Finance Q1 Review: Part I

Which bias is being used in the advertisement promoting a sale 'for a limited time only!' with a countdown clock?

• Herd Mentality

• Loss Aversion

• Hedonic Adaptation

• Fear of Missing Out (FOMO)

What is the study of how irrational factors affect individual's economic decisions?

• The study of how rational people make economic decisions

• The study of how irrational factors affect individual's economic decisions

• The study of how economies around the world interact with each other

• The study of how investors choose which stocks to buy and sell

What bias is Guy exhibiting when he decides to go to a concert despite a bad snow storm because he already paid for the tickets?

• Sunk Cost Fallacy

• Endowment Effect

• Overconfidence

• Herd Mentality

What bias is Ally exhibiting when she places high value on a Netflix trial because she 'owns' a full account?

• Loss Aversion

• The Endowment Effect

• Overprecision

• Herd Mentality

What bias is Peter exhibiting when he chooses the more conservative retirement account out of fear of loss?

• Confirmation Bias

• Overconfidence

• Loss Aversion

• Fear of Missing Out (FOMO)

What bias is Paula experiencing when she feels like an outsider after seeing her friends' pictures of a concert she couldn't attend?

• Paula is experiencing Fear of Missing Out (FOMO)

• Paula is experiencing Herd Mentality

• Paula is experiencing Loss Aversion

• Paula is experiencing Confirmation Bias

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

What is confirmation bias?

• The tendency to seek out information that supports our existing beliefs

• The tendency to value something more because you own it

• The belief that we are better at something than we actually are

• The belief that we should do something because our friends are doing it

What is an example of hedonic adaptation?

• People who win the lottery tend to return to their original levels of happiness after the novelty of winning wears off

• This is an example of the Endowment Effect

• This is an example of Confirmation Bias

• This is an example of Herd Mentality

What is the Fear of Missing Out (FOMO)?

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

• The effect of feeling a loss more than an equal gain

• Placing higher value on things you own

• The opposite of YOLO (You Only Live Once)