Timor is unnerved a little by losing over 100,000 euros last year in his portfolio that had
begun the year at 2,000,000 euros. He is now more risk averse and wants to decrease his
allocation to stocks and increase his allocation to government securities. What is the effect of
this sequence of events on Timor’s ability to spend 90,000 euros annually? If his risk
tolerance had not changed, what advice would have helped him meet his objectives? What
difficulty does his change in risk tolerance create?