Which of the following, if true, most clearly weakens Karola’s point o

QUESTION

Which of the following, if true, most clearly weakens Karola’s point of view?

A) People who use discount brokers often purchase stocks, which carry a greater risk than bonds or money market instruments.
B) The department manager for whom the two work recently made several thousand dollars on an investment made through E-Trade.
C) Between work and family commitments, neither Karola nor Larisa has much discretionary time to research or track investments on their own.
D) Merrill Lynch, like most full-service brokers, typically charges $50 to $200 per trade.
E) A colleague has purchased investments through a full-service broker and says that these trades were good ones in the long term.

ANSWER

Answer: C
Explanation: C) Discount brokers tend to limit their services to executing buy and sell orders directed by clients. So Choice C is correct: Using this kind of broker puts additional responsibilities on investors to do their own research before making an investment decision. If neither party has discretionary time to do this, then using a discount broker puts them at a disadvantage. Choice A may be true, but Karola and Larisa could avoid this risk by making very conservative investments. Past history may be an incentive to choose one over the other (as in choices B and E), but this does not show that Karola’s immediate advice is or is not faulty. Choice D points out the costs they would face using a full-service broker, which tends to weaken Larisa’s rather than Karola’s point of view.