QUESTION 141

1. An endowment fund has a board of trustees that refuses to invest in any company that manufactures or distributes tobacco and alcohol related products. The portfolio manager of the fund will most likely record this preference as a:

   		a. Time constraint.
   		b. Liquidity constraint.
   		c. Unique circumstance constraint.
   		d. Regulatory constraint.

QUESTION 142

1. An endowment fund invests in dividend-paying stocks, coupon-paying investment grade bonds, and distressed debt that has significant capital gains potential. The endowment accepts cash donations but also has received an equity donation that has appreciated considerably in value. This endowment supports non-profit organizations only. Which tax statement is most accurate?

   		a. The endowment is faced with no tax consequences.
   		b. The dividends and coupons will be taxed at the regular corporate income tax rate.
   		c. Any capital gains from the equity donation will be taxed at the regular capital gains tax rate.
   		d. The equity donation will be subject to a tax liability if sold within one year.