| Course | MT423 Asset Allocation and Risk Management |
|---|---|
| Unit | Unit 2 |
| Paper type | Risk tolerance assessment |
| Length | About 920 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Business Administration |
| Updated | October 2026 |
Free sample paper for MT423 Unit 2
A Score of 34 and a Sale in 2008: An MT423 Unit 2 Risk Tolerance Assessment for a Self-Employed Court Reporter
[Student Name]
Purdue University Global
MT423: Asset Allocation and Risk Management
Unit 2 Risk Tolerance Assessment
[Instructor Name]
[Date]
Denise Hartley, her answers and her history are composite; the questionnaire is a course instrument modeled on a published scale, and the sources cited are real.
The Instrument and the Score
Denise completed a thirteen-item questionnaire modeled on the scale Grable and Lytton (1999) developed and tested, which asks about investment knowledge, comfort with uncertainty, choices between sure and risky outcomes and reactions to past losses. Total scores on the course version run from 13 to 47. Denise scored 34, which the course's scoring key places in the band labeled above average.
A score is the start of the assessment, not its result. Taken alone, an above-average band might be read straight into an allocation with a high stock share. The rest of this assessment tests whether the score describes Denise well enough to support that.
Five Blind Spots, Applied to Denise
The first is timing. Denise filled in the questionnaire in a year when stock prices had risen for most of the previous decade. Guiso et al. (2018) found that measured risk aversion rose sharply among investors after the 2008 crisis, even among those whose wealth was barely affected, which suggests that scores move with recent markets. A score taken after a long rise may overstate how she would feel in a fall.
The second is cost. Every hypothetical gamble on the questionnaire costs nothing to answer. Choosing the risky option on paper is easier than holding a falling account with real money in it.
The third is the absence of her finances. Nothing on the instrument asks how much she has, what she needs or how stable her income is. A score of 34 means the same thing for a person with $60,000 and no savings as for one with $605,000 and a reserve, though they can afford very different losses.
The fourth is that a single score merges different things. Weber et al. (2002) showed that people's willingness to take risks differs across domains and is driven partly by how risky they perceive a choice to be, not only by how much risk they will accept. Denise's score blends her comfort with volatility, her time horizon and her loss aversion into one number.
The fifth is wording written for salaried workers. Two items ask how she would react to losing a job or receiving a raise. Denise is self-employed. Her income moves with how many depositions and trials law firms schedule, so a lean quarter is not a crisis for her but a normal part of the work, and the items do not measure how she experiences income risk.
What She Actually Did
Behavior in real downturns is the strongest evidence available, with one caution: actions in a crash can have financial causes as well as emotional ones.
In November 2008 Denise sold roughly a third of her holdings, then worth about $210,000, and held the proceeds in cash for most of 2009. In the interview she said the sale was partly fear and partly practical: her deposition work had fallen by about a third that fall as law firms cut litigation budgets, and she wanted cash to cover her own expenses. The sale therefore shows some loss aversion but cannot be read as pure panic.
In March 2020, when courts closed and her work stopped for about two months, she held every investment but paused her SEP-IRA contributions for six months. That pause was a response to lost income, not to the market, and the holding suggests her tolerance had grown since 2008.
The 2008 sale looks like fear on a chart and like a cash need in her diary; an honest assessment reports both.
The Interview and the Dollar Figure
The interview asked Denise to picture her account, not a percentage. Shown that a fall of 20 percent would take about $121,000 from her $605,000, she said she would be uncomfortable but would hold. Shown 30 percent, about $181,500, she hesitated and said she could probably hold. Shown 40 percent, about $242,000, she said she would sell some, as she had in 2008. Asked to name the largest one-year fall in dollars she could watch without selling, she settled on $180,000, which is 29.8 percent of her investable assets.
Reconciling the Three
The score suggests a tolerance above average. The 2008 history suggests a limit lower than the score implies, though part of that sale was a cash need. The 2020 history and the interview suggest her tolerance is moderate to above average and that she has learned from 2008. The assessment records her tolerance as a fall of $180,000, about 30 percent, endorsed by Denise in her own words after seeing the amounts in dollars, with a note that her 2008 behavior suggests the figure should not be pushed higher.
What This Assessment Does Not Settle
Tolerance is how much loss Denise is willing to bear. It says nothing about how much loss her finances can absorb while still meeting her retirement goal. That is risk capacity, and it depends on her balance sheet, her uneven income and her spending target. The Unit 3 analysis will compute it separately. If capacity turns out lower than $180,000, it will govern the allocation, however willing she is.
