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The Smitherson’s Family Foundation was created to fund causes dear to the family. An initial grant of $35,000,000 was established in the hopes of finding deserving projects to receive funding. The Foundation was established with a perpetual life, and one of its investment goals is to maintain the purchasing power of present assets. Which of the following represents a reasonable objective in the Foundation’s investment policy statement? A. The perpetual life of the plan indicates a low to moderate risk stance. In order to preserve purchasing power, investment in the safest of all assets is critical. Investing in assets returning in excess of the required 5% spending requirement should be discouraged. B. All family foundations must have high risk tolerance to maintain perpetual purchasing power. Return objectives should be commensurate with the risk stance and, therefore, achieving highest growth oriented returns is prescribed. C. The perpetual life of the plan indicates a moderate to high risk tolerance. Return objectives are to meet the required 5% private foundation spending requirement in addition to covering inflation expectations. Evaluating investments from a total return perspective is warranted. |