Answer: level of wealth relative to liabilities

The correct answer is **C** because a client's ability (capacity) to take risk is determined by objective factors such as time horizon, expected income, and the level of wealth relative to liabilities. - **Option A** is incorrect because the utility function reflects the client's willingness to take risk, not their ability. It measures the satisfaction derived from different investment portfolios. - **Option B** is incorrect because the degree of risk aversion pertains to the client's willingness to take risk, which is a subjective factor based on their psychological preferences. This distinction highlights the difference between **willingness** (subjective preference) and **ability** (objective capacity) when assessing an investor's financial risk tolerance.

Author: LeetQuiz Editorial Team