The Finding That Individuals Tend to Have a Negative Reaction

question 11

Multiple Choice

The finding that individuals tend to have a negative reaction to losing an amount of money-a reaction that is stronger in magnitude than the positive emotions associated with gaining the same amount of money-is referred to as

• A) risk tolerance.
• B) market irrationality.
• C) loss aversion.
• D) risk avoidance.

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Definitions:

Ratification

The formal approval or confirmation of an act, agreement, or treaty by those who are parties to it.

Unauthorized Signature

An unauthorized signature is one made without the express or implied permission of the person whose name is signed, rendering the agreement or document potentially invalid.

Fictitious Payee Rule

A legal principle that states if a negotiable instrument is made payable to a fictitious person, the entity that neglects to verify the authenticity of the payee can be held liable for any resulting loss.

Imposter Rule

A rule which holds that if one party obtains a negotiable instrument by impersonating another party and endorses it with the impersonated party’s signature, the loss falls on the drawer of the instrument.