An organization invests its savings in a volatile stock with the potential for high gains rather than a mutual fund with a lower expected return and lower volatility.
This best describes which of the following risk concepts?
An organization invests its savings in a volatile stock with the potential for high gains rather than a mutual fund with a lower expected return and lower volatility.
This best describes which of the following risk concepts?
The scenario describes an organization's willingness to invest in a volatile stock with potential for high gains rather than a safer mutual fund with lower returns, highlighting its willingness to take on higher risk for potentially higher rewards. This ability and willingness to pursue greater risk for higher possible returns best aligns with the concept of risk appetite. Risk appetite refers to the amount and type of risk an organization is willing to pursue or retain to achieve its objectives.
why not risk appetite?
D is correct. Risk tolerance expresses the level or numerical limit that can be accepted in the risks. Our risk tolerance determines which profit we choose. It is hard to understand please read the definition of risk tolerance and appetite carefully.
It's D. Risk appetite mainly related to the objective. but this situation is more precise.
Why not b?
could also be a)