Ch.12 · Model Portfolios and Asset Allocation · medium
What is 'risk capacity' as distinct from 'risk tolerance'?
0% of students got this wrong
EXPLANATION
Risk capacity is objective — it considers income stability, liabilities, dependants, emergency reserves, and financial cushion. Risk tolerance is subjective — it reflects the investor's emotional ability to withstand portfolio declines without panic-selling. A complete risk profile requires assessing both.
Practising Chapter 12 one question at a time?
Try the full chapter — 50 questions, tracked score, weak area breakdown.