What Is Wrong with the Following Statement: Only a Fool

question 3

Multiple Choice

What is wrong with the following statement: Only a fool would invest in real estate without financing most of the purchase with a mortgage; borrowing allows you to increase your expected return by using other people's money!

• A) The money you borrow comes from a bank, not "other people".
• B) The statement is insulting to fools: even people of just slightly below average intelligence might not borrow.
• C) Some people can't borrow due to poor credit rating, but that doesn't mean they're "fools".
• D) The statement ignores the effect of borrowing on the investor's risk.
• E) The statement is actually correct although stated in a too extreme form.

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Definitions:

Impression Management

The process by which individuals attempt to control the impressions others form of them, especially in social contexts.

Feeling Rule

Social norms that dictate the appropriate emotions to be expressed in various situations, shaping how individuals manage and display their emotional responses.

Collectivist Cultures

Societies that prioritize the needs and goals of the group over individual desires, emphasizing interdependence, cooperation, and social harmony.

Individualistic Cultures

Societies that emphasize personal achievement, independence, and self-reliance over collective goals and interdependence.