Spoiler - Schweser Practce Exam Bk1, Exam 2AM

In the question 1, the investors has 3.75m asset base, the return objective is to cover yearly shortfall 116,438. The answer says the ability to take risk is low since “the portfolio must meet a very large proportion of their annual needs”. But I think the 116,438 is a very small amount of the asset base, the investor surely has the ability to accept interim bad performance.

That threw me off as well. Their living expenses are highly reliant on portfolio returns though, so they cannot afford to take excessive risk with the portfolio.

I said ‘average’ considering it was their only source of income but quite a large asset base to cover for it. I agree that it’s not a 100% clear-cut answer but I thought well, whatever and moved on.