If You Purchase an Automobile for $20,000 in 2004 and Inflation

question 47

Multiple Choice

If you purchase an automobile for $20,000 in 2004 and inflation is 4 percent,how much would a similar automobile sell for four years from then? To solve this problem you would use the formula for the

• A)bank discount.
• B)internal rate of return.
• C)present value of a lump sum.
• D)future value of a lump sum.

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Definitions:

Overconfidence

The tendency to be more confident in one's own abilities or outcomes than is objectively justified.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to a person’s mind when evaluating a specific topic, concept, method, or decision.

Representativeness Heuristic

A cognitive shortcut used in decision-making that involves judging the likelihood of an event based on how closely it matches a prototype or stereotype.

Belief Perseverance

The phenomenon where individuals stick to their initial beliefs even when confronted with contrasting evidence.