Example 1 of Schweser Note 2018 Book 2 Los 8.j (Prepare and justify an investment policy statement for an individual investor.)
William Elam Case Scenario: A. Evaluate the Elams’ situational profile according to: 2. Measure of wealth.
The answer is: William seems to perceive his wealth as considerable. He compares himself to a friend who he sees as rich, which leads William to see himself taking considerable risk.
Which part in the reading indicates that he perceives his wealth as considerable? And which indicates he sees himself taking considerable risk? Who has a better understanding on this question? Thanks.
I don’t have the question but remember that risk tolerance is a function of both ability and willingness to take risk. It can be further broken down into ideas like the way people perceive their wealth versus their standard of living risk or whether it was accumulated passively or actively. These things all give you clues towards a client’s risk tolerance.
In a case where a person perceives themselves like a wealthy friend, they might have a higher willingness to take risk. Maybe they view their wealth as substantial and that contributes.
Questions like these are the core of the AM portion of the test. It’s all about making inferences about clues given to you in the reading. When someone compares themselves to another (especially in a way that they admire and want to replicate), it’s a clue that their willingness to take risk might be higher. Is his ability to take risk higher? I have no clue, you’d have to determine that for an IPS but look to these inferences made in the reading for clues on how you should answer. You’ll need to practice questions exactly like this multiple times to get a hang of the real thing come June.
To PreDRaR66:
The father of the family in this case, as far as I know, is more willing to take risks than he can. Thank you for giving me this hint: when a person mentions another one and agrees with that one’s approach to investing, he probably also thinks he has equivalent ability or willingness of his friend.
Besides, what does this bright red dot with “-1” mean? (If you don’t know, just ignore it. This is not a question. 
)
Net _ one _ down vote.
One more didn’t like the post than the number who did.
To S2000magician,
Thank you for telling me that.
There are always people who do things in a destructive rather than constructive way.
Thanks Predar66 for the contribution 