QUESTION 71

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.

QUESTION 72

1. A portfolio manager compares her performance to that of the appropriate benchmark and concludes she has underperformed by 189 basis points. The manager subsequently decides to change her strategic allocation from 25% to 30% cyclical stocks. In which stage of the portfolio management process is she most likely operating?

   		a. Planning.
   		b. Execution.
   		c. Feedback.
   		d. Exit.