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:

Desensitizing

The process of reducing sensitivity or responsiveness to an external stimulus, often used as a therapeutic technique.

Systematic Desensitization

A behavioral therapy method used to reduce phobias, anxiety, and fears through gradual exposure to the feared object or situation.

Relaxation Techniques

Various practices used to reduce stress and anxiety, promoting a state of calm and physical relaxation.

Flooding

A psychological treatment method where individuals are exposed to their fears or phobias in a controlled and safe environment, with the aim of extinguishing the fear response.