NO.PZ202212280100005201
问题如下：
Emma Young, a 47-year-old
single mother of two daughters, ages 7 and 10, recently sold a business for
$5.5 million net of taxes and put the proceeds into a money market account. Her
other assets include a tax-deferred retirement account worth $3.0 million, a
$500,000 after-tax account designated for her daughters’ education, a $400,000
after-tax account for unexpected needs, and her home, which she owns outright. Her
living expenses are fully covered by her job. Young wants to retire in 15 years
and to fund her retirement from existing assets.
(1) The broker
suggests that Young rebalance her $5.5 million money market account and the
$3.0 million tax-deferred retirement account periodically in order to maintain
their targeted allocations. The broker proposes the same risk profile for the
equity positions with two potential target equity allocations and rebalancing
ranges for the two accounts as follows:
·
Alternative 1: 80% equities +/–
8.0% rebalancing range
·
Alternative 2: 75% equities +/–
10.7% rebalancing range
Determine
which alternative best
fits each account.
选项：
解释：
When doing the rebalance, we have to consider the cost of rebalance and the benefit of rebalance.
$5.5 million money market account:
Money market account is taxable and account who is taxable require a large rebalancing range in order to reduce the rebalance cost. High frequent of rebalance would increase the frequency of transaction and for taxable account more tax cost would be generated. Alternative 2: 75% equities +/– 10.7% rebalancing range has a higher rebalance range.
$3.0 million tax-deferred retirement account: tax-deferred retirement account is tax-deferred so that we can do the rebalance at a higher frequency. Alternative 1: 80% equities +/– 8.0% rebalancing range is more suitable.
