A(n) _____________ return requirements must be balanced between the need for current income and the need for the long-term protection of capital.
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A. B. C. D.C
The correct answer to the question is C. endowment fund's.
Endowment funds are investment portfolios managed by nonprofit organizations, such as universities, foundations, or charitable institutions. These funds are typically established to provide a permanent source of income to support the organization's operations or specific objectives over the long term. As a result, the investment objectives of an endowment fund must balance the need for current income and the preservation of capital.
Pension Fund's Return Requirements: Pension funds are investment pools set up by employers to provide retirement benefits to their employees. The primary objective of pension funds is to generate returns that can fund future pension obligations. While the preservation of capital is important, the primary focus is on generating returns to ensure the fund's ability to meet pension liabilities.
Life Insurance Company's Return Requirements: Life insurance companies are financial institutions that offer life insurance policies and annuities. Their primary goal is to provide financial protection to policyholders and ensure the fulfillment of claims. The investment objectives of life insurance companies typically revolve around generating sufficient returns to meet policyholder obligations, such as death benefits or annuity payments. Balancing the need for current income and capital protection is important, but the primary focus is on meeting contractual obligations.
Endowment Fund's Return Requirements: Endowment funds have a long-term perspective, as they are intended to provide a permanent source of income for a nonprofit organization. These funds typically support activities such as funding scholarships, research, or other initiatives. Therefore, the return requirements of an endowment fund must balance the need for current income to support ongoing operations and the need to protect the capital to ensure sustainability and continued support in the future.
Investment Company's Return Requirements: Investment companies encompass a broad category of entities that pool funds from individual investors and invest in various financial instruments. They include mutual funds, exchange-traded funds (ETFs), and closed-end funds. While investment companies have different objectives depending on the specific type and strategy, their primary focus is typically on generating returns for their investors rather than the need for capital preservation.
In summary, the need for current income and the long-term protection of capital are particularly important for endowment funds. These funds aim to support nonprofit organizations' ongoing operations while ensuring the preservation of capital to sustain their activities over the long term.