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An Investor Purchases Shares of an Index Fund

Question 38

Multiple Choice

An investor purchases shares of an index fund. The investor could take on the same level of risk by taking out a loan and purchasing a higher-risk specialty fund. The Sharpe ratio on this complete portfolio is higher than her existing investment. What behavioral concept prevents the investor from taking out the loan and investing in the index fund?


A) Framing bias
B) Excessive volatility
C) Loss aversion
D) Mental accounting

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