According to Table 18.1 in the NISM Series X-B workbook (Factors affecting risk appetite), how does the number of dependent family members typically influence an investor's risk appetite, assuming all other factors remain the same?

[ A ]Risk appetite decreases as the number of dependent members increases[ CORRECT ]

[ B ]Risk appetite increases as the number of dependent members increases

[ C ]The number of dependent members has no bearing on risk appetite; only the number of earning members matters

[ D ]Risk appetite depends only on life expectancy and is unaffected by the number of dependents

Takeaway

Option A is correct: per Table 18.1, risk appetite decreases as the number of dependent members increases, since more dependents increase the financial responsibilities and reduce the cushion available to absorb investment losses.

Derivation

Table 18.1 lists several factors affecting risk appetite under 'Family Information' (earning members, dependent members, life expectancy), 'Personal Information' (age, employability, nature of job, knowledge of markets, psyche), and 'Financial Information' (capital base, regularity of income). It states risk appetite increases with more earning members but decreases with more dependent members. Candidates often conflate 'earning members' and 'dependent members' since both are family-related factors, but they move risk appetite in opposite directions.

Why the others fail

B — Risk appetite increases as the number of dependent members increases

This is the reverse of what the table states; the workbook links more dependents to lower, not higher, risk appetite.

C — The number of dependent members has no bearing on risk appetite; only the number of earning members matters

The table lists both earning members and dependent members as separate factors, each with its own distinct influence on risk appetite.

D — Risk appetite depends only on life expectancy and is unaffected by the number of dependents

Life expectancy is a separate factor in the same table; dependents are listed independently as reducing risk appetite.