hard · CFA Level I pm
Elias Thorne, a 68-year-old retired executive, maintains a 15 million portfolio at Lumen Credit. His annual living expenses are450,000, and he has no debt. Thorne expresses a deep psychological aversion to any nominal loss of principal, yet his financial objective is to grow the portfolio to $25 million over the next 15 years to fund a family foundation. The risk-free rate is 3%. Based on the conflict between the client's psychological profile and his financial circumstances, the most appropriate risk tolerance to document in the Investment Policy Statement (IPS) is:
- High, based on the client's objective financial ability to take risk.
- Average, by reconciling the high ability with the low willingness.
- Low, based on the client's stated willingness to take risk.
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