Financial Analyst: 'Investing in cryptocurrency is inherently risky. The market is highly volatile, and there is no underlying asset or government backing. Therefore, no rational investor should put their money into cryptocurrency.'
- AGovernment backing does not always guarantee the stability of a currency.
- BThe volatility of cryptocurrency markets has decreased significantly in recent months.
- CSome rational investors might value the potential for high returns despite the high risk.
- DOther investment vehicles, such as stocks, also carry inherent risks.
Show answer & explanationAnswer & explanation
Correct answer: C. Some rational investors might value the potential for high returns despite the high risk.
The analyst concludes that 'no rational investor' should invest in cryptocurrency because it is 'inherently risky.' This assumes that a 'rational investor' *always* avoids high risk, or that high risk automatically precludes rational investment. However, rationality in investing often involves assessing risk *relative to potential reward*. An investor might rationally choose high risk for high potential reward if it aligns with their financial goals and risk tolerance. Option A points out this unstated premise about what constitutes 'rational' investment behavior.
Why the other options are wrong
- A. This challenges a premise but doesn't address the specific link between 'inherently risky' and 'no rational investor'.
- B. This challenges a premise of the argument (high volatility) but the flaw is in the *definition* of 'rational investor' given the premise.
- D. This suggests a double standard but doesn't directly challenge the definition of a 'rational investor' within the context of cryptocurrency.
Unstated Definitional Premise
An unstated assumption in an argument concerning the definition or scope of a key term, which, if made explicit, would be necessary for the conclusion to follow.
- Often involves terms like 'rational,' 'ethical,' 'successful,' etc.
- The argument relies on a specific, often narrow, interpretation of the term.
- Challenging this definition can undermine the conclusion.
Memory trick: Words' true meanings, check the unseen leanings!