单选题 William Bonney, CFA, is writing an investment policy statement for one of his high net worth clients, Joey Rook. Rook is a retiree who receives Social Security benefits but because he was self-employed, has no pension income. He has a portfolio of $ 1.2 million and recently purchased a vacation cabin requiring mortgage and maintenance expenses of $ 6000 per month. After meeting with his client, Bonney writes the following policy statement: "The total return objective is to earn 6% after-tax. At no time should the principal amount decline in value by more than 15%." The most valid criticism of this return objective statement is that: A. it considers only the after-tax return. B. the return objective is too conservative and the risk allowed is unrealistically low in today's market. C. it fails to consider current income.

【正确答案】 C

【答案解析】For any retiree, current income must always be considered, and in this case the current income must always be considered, and in this case the current income needs appear quite high relative to the portfolio(6% after tax return on $1.2M will barely cover vacation home expenses, much less other living needs). After tax return is an appropriate measure, and 6% after tax is not conservative at all. The risk level is not unrealistic.