Final answer:
The risk tolerance of investors varies: Janette is not risk-tolerant; Mark is risk-tolerant; Sarah is moderately risk-tolerant; and John is not risk-tolerant, showing how individual preferences affect investment choices.
Step-by-step explanation:
Assessing the level of risk tolerance among different investors based on the given scenarios:
- Janette who has $100,000 to invest but cannot sleep at the thought of losing any money, is not risk-tolerant. Her aversion to any loss indicates a preference for very safe, low-risk investments.
- Mark, who is willing to invest in a startup with a high chance of failure because he believes in the company's mission, would be considered risk-tolerant. His willingness to face potential losses for the chance of supporting a mission he believes in shows a higher risk appetite.
- Sarah's diversified investment portfolio, which includes both stocks and bonds, and her comfort with moderate value fluctuations, show that she is moderately risk-tolerant. She is prepared to accept some level of risk for the potential of higher returns.
- John, who prefers low-risk, low-return assets and prioritizes the safety of his investments, is not risk-tolerant. He prefers to protect his capital over chasing higher profits.
These cases illustrate how various investors approach the tradeoff between risk and return differently. Generally, higher risk is associated with the potential for higher returns, which can influence an investor's willingness to accept risk.