When a Bank Makes a Car Loan, the Loan

question 31

Multiple Choice

When a bank makes a car loan, the loan

• A)is an asset to the bank.
• B)is a liability to the bank.
• C)is an asset to the person taking it out.
• D)is a money market instrument.

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Definitions:

Mispriced

A situation in which a financial instrument is valued incorrectly by the market, often presenting opportunities for investors.

Confirmation Bias

The tendency to search for, interpret, favor, and recall information in a way that confirms one's preexisting beliefs or hypotheses.

Representativeness Heuristic

A cognitive bias in which an individual categorizes a situation based on patterns of previous experiences or beliefs about the scenario.

Over-Confidence

A psychological condition where an individual overestimates their knowledge, skill, or importance.