Colleges That Use a Fixed Rate of Return Approach to Manage

question 65

True/False

Colleges that use a fixed rate of return approach to manage the distribution of income from their endowments must apply the same rate to determine how much investment income to report in their financial statements.

---

Definitions:

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of data values, commonly used in finance to assess the volatility of investment returns.

Investment

Allocating resources, usually money, with the expectation of generating an income or profit.

Reward-to-Variability Ratio

A ratio used to evaluate the return of an investment relative to its risk, with a higher ratio indicating a more favorable risk-reward profile.

Risk-free Rate

A presumed income from an investment that is free from any financial risk, typically reflected through government bond yields.