NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Risk Profiling for Investors
Which of the following changes in an investor's circumstances would generally REDUCE her risk capacity?
A new large loan with higher EMIs and an additional dependant reduces risk capacity because it cuts surplus cash flow and raises obligations. Inheritance, a longer time horizon and loan repayment all increase the ability to withstand investment losses.
- AReceiving a large inheritance
- BHer goal date moving from 5 years away to 15 years away
- CRepaying a home loan fully
- DTaking on a large new education loan with higher EMIs and having a new dependantCorrect
Explanation
Higher liabilities and added dependants reduce surplus income and increase obligations, lowering capacity to bear losses. An inheritance, a longer horizon and loan repayment all raise capacity.
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