RISK TOLERANCE

Your risk tolerance t for a given gamble is (approximately) twice your answer to the following question (at the time you face the given gamble):

  • WHAT IS THE LARGEST AMOUNT YOU WOULD WAGER ON A TRIPLE-OR-NOTHING BET WITH EVEN ODDS?
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    • NOTE: RISK TOLERANCE MAY VARY WITH WEALTH.

    As wealth increases, risk tolerance generally increases as well.

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