References
Grable, J., & Lytton, R. H. (1999). Financial risk tolerance revisited: The development of a risk assessment instrument. Financial Services Review, 8(3), 163-181. https://doi.org/10.1016/S1057-0810(99)00041-4
Guiso, L., Sapienza, P., & Zingales, L. (2018). Time varying risk aversion. Journal of Financial Economics, 128(3), 403-421. https://doi.org/10.1016/j.jfineco.2018.02.007
Weber, E. U., Blais, A.-R., & Betz, N. E. (2002). A domain-specific risk-attitude scale: Measuring risk perceptions and risk behaviors. Journal of Behavioral Decision Making, 15(4), 263-290. https://doi.org/10.1002/bdm.414
What the MT423 Unit 2 assignment asks for
In Unit 2 students assess a client's willingness to take investment risk. Most sections supply or name a questionnaire, and the score should be reported with its band, but the band is the beginning of the work. Instructors expect the instrument's limits applied to this particular client, not listed in general terms. The client's behavior in real downturns is the strongest evidence and should be included, with care to separate emotional causes from financial ones. Converting tolerance into a dollar figure the client endorses, by showing losses in dollars rather than percentages, gives later units something to test against. The assessment should keep tolerance separate from capacity, the amount of loss the client's finances can absorb, which comes next in the course.
How the MT 423 Unit 2 example is put together
The example reports the score of 34 and its band, then states that the band will be tested rather than used directly. Five blind spots follow, each tied to Denise: the timing of the questionnaire, costless hypothetical gambles, the absence of her finances, a single score merging distinct attitudes as Weber and colleagues describe, and wording that ignores self-employment. The behavior section examines her 2008 sale and her 2020 pause, under a highlighted line about a chart and a diary telling different stories. The interview section shows her losses of 20, 30 and 40 percent in dollars and records the $180,000 she named. A reconciliation brings the three sources together, and a final section hands capacity to Unit 3.
Where the points sit in the MT423 Unit 2 rubric
Risk tolerance assessments tend to be marked on whether the score is interpreted rather than simply mapped to an allocation, whether blind spots are applied to the client, how carefully past behavior is read and whether tolerance ends as a checkable figure. A band converted straight into a portfolio skips the analysis the unit exists to test. Rubrics reward limits tied to this client's circumstances, such as self-employment or recent market history. Credit goes to noting that a crash-time sale may have had financial causes. A tolerance stated as a word cannot be tested later, so a dollar figure earns marks. Keeping capacity separate shows the student understands the course's central distinction. Sources on risk measurement belong in APA 7.
MT423 Unit 2 help: mistakes that cost points
The usual weak assessment reports a score, names the band, and recommends an aggressive or moderate portfolio in the next sentence. Another frequent error lists generic questionnaire limits that could describe any client. Students often treat a 2008 sale as proof of low tolerance without asking whether the client needed cash. Many leave tolerance as an adjective, so no later loss can be checked against it. Some merge tolerance with capacity, describing the client's balance sheet in the same breath as her feelings. Before submitting, read your conclusion and check whether it contains a dollar figure the client has agreed to. If it only contains a word like moderate, add the interview step that turns the word into an amount.
Get an MT423 Unit 2 example written to your instructions
Questionnaire results differ by instrument, so share the score, scale and client details that the Unit 2 case supplies. A first custom MT423 tolerance assessment is then written free, interpreting the result, naming blind spots specific to that client and converting tolerance into dollars, formatted as the rubric directs. Turnaround is 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
More MT423 papers and BS in Business Administration samples
- MT423 Unit 1: Downturn Exit Board Post
- MT423 Unit 3: Risk Capacity Analysis
- MT423 Unit 4: Asset Class Review
- MT423 Unit 5: Strategic Allocation Proposal
- MT423 Unit 6: Seminar Reflection
- MT423 Unit 7: Glide Path Design
- MT423 Unit 8: Stress Test Report
- MT423 Unit 9: Sequence Risk Illustration
- MT423 Unit 10: Rebalancing Policy
- MT422 Unit 2: Return and Risk Calculation
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- MT400 Unit 2: Process Architecture Outline
MT423 Unit 2 questions, answered
Which risk tolerance questionnaire should the assessment use?
Whichever the prompt supplies or names. Instruments differ in length and scoring, and some come from published research while others are built by firms. The assessment should state the scale, the scoring range and what each band means, then interpret the client's result within those limits rather than borrowing another tool's labels.
How do past investing decisions count?
As evidence of revealed tolerance, weighed carefully. A sale during a downturn may reflect fear, or it may reflect a cash need, a job loss or a poor adviser. Stating the competing explanations, and saying which the facts favor, is more convincing than treating one episode as proof either way.
Why convert tolerance into a dollar figure?
Because people react to amounts, not percentages. A client who accepts a 25 percent decline in principle may balk when the same figure appears in dollars on a statement. A dollar figure the client has endorsed can also be tested directly against later stress results, which a band label cannot.
Where can I find a free MT423 Unit 2 sample paper?
This page carries the complete MT423 Unit 2 assessment, turning a questionnaire score, two crashes and an interview into a $180,000 tolerance figure.
Why does the MT423 Unit 2 sample question Denise's score?
She took it after a long market rise, its items assume a salary she does not have, and none of them ask about her finances.