CFA Level I · CFA Level I Exam · Basics of Portfolio Planning and Construction
A 30-year-old investor with stable employment, no near-term liabilities and a long horizon states she is uneasy with any portfolio decline. Her risk tolerance is most likely classified as:
Her risk tolerance is most likely below average. Although her ability to take risk is high given stable income and a long horizon, her willingness is low, and when ability and willingness conflict the more conservative of the two determines overall risk tolerance.
- Abelow average, because her willingness is lowCorrect
- Babove average, because her ability is high
- Cabove average, because her horizon is long
Explanation
Ability is high, but willingness is low. When the two conflict, the lower governs, so overall risk tolerance is below average. The other options rely only on ability or horizon.
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