Basics Beginner: Risk Tolerance

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Managing risk can help you take advantage of risk without conflicting with your risk tolerance.
Choose wisely. There is only one correct answer.
True. Diversification and maximizing your investment time horizon can minimize the negative impact of risk on your investments, allowing you to take on more risk in segments of your investment portfolio.
2.
The risk-return tradeoff concept states that _______.
Choose wisely. There is only one correct answer.
The riskier an investment is, the greater its potential return should be. The risk-return tradeoff also states that safe investments usually yield low returns, and vice versa.
3.
"Getting the most return for a given risk, and taking on the least risk for a given return" is a simple statement of _______.
Choose wisely. There is only one correct answer.
Modern Portfolio Theory. This is the theory that portfolios should and can be managed to provide the most return for a given level of risk, and should take on the least possible risk to achieve a given return.
4.
A 75-year-old couple investing their life savings are likely to have _______.
Choose wisely. There is only one correct answer.
Conservative risk tolerance. A 75-year-old couple investing their life savings will need to protect their capital, and are likely to have conservative risk tolerance.
5.
All of the following are elements of risk tolerance except _______.
Choose wisely. There is only one correct answer.
None of the above. All of these are elements of an investor's risk tolerance.