The amount of risk an individual should take depends on his or her:
I. Return requirements
II. Risk tolerance
III. Time horizon

Question

Quizplus · Accepted Answer

Return requirements, risk tolerance, and time horizon are all important factors to consider when determining the appropriate level of risk to take. Return requirements will impact how much risk an individual is willing to take on in pursuit of higher returns. Risk tolerance will affect how comfortable an individual is with uncertainty and how much risk they are willing to take on to achieve their return goals. Time horizon is also important because it can impact an individual's ability to take on risk, as longer time horizons may provide more opportunities to recover from potential losses. Therefore, all three factors should be considered when determining an individual's optimal level of risk.

The Amount of Risk an Individual Should Take Depends on His