I come across this type of case a few times, but the solutions seem a bit inconsistent at times. What is an individual’s risk tolerance if he is currently unemployed/has very low income, just inherited a large amount of money, and is planning on going back to school to get a better job in the future?
- In the Schweser Practice Exam 2 AM, Helen Jackson case, where a 29-old lady is planning on going back to college to get a better job after winning a lottery, the answer key says “her ability to tolerate risk is LOW because her portfolio (even with large lottery winning), is essentially her sole source of support. Jackson is almost completely dependent on the portfolio for her family’s income”.
But…
- In the Schweser Practice Exam 3 AM, Jim Wilson case, where a 42-year old man is planning on going to law school to get a letter job after being also offered large amount of money for his company stocks; the answer key says, “his ability to tolerate risk is ABOVE-AVERAGE because he has significant flexibility since he’s quite young and have significant earning power after law school”.
Really confused here. Any tips to tackle this kind of questions?