If You Polled Some Friends About the Number of Murders

question 187

Multiple Choice

If you polled some friends about the number of murders in New York City and other friends about the number of murders in the state of New York,you'd likely find that the average number of murders estimated for New York City is more than for the entire state.This impossible finding is best explained by the

• A)availability heuristic.
• B)confirmation bias.
• C)hindsight bias.
• D)tendency toward overconfidence.

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Definitions:

Strike Price

The price at which the holder of an option contract has the right to buy or sell the underlying asset.

Underlying Stock

The stock on which a derivative instrument, such as an option or future, is based.

Implied Volatility

A measure of the market's forecast of a likely movement in a security's price and is used to price options contracts.

Call Options

Financial derivatives that give the holder the right, but not the obligation, to buy an asset at a specified price within a specific timeframe.