulated the following assets (current market value) $5,000 in cash $160,000 in stocks and bonds $220,000 in Bamett Common Stock The value of their holdings in Barnett stock has apprecinted vubstanbully as a real of the companys growth in sales and profits during the past 10 years. Christopher Maclin in confident that the company and its stock will continue to perform well. The Maclin needs $30,000 for a down payment on the purchase of a house and plan to make a $20,000 non-tax-deductible donation to a local charity in memory of Louise Maclin's father. The Maclin's annual living expenses are $74,000. After-tax salary increases will offset any future increases in their living expenses. During discussions with their financial adviser, Grant Webb, the Maslins express concerns about achieving their educational goals for their children and their own retirement goals. The Maclin's tell Webb: They want to have sufficient funds to retire in 18 years when their children begin their four years of university education They have been unhappy with the portfolio volatility they have experienced in recent years. They state that they do not want to experience a loss in portfolio value greater than 12 percent in any one year - They do not want to investment in alcohol and tobacco stocks.They will not have any additional children, After their discussion, Webb calculates that in 18 years the Maelin will need 52 million to meet their educational and retirement goals. Webb muggests that their portfolio be structured to limit shortfall risk (defined as expected total retum minus two standard deviation) to no lower than a negative 12 percent return in any one year. Maclin's salary and all capital gains and investment income are taxed at 40 percent and no tax-sheltering strategies are available. Webb's next step is to formulate an investment policy statement for the Maclin. A. 1) formulate the risk objective of an investment policy statement for the Meclis i) Formulate the return objective of an investment policy statement for the Maslims Calculate the pre-tax rate of return that is required to achieve this objective. Show your calculations B Formulate the construinte portion of an investment policy tatement for the Meclis addressing each of the following D 1) Time Horizon Liquidity requirements Tax concerns Wnique circumstances Note: Maclin does not require addressing legal and regulatory concerns in any of the above res