Hi, I have a from example 12 in institutional reading page 456: The risk objective as stated: [question removed by moderator]
I thought it should be other way around. The risk tolerance should be higher because they have to spend the money in 10 years ???
Plese explain
it is below average because they are seemingly spending their money in 5 years on average …
So it should be avove average because they have to spend the money anyway- why should they care?
they have to spend it anyways – but need to last the 10 years. If they spent it all because they assumed a higher risk tolerance immediately - they would not last the 10 years. If they spent it closer to 10 years - they are good.
and they do not have all the money to hand immediately - they will receive the money over time - and possibly completely only closer to the 10 year mark.
So they need to be careful about how they spend the money - otherwise they will run out.
Ok. Make sense. Thanks