Access http://www.rce.rutgers.edu/money/riskquiz/
default.asp. Take the short quiz. After completing the quiz, answer the following questions:

• What is “risk tolerance?”
• Why should investors know their risk tolerance before investing?
• How would you rate your risk tolerance: high, moderate, or low?
• To what extent did the quiz accurately measure your risk tolerance?

Explain the importance of the following considerations to a potential investor’s risk tolerance:

• Need for ready cash in the event of an unexpected major expense
• Time frame for accumulating money before it will be needed
• Tax treatment of profits or losses from investments
• Investor’s ability to absorb losses