Question: The Eagle University Endowment was established with $75 million dollars. The endowment has two major goals: to build a $25 million dollar library and to provide scholarships to environmental science majors. The environmental science program is not reliant upon this endowment to remain viable. The endowment has opted to use a simple spending rule with a 5 percent spending rate. Those responsible for the endowment intend to adjust the required return by an allotment for education inflation, which they assume to be 5 percent. The Vice President of Finance for Eagle University has asked for recommendations to help construct an IIPS for the endowment fund. Answer the following questions based on the information provided:
a. What should be used as the return objective?
b. What should be the fund's risk tolerance level?
c. Identify two specific constraints.