Sandy is $30$ years old and has a well$-$paid job as a commercial lawyer based in San

Francisco. She enjoys spending her money on entertainment, restaurants, and holidays.

She describes herself as ambitious and willing to accept riskier investments if that means

gaining better returns.

Sandy$’$s financial information includes $$180,000$ in investments from salary and bonuses,

$$25,000$ of $“$rainy day$”$ funds in savings and $$20,000$ in a retirement account. She has

no substantial debts. Her $$150,000$ portfolio currently invests $70\%$ in equity mutual

funds and $30\%$ in bond mutual funds. She is keen to build up her fund to maintain her

lifestyle and build a family. However, her financial adviser finds her difficult to consider

the non$-$traditional investments that are available through newly introduced

exchangetraded funds.

As a result of the inheritance, she will receive $$3,500,000$ shortly. She plans to invest

$$500,000$ in speculative funds and the balance in conservative bond funds. She considers

the balance investment extremely important as she would not likely inherit another sum

of money. A severe financial loss can cause a traumatic effect and impact her life

milestone.

Requred 

a$.$ Analyze the consistency of Sandy$’$s risk tolerance level before and after the

inheritance. 

b$.$Discuss the behavioral biases in Sandy$’$s inheritance investment approach.