Advanced Personal Finance Midterm Prep

Front

Shannon decides to do her own taxes, in spite of changing tax laws. How hard can it be? This is an example of

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Overconfidence

Front

Paula sees her friends' pictures of a concert that she couldn't attend because of work. She feels like an outsider.

Back

Paula is experiencing Fear of Missing Out (FOMO)

Front

Which of the following is an example of loss aversion? Selling your house at a loss to find a better investment opportunity, Believing that your house is worth more than it is because you own it, Deciding against selling your house below what you purchased it for, Only looking at sources that reinforce a higher selling value for your home

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Deciding against selling your house below what you purchased it for

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Confirmation bias is …

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The tendency to seek out information that supports our existing beliefs

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The Fear of Missing Out, or FOMO, is…

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The anxiety that an interesting or exciting event is happening without you

Front

The irrational ways that we process information & make decisions using our own perspective and incomplete information. Often result(s) in less than optimal decisions.

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Cognitive biases

Front

While researching Apple, Remy tends to focus on positive stories about their profits instead of stories about poor sales

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Remy is experiencing Confirmation Bias

Front

You meet a girl with great fashion sense at a party. You hire her to be your math tutor. You are

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Experiencing The Halo Effect

Front

When people have the tendency to think they know more than they do

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Overconfidence

Front

What is a good way to combat confirmation bias?

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Reading information that disproves what you believe.